- Investment loss impacts first half results
- Combined ratio improves to 91.3%
- Rate increases in reinsurance, retail and London market
Shares in insurance group Hiscox (HSX) slumped 7% following the announcement of disappointing first half 2022 results that were impacted by unrealised losses on the bond portfolio.
Hiscox reported a headline first half 2022 pre-tax loss of $107 million, dragged down by unrealised losses on the bond portfolio, compared with a consensus forecast of losses of $92 million.
Premium income increased by 9% year on year to $2.56 billion supported by ongoing rate increases across the portfolio (8% in the London Market, 13% in Reinsurance and 6-8% in Retail).
Rate increases are feeding through to the bottom line which is delivering a strong underwriting performance across the Wholesale book.
Today’s results showed a combined ratio of 91.3%, an improvement on the 93.1% seen a year earlier.
A ratio below 100% indicates that the company is making an underwriting profit, while a ratio above means it is paying out more money in claims than it is receiving from premiums.
RETAIL SPACE A KEY OPPORTUNITY
Hiscox’s $500 million investment in marketing and branding and $320 million investment in IT infrastructure during the past decade will help it capture a larger share of the retail small and medium business space.
It currently has just a 1% to 2% market share of a highly fragmented global market worth $80 billion.
Hiscox aims to grow between 5% and 15% in Retail, which currently generates 54% of gross written premiums.
In Hiscox Retail, the firm says growth momentum is building with gross written premiums up 1.5% to more than $1.2 billion on the back of solid growth in Europe and an improved performance in the UK.
Within this part of the business, Hiscox says that rates are strengthening across all regions.
REINSURANCE AND LONDON MARKET STAR PERFORMERS
The London Market and Reinsurance businesses put in a particularly strong underwriting performance and are driving profitability.
During the first half of 2022, Hiscox Re & ILS achieved a 13% rate increase which the firm attributes to capacity constraints in retrocession, North American catastrophe and cyber, and greater demand from clients. All of this equates to a cumulative rate increase of 52% since 2017, says Hiscox.
In the opening six months of 2022, Hiscox London Market achieved an 8% rate increase, which equates to a 72% cumulative rate increase since 2017. The firm explains that the cyber market remains hard, with rates up 60% so far this year.
Commenting on the results, Peel Hunt analyst Andreas van Ebden said: ‘The outlook is positive, as Hiscox continues to de-risk its exposures and push through rate rises. Hiscox expects rates increases to maintain momentum into 2023.’
