Hiscox reports profit increase; remains cautious

International specialist insurer Hiscox reported an 11 percent increase in pre-tax profits, but said that it will not take undue risk, “preferring modest investment returns alongside better underwriting results to fuel profits”.

“Our investment strategy remains cautious: we will not take undue risk, preferring modest investment returns alongside better underwriting results to fuel profits,” said company chairman Robert Childs. “Our investments delivered a return of 1.9 percent (2012: 3.1 percent) which is good, given the challenging year in bond markets, and was driven by our allocation to risk assets, principally equities.

The re/insurer, which reached pre-tax profits of £244.5 million in 2013 compared with £217.5 million in 2012, explained that it had separated its London Market insurance and reinsurance businesses to give these different product areas more dedicated leadership and formed its own ILS fund to deploy its own and others' capital.

“Competition has increased but as a respected leader in reinsurance we have been able to maintain our share of well-rated business,” said Childs. “However we cannot presume that the elements in 2014 will be as kind to us as they were in 2013, already we have seen extreme weather events, freezes in the US and floods in the UK.”

Net earned premium increased 7.1 percent to £1,283.3 million in 2013 compared with £1,198.6 million in 2012 and the combined ratio for the year was 83 percent compared with 85.5 percent in 2012.

"2013 was a very good year for Hiscox. Our long term strategy of building local retail businesses in Europe, the UK, Guernsey and the US to balance internationally traded business in London and Bermuda continues to deliver. We are excited about the opportunities we see in many retail markets where we have room to grow profitably. In our big ticket areas, discipline and opportunism will guide us,” said Bronek Masojada, chief executive of Hiscox.

With these results, Hiscox announced a capital return of 50p per share, equal to approximately £178 million in total, as well as special distribution of 36p per share following the board’s review of the group’s capital requirements.

Individually Hiscox’s three underwriting businesses performed well with the retail businesses in the UK and Europe delivering a record profit of £56.4 million in 2013 compared with £49.1 million in 2012.

The London Market businesses delivered profit of £116 million in 2013, compared with £122 million in 2012, driven by a relative lack of natural catastrophes and good underwriting. The teams underwrote a combined £411.5 million of reinsurance premium during 2013.

Meanwhile Hiscox International, which comprises the Bermuda, Guernsey and US activities reached profits before tax of £80.9 million in 2013 compared with £62.7 million in 2012. Gross written premiums grew by 12.9 percent to £472.1 million driven by good growth in Hiscox USA.