Insurer and reinsurer Hiscox has today announced underwriting profit of $269.5 million for 2022, its highest since 2015, despite the impacts of elevated large natural catastrophes and man-made losses.
Year-on-year, the underwriting result across the group improved by around $54 million, as the combined ratio strengthened from 93.2% in 2021 to 90.6% in 2022.
Gross premiums written (GPW) rose 3.6% to $4.424 billion in 2022, supported by an attractive rate environment, as net premiums earned moved from $2.919 billion in 2021 to $2.928 billion in 2022.
Profit before tax across the group reached $44.7 million in 2022, compared with $190.8 million a year earlier, as the firm’s return on equity fell from 8.1% to 1.7%.
On the asset side of the balance sheet, Hiscox has reported an investment return of -2.6% for 2022, against a positive 0.7% in 2021. The total investment result was a loss of $187.3 million for 2022 compared with a gain of $51.2 million in 2021.
During the year Hiscox also benefited from $239.1 million of positive prior year development, compared with $148.9 million in 2021.
Turning to the company’s operating segments, and Hiscox Re & ILS saw strong top-line growth in the year on the back of ILS inflows in the first half of the year and an improving underwriting and rating environment.
GPW rose nearly 29% to more than $1 billion for the first time. In fact, as a result of deploying organic capital at the January 1st, 2023, renewals, Hiscox Re & ILS’s January 2023 net premiums written were up 49% year-on-year.
The Hiscox Re & ILS combined ratio deteriorated from 68% in 2021 to 81.6% in 2022, after the unit absorbed $90 million of net losses related to Hurricane Ian. Group-wide, Hiscox reports no material change to net losses from Hurricane Ian of $135 million and the war in Ukraine of $48 million.
Hiscox Re & ILS’s underwriting profit fell from $91.1 million in 2021 to $57.6 million in 2022, as profit before tax declined from $98.5 million to $21.5 million in 2022.
ILS assets under management (AuM) was $1.9 billion as at 31 December 2022, which is up from $1.4 billion at 31 December 2021. Hiscox explains that during the first half of the year it secured net AuM inflows of $511 million, partly offset by $79 million net outflows in the second half.
Across its reinsurance and ILS business, the firm notes that it continued to drive underwriting discipline by further reducing exposure in the risk excess class. Additionally, the carrier successfully reduced its participations on aggregate excess of loss deals and will continue this disciplined underwriting action in 2023 designed to reduce exposure to secondary perils.
In Hiscox London Market, GWP declined almost 5% to $1.114 billion, mainly as a result of underwriting actions taken on the property binder portfolio. However, the attractive rating environment means London Market is expected to grow GWP in 2023.
The unit’s combined ratio strengthened from 89.1% to 84.8%, after absorbing Hurricane Ian losses of $40 million and losses related to Russia’s invasion of Ukraine of $34 million.
Underwriting profit improved from $89.6 million last year to $110 million in 2022, while profit before tax declined from $104.8 million to $53 million.
At Hiscox Retail, a combined ratio of 94.8% for 2022 saw the segment return to its targeted range a year ahead of plan. The segment’s GPW increased more than 5% to $2.272 billion on the back of strong growth in the commercial business.
Hiscox Retail’s underwriting result improved from $34.9 million in 2021 to $101.9 million in 2022, although the division fell to a loss of $3.4 million for the year, compared with profit before tax of $54.9 million in 2021.
Aki Hussain, Group Chief Executive Officer, Hiscox Ltd, commented: “I am very pleased with the progress made across the Group during 2022, as we delivered the strongest underwriting result in seven years. We have a refined strategy, a new experienced and energetic leadership team, we have made significant progress in rolling out new-generation technology in the USA and Europe and we are enjoying our highest employee engagement scores in ten years.
“The outlook for 2023 is very positive. We are facing favourable market conditions in all of our key markets; our talented teams supported by a strong balance sheet and financial flexibility are set to make the most of the significant opportunities ahead.”
Adding: “The reinsurance market conditions are the best we have seen in over a decade. Hiscox is a net beneficiary of reinsurance rate hardening. The scale and breadth of our business, as well as the long-standing relationships developed with our reinsurance panel, have been an essential part of ensuring we secured the required retrocession protection to support our 2023 business plan.
“Hiscox Re & ILS has the expertise, strong balance sheet and financial flexibility to capitalise on the current trading conditions. As a result of deploying our organic capital at 1 January 2023 renewals, our net premiums written in January 2023 were up 49% year-on-year. In 2023, net premium written growth is expected to exceed gross premium written growth.
“Our London Market business is building a solid and dependable track record of profitability, and with the property portfolio changes now mostly complete, I expect to see the business grow as we continue to deploy underwriting aggregate with discipline in the improving market conditions. In addition, with the work underway to create leading capabilities in digital trading and underwriting the energy transition, there is excitement in the business about the coming years and the opportunity to play a key role in the London Market.
“We expect the investment result, which has been a headwind over the last 12 months, to become a tailwind in 2023, as bond reinvestment yields reached 5.2% at the end of February.
“Last but not least, change in how we present our numbers to the market is coming in the form of IFRS 17; however, this is purely a change in accounting standard, which has no impact on our business fundamentals. The strategy and the economics of the business are unchanged.
“Finally, I would like to thank our employees, business partners and shareholders for their continued support.”
