Hiscox plc reported a first-half profit gain, pointing to a turnaround from loss-making catastrophes a year earlier, while also announcing Robert Childs has been selected to succeed the retiring Robert Hiscox as chairman.
Comprehensive income in the first half was 116.39 million pounds (US$183.3 million), compared with a 95.59 million pound loss a year earlier. The difference this year was in catastrophe experience, as the group's combined ratio improved to 81.7 from last year's 116.9. Gross written premiums rose 7% to 906.4 million pounds as Hiscox said it "targeted growth areas where rates are rising."
"Our reinsurance teams in London and Bermuda have benefited from the low incidence of catastrophes or large losses during the period and taken advantage of higher rates in selective areas," said Chairman Robert Hiscox in a statement. "The retail businesses in the U.K. and Europe have both had some bad weather losses, but have demonstrated their core strength by turning in a reasonable profit even after increased marketing spend. The U.S. business is developing strongly and Guernsey continues to shine."
Hiscox, who is set to retire as chairman in February 2013, said although the U.K. Corporate Governance Code favors an independent chairman, "I agree with the recommendation of the nominations committee, as do the major shareholders who were consulted. The board believes that Robert Childs has the strength of character, the commercial experience and the detailed knowledge of our business that will make him an excellent chairman of the board.'
Childs was the active underwriter of the group's Lloyd’s Syndicate 33, who then started and built the Hiscox businesses in Bermuda and the United States, said Hiscox in a statement. He has recently had an oversight role covering all the underwriting in the group as chief underwriting officer.
Hiscox also announced Jeremy Pinchin has been appointed CEO of Hiscox Bermuda and group company secretary effective Aug. 14, taking over from Charles Dupplin who will be returning to the United Kingdom.
In the first half, the group's London market segment more than doubled its pretax profit, to 69.5 million pounds, on the strength of underwriting gains in terrorism, upstream energy, commercial property, aviation and catastrophe reinsurance in Japan. Growth was reported in Africa and the Middle East in both terrorism and political risk business.
A U.S. executive for the group recently told Best's News Service that kidnap and ransom and extortion coverages are growth areas for Hiscox.
For the U.K. segment, pretax profit fell 37.3% to 15.8 million pounds, partly on reserving efforts made for possible flood or event cancellation claims due to unusually heavy rainfall. Regarding event cancellation, Hiscox said the group's underwriters "are to be congratulated for avoiding high-profile outdoor events, which have had to be cancelled."
Hiscox said the group's U.K. businesses were "distracted" by preparations for Solvency ll. "The chorus of complaints to the regulators has had an effect and their demands have ameliorated to some extent," he said. "Sense must prevail and I hope we can make the processes which Solvency II requires an intrinsic part of our risk management without them stripping us of the use of intuition and common-sense. After all, no model could ever have predicted the amount of rain falling this year in the U.K. and tipping down outside my window as I write."
Hiscox Europe's pretax profit rose to 600,000 pounds from 100,000 pounds, though claims rose due to factors such as severe winter weather in France and higher-than-normal claims from Benelux households due to a rise in armed burglary. The Europe operation, like that in the United Kingdom, concentrates on household and specialist commercial lines, including fine art, media and technology, and kidnap and ransom.
For Hiscox International, pretax profit improved to 46.2 million pounds from an 82.2 million pound loss a year earlier as catastrophe results improved. Hiscox noted its Bermuda unit profited from its strategy of pulling back on catastrophe lines in softening conditions, then going back in when "the inevitable loss drives prices up and wounded competitors away."
The International segment included the Bermuda, Guernsey and U.S. operations. "Guernsey has for long been one of the jewels in our crown and it continues to perform well," said Hiscox. "The team has concentrated on expanding its distribution in the Middle East and Far East. They have remained cautious about the piracy market, choosing to underwrite only those risks which they regard as being sensibly priced."