Insurer and reinsurer Hiscox has reported a record year for profit in 2016 despite tough market conditions and helped by the performance of its Hiscox Re and insurance-linked securities (ILS) unit where it found opportunity for growth in casualty and specialty business lines.
Overall, the re/insurer reported a record £354.4 million profit in 2016, up 64% on the the previous year and the highest the firm has ever seen.
The firm noted in its earnings release that its reinsurance and ILS business performed very well throughout the year, and gross written premiums (GWP) for Hiscox Re and ILS increased by an impressive 29.1% to £495.2 million, in 2015 this figure was at £383.4 million.
Hiscox said growth in casualty and specialty lines were mostly responsible for driving its reinsurance premium increase.
The reinsurer also reported excellent results for ILS, which benefitted from good underwriting and an increased contribution from fees and profit commissions.
Hiscox said; “The market continues to be awash with capital from new and traditional sources, which has seen rating pressure across the portfolio. While single-digit rate reductions at the important January renewals were within expectations, we remain willing to walk away from unattractively priced business.
“We are finding opportunity in non-catastrophe-exposed lines, such as smaller-ticket casualty and specialty reinsurance.”
Despite the challenging trading environment, reinsurance delivered a profit of £115.5 million and an impressive combined ratio of 53.7%, the reinsurer said this was due to using a strategy of careful risk selection which helped the firm avoid losses, as well as the lower severity of catastrophe activity.
Hiscox outlined its key strategies for continued growth in 2017, saying product innovation continues to be a key focus, with product development in cyber reinsurance covers, collateralised reinsurance and ILS offering.
Bronek Masojada, Chief Executive Officer (CEO) of Hiscox, commented on the firm’s 2016 result; “This is a good result, flattered by foreign exchange and boosted by a strong investment return. Our retail business has come of age, driving growth and profitability for the Group.
“This gives us options and, although there are uncertainties in both the insurance and political environments, we have the right people, footprint and financial power to adapt. We will remain focused and disciplined where margins are shrinking and invest where we see opportunities for long-term profitable growth.”
Masojada further attributed Hiscox’s success to its strategy of growing retail lines of business while aggressively managing the more volatile London Market and reinsurance businesses as opportunity and conditions dictate; “This strategy has resulted in our transformation from a niche Lloyd’s underwriter to an international insurance group with a strong consumer brand.
“Our long-held strategy of balance and diversity gives us choice and flexibility in this soft market and the symbiotic relationship we have created between our retail operations and bigger-ticket, more volatile lines, is not quickly replicated. It is the culmination of years of investment in infrastructure, our skills and our brand,” said Masojada.
The re/insurer’s Hiscox Re and ILS units were recognised for their outstanding achievement with an Underwriting Team of the Year award at the Insurance Day London Market Awards.