Hiscox performance improves at H1 – driven by reinsurance and London market arms

Hiscox has posted improved performance in its interim results for the first half of 2023, characterised by continued growth and earnings momentum.

Hiscox said both its London market and reinsurance divisions had benefited from hard market conditions at recent renewals.

Group-wide, the London-listed carrier posted an improved group combined ratio of 85.7%, discounted, or 90.2% undiscounted, for the first half of 2023.

Pre-tax profit increased exponentially, going from $25.4m at last year’s halfway point to $264.8m after the first six months of 2023.

Gross premium went up to $2.723bn from $2.617bn in the same period a year ago.

Net, the figure was $1.946bn, up from $1.785bn at the same point last year.

“Our business has delivered growth in revenues and profits in every business unit, as our proactive and disciplined underwriting and favourable market conditions come together,” said Aki Hussain, Hiscox group CEO.

“Our portfolio of businesses, our people and innovation to meet the changing needs of our customers position us well to continue delivering high-quality growth and earnings.”

Leaning into reinsurance growth

Within its reinsurance and insurance linked securities (ILS) business, Hiscox said it had continued to benefit from the hard market conditions, “deploying incremental capital to grow exposure and improve the quality of the book”.

Net premium increased by 17.9% to $345.1m, up from $292.8m in the same period of 2022.

The firm said this was underpinned by strong double-digit growth in its North American natural catastrophe-exposed, retrocession and marine reinsurance books.

Its Hiscox Re & ILS arm recorded an undiscounted combined ratio of 81.2% for the first six months, improved from 92.8% at the same point of 2022.

The improvement “reflects quality of growth being achieved”, the re/insurer said.

“Leaning into the hard market”, the group allocated additional organic capital to the Hiscox Re & ILS business.

The business grew natural catastrophe exposure “at a double-digit rate” while also moving up in layers, further de-risking its bottom line from attritional or low severity events.

The firm said this also explained the dynamic between net premium growth and rate increases.

Seismic shift at 1/1

While the exceptional conditions seen at January reinsurance renewals have eased, the momentum in the market remains strong, Hiscox said.

A slight slowdown from the growth seen in the first quarter was, the company said, due to a decision to keep exposure flat in Japan, already at target market share, and in Florida, where exposure grew only slightly, due to a “complex underwriting and legislative environment”.

“The January renewals saw a seismic shift in pricing following Hurricane Ian, with the market conditions akin to those following Hurricane Andrew in 1992,” Hiscox said.

“All lines of business saw significant rate increases, which resulted in a total risk-adjusted rate change of over 30%. The April renewals, dominated by Japanese clients and some specific larger US cedants, met the anticipated rate increases of 20%, following a significant re-rating over the prior two years, and we maintained our share of the market.”

Hiscox said the “powerful combination” of exposure growth and the best-rated reinsurance market in a decade is expected to result in material increases in profits in a normal loss year.

In addition, favourable market conditions allowed a continuing trend of improvement to the quality of the book, the insurer explained, with reductions both in participations on aggregate excess-of-loss deals, and exposure to secondary perils.

“The June renewals also saw significant rate increases in US catastrophe and retrocession and we have again grown exposure, although less so than in January.

“As Florida remains a highly uncertain legal and regulatory jurisdiction, renewal rates were pushed up by over 40%, which allowed us to increase exposure in the state minimally while growing net premiums at a double-digit rate,” the firm added. 

London market growth

Meanwhile, Hiscox London Market grew its premium by 10.6% from $591.8m to $654.4m year-on-year.

The rise, according to Hiscox, was driven by a combination of strong rate in property, as well as new business growth in upstream energy and renewables – partially offset by softening rates in casualty lines.

Hiscox London Market’s combined ratio also improved from 85.6% in H1 2022 to 79.6% in H1 2023.

Profit before tax in its London Market business also increased from $17.8m to $106.9m year-on-year.

Hussain added: “Our London market business has returned to growth, as we believe the property book is priced adequately following significant re-rating and we are benefitting from attractive new growth opportunities in upstream energy, marine and renewables.”