Hiscox declares $626m profit

Hiscox Group has released its results for the year ended 31 December 2023.

Hiscox, which is one of the largest operators in the London market, also has insurance companies operating in USA, UK, Europe and Asia and a reinsurance business in Bermuda. The business is headquartered in Bermuda. Therefore, there is no direct read across to the performance of the syndicates supported by members of Lloyd’s. The operating units which include the Lloyd’s operations, namely London market and reinsurance and ILS are two of the best performers in what the group describes as a record profit of $626m, with the highest return on equity, at 21.8%, that it has achieved in seven years.

The group is now reporting under revised accounting protocols, called IFRS 17, so some familiar concepts are given new names and are calculated in slightly different ways. For example, gross written premiums are now called insurance contract written premiums. Under IFRS 17, the time value of money is reflected in the future cost of claims. Hiscox has published combined ratios on both a discounted and undiscounted basis. Lloyd’s syndicates continue to report on UK GAAP basis, without discounting. The group’s undiscounted combined ratio was 89.8%, an improvement on the restated combined ratio of 91.1% in 2022. The performance of the London market division was better, with an undiscounted combined ratio of 83.8%. The combined ratio for the Reinsurance and ILS division on the same basis was 69.8%. The combined ratio is a standard measure of insurance company profitability, measuring claims and expenses as a proportion of premiums. At 100%, the company is breaking even on its underwriting operations, and below 100% it is making an underwriting profit.

Although syndicate 33 does write some retail business, it largely comprises business written by Hiscox’s London market and reinsurance divisions. SPA 6104 writes reinsurance business.

The London market reported rate improvements of 7% in the calendar year, bringing the compound improvement in rating levels to 70% since 2018. Property insurance was the stand-out performer, with increases of 26% for smaller business under binding authorities, and 21% for larger business in the open market. In contrast, there was increased competition following several years of increasing rates for cyber and directors and officers’ insurance that did lead to some rate reductions in 2023.

Rates for reinsurance business were even stronger, up 31% in the year, with the compound increase since 2018 now 90%.

While there were again releases from reserves held for old years of account; the net reserve release was $123m, down from $209m in 2022. Hiscox has also strengthened reserving to move to an 83% confidence level up from 79% at the end of 2022. The group has been active in protecting against old year deterioration by executing legacy transactions with external reinsurers, especially in areas of business no longer written. 31% of group reserves and 42% of casualty reserves are protected by these transactions, called loss portfolio transfers.

Summary results are as follows

 

	2023	2022 As restated under IFRS 17
Insurance contract written premium	$4,598.2m	$4,355.4m
Net insurance contract written premium1	$3,555.8m	$3,225.5m
Insurance service result	$492.3m	$360.9m
Net investment result	$384.4m	$(187.3)m
Profit before tax	$625.9m	$275.6m
Earnings per share	206.1¢	73.8¢
Total dividend per share	37.5¢	36.0¢
Net asset value per share	951.1¢	764.5¢
Group combined ratio (discounted)	85.5%	88.7%
Group combined ratio (undiscounted)	89.8%	91.1%
Return on equity	27.6%	10.1%
Return on equity adjusted for Bermuda DTA	21.8%	10.1%
Positive prior year development	$122.8m	$209.4m
Bermuda solvency capital ratio (BSCR)	212%	199%

We anticipate receipt of the results and updated for Syndicate 33 and SPA 6104 later this week.

The full results are available here and the slides from the analysts’ presentation are available here.