gaps in our current model, working Hiscox Bermuda: Our main focus in
direct and in partnership with specialist Bermuda is on reinsurance with an emerging
commercial brokers who don’t have in- presence in healthcare. Revenues grew by
house private client expertise but who want 11.5% to $318.1 million (2011: $285.2 million).
to offer a Hiscox Home Insurance policy to Profits grew substantially despite the cost
their clients. We also announced our plans of Superstorm Sandy. This performance
to open a multi-function office in York during reflects strong growth in the reinsurance
2013, with progressive in-sourcing of some business with a focus on areas like Japan,
of our direct customer service centres. Thailand and Australia which were
We have had effective relationships with particularly affected by natural catastrophes
our outsourcing partners for over a decade, in 2011. Healthcare made steady progress.
Hiscox Europe but we feel that the next stage in our journey
2012 2011 requires greater control over critical aspects The reinsurance market is evolving and we
£m £m
of our customer service. must change with it. New forms of capital
Gross premiums written 132.3 130.9
are entering the industry, selling collateralised
Net premiums earned 125.6 123.4 Hiscox Europe: Our European business policies or buying catastrophe bonds issued
Underwriting profit 1.8 2.7 has reached its fourth consecutive year by cedents like Hiscox, in competition with
Investment result 3.1 (0.1)
of profitability. Revenues have grown by 5.9% traditional markets. For a number of years
to €160.4 million (2011: €151.4 million), though we have invested in a small portfolio of
Foreign exchange (1.0) (0.2)
only 1.1% to £132.3 million when looked at catastrophe bonds issued by cedents.
Profit before tax 3.9 2.4 in sterling. Profits grew to £3.9 million (2011: In 2012 we invested in a fund managed
Combined ratio 100.9% 100.5% £2.4 million) despite increased marketing by Third Point Reinsurance Investment
Combined ratio excluding
spend to support our French direct business. Management Ltd and took a stake in the
foreign exchange 100.2% 100.4% The combined ratio rose to 100.9% (2011: firm. After all, a catastrophe bond is no more
100.5%), with improved investment returns than a reinsurance contract and a bond
driving the profit. Combined ratios and investment linked together. We will also
returns on equity are being challenged by be ceding tailored portfolios of catastrophe
Hiscox International the European economy and issues of scale. reinsurance exposure to the fund. We need
2012 2011 to adapt as the market adapts and this
£m £m
The combined ratio challenges have come helps us to do so.
Gross premiums written 418.3 365.8
from two fronts. First we have seen some
Net premiums earned 302.7 277.6 recession-related claims: jewellery thefts Hiscox Guernsey: This business
Underwriting profit 30.3 (92.7) in public places, aggressive home invasions, underwrites kidnap and ransom, piracy,
Investment result 29.2 6.3
and some large fine art thefts. The second fine art, terrorism and personal accident
is our expense ratio. This is driven by insurance. It delivered a very good profit even
Foreign exchange 3.1 (3.1)
increased marketing expenditure to support though revenues declined by 8.5% to £73.0
Profit before tax 62.6 (89.5) the growing direct business in France, and million (2011: £79.8 million). This is due to
Combined ratio 89.2% 133.9% also an increasing focus on smaller ticket a disciplined approach to underwriting piracy
Combined ratio excluding
business. This business is attractive from and business that was previously signed
foreign exchange 90.2% 132.8% a loss ratio perspective, but initially it does in three-year deals to take advantage of good
drive up operating cost. We will be working terms, prices and conditions. The team
in 2013 to re-engineer our business to bring continues to concentrate on expanding
this ratio down. its distribution into new territories.
We continue to see opportunity in Europe. Hiscox USA: Our US business made
Partnerships with major financial institutions excellent progress during the year.
have performed well and are expanding from Revenues grew by 32.6% to reach $230.5
their commercial focus to high net worth million (2011: $173.8 million), with strong
personal lines. We also expect in time to see growth across every office and in every
the broader brand benefit from our direct product. The business was performing
activities. We were on French TV for the first well ahead of plan at the bottom line until
time ever in 2012. This supported our small Superstorm Sandy. We suffered losses
direct business, and is also, reflecting our on our construction account with most
UK experience, driving brand recognition other areas escaping relatively unscathed.
and perception in the broker channel. As they mature our professional liability
We will be launching a direct business in accounts are developing well – a reflection
Germany in 2013, and I am confident that, of early prudent reserving. During the year
in time, the German and French business we launched ‘Hiscox One’, a one-stop
will replicate the success we enjoy in the UK. modular insurance cover for film and
television productions. It is the first
Hiscox International integrated product on the market and has
Hiscox international comprises our activities been received well. The direct business
in Bermuda, Guernsey and the United States. continued to expand, reaching almost $10
In aggregate they had a good year, though million in premium income (2011: $3 million)
obviously not as positive as it might have been with some exciting prospects in store for
without Superstorm Sandy which materially 2013. We will continue to market the
impacted both our Bermudian and United products online in 2013, and test brand
States businesses. Each of the three business’s advertising on billboards, specialist
progress is discussed below. publications and other print media in Austin
Chief Executive’s report Hiscox Ltd Report and Accounts 2012 9