Hiscox Ltd Interim results For the six months ended 30 June 2015 - PowerPoint PPT Presentation

Hiscox Ltd Interim results For the six months ended 30 June 2015

An excellent six months • Premium growth of 12.0% (2014: -3.8%) • Profit before tax £135.1m (2014: £124.6m) • Combined ratio 82.5% (2014: 82.0%) • Return on equity 19.9% (2014: 18.9%) • Interim dividend of 8.0p (2014: 7.5p) 1

Financial performance

An excellent six months June June Dec 2015 2014 2014 £000 £000 £000 Gross premiums written 1,096,299 978,932 1,756,260 Net premiums written 860,084 732,592 1,343,410 709,823 643,471 1,316,259 Net premiums earned Investment return on financial assets 27,857 30,115 56,355 (15,678) (16,415) 4,974 Foreign exchange (losses)/gains • Euro movement Profit before tax 135,075 124,620 231,075 Profit after tax 129,380 119,846 216,152 Basic earnings per share (p) 43.7 36.4 67.4 Interim/final equivalent dividend (p) 8.0 7.5 22.5 Additional capital return (p) – – 45.0 Net asset value £m 1,414.7 1,332.5 1,454.2 p per share 505.5 425.6 462.5 • 18.8% growth in NAV Return on equity after tax* 19.9% 18.9% 17.1% per share 3 *Annualised.

Segmental analysis 30 June 2015 30 June 2014 Hiscox Hiscox Hiscox London Hiscox Corporate Hiscox London Hiscox Corporate Retail Market Re Centre Total Retail Market Re Centre Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Gross premiums written 502,140 306,408 287,751 ‒ 1,096,299 455,775 251,700 271,457 − 978,932 Net premiums written 472,474 217,122 170,488 ‒ 860,084 418,029 189,463 125,100 − 732,592 Net premiums earned 424,547 179,107 106,169 ‒ 709,823 373,352 163,078 107,041 − 643,471 Investment result – Financial assets 11,352 5,310 5,102 6,093 27,857 8,325 6,456 11,723 3,611 30,115 Foreign exchange (losses)/gains (11,262) (4,352) 243 (307) (15,678) (2,981) (6,556) (3,597) (3,281) (16,415) Profit/(loss) before tax 59,320 23,447 59,622 (7,314) 135,075 37,375 24,783 75,566 (13,104) 124,620 Combined ratio 89.1% 89.8% 45.5% ‒ 82.5% 92.7% 87.2% 41.8% − 82.0% Combined ratio excluding monetary FX 86.4% 87.3% 45.2% ‒ 80.3% 91.9% 82.9% 38.2% − 79.7% Hiscox Retail Hiscox Re Hiscox Retail brings together the results of the UK and Europe, and Hiscox International being the US, Hiscox Re is the reinsurance division of the Group, combining the underwriting platforms in Bermuda, Guernsey and Asia retail business divisions. Hiscox UK and Europe underwrite European personal and London and Paris. The segment comprises the performance of Hiscox Insurance Company (Bermuda) commercial lines business through Hiscox Insurance Company Limited, together with the fine art and Limited, excluding the internal quota share arrangements, with the reinsurance contracts written by non-US household insurance business written through Syndicate 33. In addition, Hiscox UK includes Syndicate 33. In addition, the healthcare and casualty reinsurance contracts written in the Bermuda elements of specialty and international employees and officers’ insurance written by Syndicate 3624. hub on Syndicate capacity are also included. The segment also captures the performance of Kiskadee, Hiscox International comprises the specialty and fine art lines written through Hiscox Insurance Company the Group’s Insurance Linked Securities business. (Guernsey) Limited, and the motor business written via DirectAsia, together with US commercial, Corporate Centre property and specialty business written by Syndicate 3624 and Hiscox Insurance Company Inc. via Corporate Centre comprises the investment return, finance costs and administrative costs associated the Hiscox USA business division. with Group management activities. Corporate Centre also includes the majority of foreign currency Hiscox London Market items on economic hedges and intragroup borrowings, further details of which can be found at note Hiscox London Market comprises the internationally traded insurance business written by the Group’s 13 of the Group’s Report and Accounts for the year ended 31 December 2014. Corporate Centre 4 London based underwriters via Syndicate 33, including lines in property, marine and energy, casualty forms a reportable segment due to its investment activities which earn significant external returns. and other specialty insurance lines. In addition the segment includes elements of business written by Syndicate 3624 being auto physical damage, auto extended warranty and aviation business.

Solid investment performance 30 June 2015 30 June 2014 Asset Annualised Asset Annualised allocation return Return allocation return Return % % £000 % % £000 Bonds £ 15.4 0.9 16.2 1.1 US$ 53.2 1.6 50.0 2.0 Other 9.1 0.4 11.0 2.4 Bonds total 77.7 1.3 15,038 77.2 1.8 21,211 Equities 8.7 9.3 11,910 7.4 7.2 7,914 Deposits/cash/ bonds <3m 13.6 0.4 909 15.4 0.4 990 Actual return 1.8 27,857 2.0 30,115 Group invested assets £3,032m £2,965m Before fees, derivative positions, investments in insurance linked funds 5 and third-party assets managed by Kiskadee Investment Managers.

High quality, conservative portfolio Investment portfolio £3,032m* as at 30 June 2015 • AUM reduced by capital distribution Asset allocation Bond credit quality Bond currency split • Risk assets up to 8.7% Bonds Gvt. USD • High credit quality Cash AAA GBP AA Risk assets maintained EUR A CAD BBB BB and below 1.7 1.1 8.7 10.6 11.4 29.3 13.6 19.8 20.8 68.5 77.7 22.1 14.7 *Excludes third-party assets managed by Kiskadee Investment Managers. 6

Portfolios – USD bond portfolios as at 30 June 2015 Portfolios: $2.5bn BB and • Favour corporates AAA AA A BBB below Total Duration % % % % % % months • Credit provides positive carry Government issued 22.4 1.5 23.9 18.0 Government supported* 1.7 7.8 0.8 0.2 10.5 12.0 • Still cautious on duration Asset backed 11.5 0.3 0.1 11.9 10.2 • Governments for liquidity Mortgage backed agency 4.6 4.6 20.3 Non agency 0.7 0.1 0.1 2.3 3.2 10.9 Commercial MBS 6.9 0.4 0.2 7.5 21.7 Corporates 1.3 4.2 20.9 11.7 0.3 38.4 18.7 Total 22.1 39.8 23.6 11.9 2.6 100.0 16.9 7 *Includes agency debt, Canadian provincial debt and government guaranteed bonds.

Portfolios – GBP, EUR and CAD bond portfolios as at 30 June 2015 GBP portfolios: BB and • Governments favoured AAA AA A BBB below Total Duration £439m for duration management % % % % % % months • Corporates added Government issued 44.0 44.0 26.2 for carry Government supported* 16.8 1.4 0.2 18.4 11.2 • No exposure to Sovereign Asset backed 4.5 4.5 10.1 debt of Greece, Ireland, Italy, Portugal or Spain Corporates 3.5 5.5 13.6 10.5 33.1 15.3 Total 24.8 50.9 13.6 10.7 0.0 100.0 19.8 EUR and CAD BB and AAA AA A BBB below Total Duration portfolios: £289m % % % % % % months Government issued 39.8 0.4 40.2 47.0 Government supported* 11.9 8.3 0.4 20.6 12.9 Asset backed 1.6 1.6 10.8 Corporates 4.5 7.9 17.5 7.0 0.7 37.6 13.1 Total 57.8 16.6 17.9 7.0 0.7 100.0 26.6 8 *Includes supranational and government guaranteed bonds.

Growing demand for capital • Significant capital return over the last three years has allowed us to grow into the capital base • Catastrophe exposure remaining steady • Good growth and business mix moving to longer-tail • Solvency II has increased capital requirements • Continuing to invest in growing the businesses – IT/marketing/ILS/new teams – Acquisitions: DirectAsia/RH Classics/R&Q Marine Services • Capital return reviewed at year end based on results and business plan 9

Growing demand for capital 2014 capital requirements £1.41bn available capital (at 30/6/15) £1.26bn available capital (post return) Economic Regulatory A.M. Best Standard & Poor's Fitch ratings Group capital Group capital Bermuda solvency (catastrophe model (economic) model (regulatory) capital requirement stressed) Rating agency assessments shown are internal Hiscox projections of the agency capital requirements on the basis of 2014 year end results. Hiscox uses the internally developed Group capital model to assess its own capital needs on both a trading (economic) and purely regulatory basis. 10 All capital requirements have been normalised, with respect to variations in the allowable capital in each assessment for comparison to a consistent available capital figure.

Fascinating financial facts • Good overall claims experience. Moderate losses in London Market – Marine and energy (PEMEX and Chevron) net £12m – Reserves for Ukraine political risks net £20m • Reserve releases £123m (2014: £90m) • $875m Letter of Credit and bank facility – $529.5m drawn down (2014: $338m) 11

Underwriting