Hiscox trebles pre-tax profits

Hiscox announced its pre-tax profit had more than trebled from £105.2m to £320.6m with after tax profits of £280.5m up from £70.8m.

It said its combined ratio was 86.0%, up from 75.3% but was 82.2%, down from 91.6% excluding foreign exchange.

Financial highlights (2008 in brackets)

• Gross premiums written £1,435.4m (£1,147.4m)
• Net premiums earned £1,098.1m (£928.1m)
• Profit before tax £320.6m (£105.2m)
• Profit after tax £280.5m (£70.8m)
• Group combined ratio excluding foreign exchange 82.2% (91.6%)
• Group combined ratio 86.0% (75.3%)

Robert Hiscox, chairman said: “A record profit after continued investment in developing our UK brand and building our US business is a very happy result.”

Hiscox London Market

Hiscox London Market was again the main profit generator in the Group, contributing £179.9m (2008: £137.0m). This was achieved through underwriting £663.0m of business (2008: £545.9m).

Reinsurance

“Our reinsurance business performed well yet again. Having made a profit in 2008 despite the impact of Hurricane Ike, it is not surprising that it made a very good return in a year largely free of major losses.

“Our expertise in reinsurance is widely recognised, reflected by the fact that a number of third party capital providers have chosen us to underwrite on their behalf. In 2009 Syndicate 6104 – a syndicate funded entirely by third party capital -- supported us. This support has been extended into 2010. We have a number of similar arrangements with other insurance companies.

“Overall, reinsurance prices softened in the January renewals, although I believe that in 2010 we will see rates largely similar to or better than those in 2008-- a year in which we achieved a good result despite the impact of Hurricane Ike.

Specialty

“This division underwrites a spread of specialist risks: personal accident, bloodstock, kidnap and ransom, terrorism, political risks and aviation war. Good performance across most of these lines was offset by political risk losses, largely due to credit defaults.

“We took a cautious approach early in the year in reserving for these claims in view of the continuing fragile state of the global economy. There is a possibility, however, that, as conditions improve, these political risk losses may reduce, which is what we experienced in the last big financial crisis in 1998.

“In keeping with our belief that you should advance to the sound of gun fire we expect to expand our political risk underwriting this year as client demand and pricing increases due to the turbulent global economic situation.

Marine and energy

“This division had a good year. Energy rates rose in 2009 following Hurricane Ike. We were able to take advantage of these rates and better terms to write a larger book of business and have been well rewarded for doing so in 2010.

Property

“Our primary focus is on catastrophe exposed property for global companies, homeowners and small businesses. Rates have been under pressure and we expect to reduce the size of this account significantly.

“In 2010 this reduction will be partially offset by a scheme to underwrite mechanical equipment – a non-cat area which we expect will serve us well.

Casualty

“Our London team now focuses on professional indemnity written in Lloyd’s and their results exclude the technology and media book which is now accounted for as part of Hiscox USA.

“We have shrunk as rates have come under pressure and have taken a cautious reserving approach in view of the economic climate. We have, however, had a net benefit from releases on prior underwriting years.