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March 2005

Hiscox plc Preliminary results for the year ended 31 December 2004 Robert Hiscox, Chairman Bronek Masojada, Chief Executive Stuart Bridges, Finance Director Robert Childs, Director of Underwriting. March 2005. Strong Results. Operating Profit* (£m). Profit before Tax (£m).

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March 2005

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  1. Hiscox plcPreliminary results for the year ended 31 December 2004 Robert Hiscox, ChairmanBronek Masojada, Chief ExecutiveStuart Bridges, Finance DirectorRobert Childs, Director of Underwriting March 2005

  2. Strong Results Operating Profit* (£m) Profit before Tax (£m) Combined Ratio (%) 77.1 86.3 83.4 77.0 87.2 93.0 2003 2004 2003 2004 2004 2003 *Based on longer term investment return 2

  3. Strong Results Gross Written Premium (£m) Net Premium Earned (£m) 797.4 778.9 642.4 676.7 547.5 548.9 385.1 344.2 3

  4. Strong Results EPS (p) (on profit after tax) EPS (p) (on operating profit after tax) Net Asset Value per Share (p)* 18.7 21.0 119.1 132.8 20.9 19.3 31 Dec 2003 31 Dec 2004 2003 2004 2003 2004 (*before equalisation provision) 4

  5. Highlights • Strong underwriting result • Dividend growth • Net tangible asset growth • Strategy continues to deliver • Balance and focus 5

  6. Financial PerformanceStuart Bridges Group Finance Director 6

  7. Hiscox plc Results 7

  8. Segmental Analysis For the year ended 31 December 2004 2004 2003 London Market/Group £000 London Market/Group £000 International Retail £000 Group Total £000 International Retail £000 Group Total £000 UK Retail £000 UK Retail £000 Gross Premiums Written 511,874 175,699 91,320 778,893 541,442 174,551 81,387 797,380 Net Premiums Written 462,325 151,349 67,892 681,566 458,463 145,726 56,777 660,966 Net Premiums Earned 444,407 137,932 60,090 642,429 366,810 132,189 48,452 547,451 Operating Profit 63,561 18,786 3,990 86,337 61,545 15,015 562 77,122 Profit before tax 53,356 20,508 3,170 77,034 64,458 18,523 427 83,408 Combined Ratio 92.9% 89.8% 97.9% 93.0% 85.8% 90.3% 98.2% 87.2% London Market/Group: Hiscox plc share of Syndicate 33, Managing Agent, Hiscox Investment Management and central Group costs. UK Retail: UK retail within Hiscox Insurance Company and Hiscox Connect International Retail: Guernsey Insurance Company and European retail business within Hiscox Insurance Company. 8

  9. Investment Performance Longer term rate of return: 4% Bonds & Cash, 6% Equities 9

  10. IFRS: Adoption • Opening balance sheet for IFRS is January 2004 • 2004 results restated for IFRS announced summer 2005 • Results for the half year 2005 will be under IFRS • Comparatives will also be restated in the half year and annual report for 2005 10

  11. IFRS:Estimated impact on the balance sheet 11

  12. IFRS:Estimated impact on profit 12

  13. Hiscox Syndicate 33Robert Childs Director of Underwriting 13

  14. Rates Holding 244 241 193 126 104 100 100 95 78 69 67 61 Exposure Premium 2004 1999 2000 2001 2002 2003 Rolling 12 Month Index to December 14

  15. 2002 YOA Gross Comparison 2002 YOA Net Comparison Syndicate 33 Moody’s Composite Quarters from Inception Quarters from Inception 2003 YOA Net Comparison 2003 YOA Gross Comparison Quarters from Inception Quarters from Inception Syndicate 33 v Competitors: Incurred Loss Ratio 15

  16. Rating Syndicate 33 Rating Index 500 400 % 300 200 100 0 London Market Reinsurance Specialty 16

  17. D&O - Relationship between Income and Rates 1998 1999 2000 2001 2002 2003 E 2004 E 2005 E 17

  18. Property Insurance Business Mix Relationship Between Big Ticket and Small Ticket Business & Rates 1998 1999 2000 2001 2002 2003 E 2004 E 2005 E 18

  19. Business Areas 19

  20. Business Areas 20

  21. Adjusting to the market cycle • Analysis, agility, action • discipline • renewals v. new business • selective underwriting • Specialty focus • opportunities in smaller risks • Global business, local presence • Europe • US 21

  22. Retail: UK and InternationalBronek Masojada Chief Executive, Hiscox plcActing Managing Director - Retail 22

  23. Hiscox Insurance Company Gross Written Premium: £m Combined Ratio: % 118.0 231.4 218.7 107.9 102.6 97.7 97.8 97.9 93.6 92.6 176.4 163.9 127.3 97.8 90.0 74.7 Non-Core Core 23

  24. 174.6 44.2 37.2 29.6 18.9 132.2 15.0 (1.7) 2.3 90.3% 107.4% 90.6% Retail Performance 2004 (£m) 2003 (£m) Europe Guernsey Guernsey UK UK Europe GWP 175.7 55.7 35.6 42.5 17.6 137.9 Net Premiums Earned Operating Profit 18.8 1.2 2.8 Combined Ratio 89.8% 102.1% 91.1% 24

  25. UK Personal Lines UK PI France Germany Retail: Rates 190% 170% 150% 130% Rolling 12 Month Index of Rates 110% 90% 70% 50% Jul-01 to Jun-02 Jul-02 to Jun-03 Jul-00 to Jun-01 Jul-03 to Jun-04 Jan-02 to Dec-02 Jan-03 to Dec-03 Jan-04 to Dec-04 Jan-01 t0 Dec-01 Month 25

  26. Business Areas 26

  27. Europe • Further progress • Strong premium growth • Product expansion • Large high net worth • Professional insurances • Distribution for TMT 27

  28. Summary and OutlookBronek MasojadaChief Executive, Hiscox plc 28

  29. Summary • Solid progress on strategy • Syndicate 33, operating profit up to £63.5m, 92.9% combined ratio • UK Retail, operating profit up to £18.8m, 89.8% combined ratio • International operations, operating profit up to £4.0m, 97.9% combined ratio • Sustainable profits • Net asset growth 29

  30. Reinsurance & Major Property Strategy 100% = £1,051m Total group controlled income for 2004 • Grow Retail to balance London Market volatility • Successful to date • 25% to 42% of group in 10 years • Larger than entire group GWP in 1994 • Use all group locations and legal entities to reach customers • Focus for 2005 and beyond Art & Private Clients London Market Professions & Specialty Commercial 17% 34% 9% 10% 24% 6% Specialty ATMT Retail London Market Syndicate 33, Hiscox Insurance Company & Hiscox Guernsey Syndicate 33 30

  31. Outlook • Competitive trading environment • Opportunities • Selective underwriting in London market • Increase ownership of Syndicate 33 • Continue Retail expansion: UK, Europe and globally via Lloyd’s • Extend distribution • Good start to 2005 31

  32. Q & A 32

  33. Appendices • Realistic Disaster Scenarios • Geographical & Currency Split • Loss Ratios as a % of Syndicate Premiums • Syndicate 33 Capacity and Hiscox plc Ownership • Reinsurance • Company Background • Glossary of Terms 33

  34. Realistic Disaster Scenarios Syndicate 33 - Losses shown as a percentage of 2005 capacity 34

  35. Geographical & Currency Split 2005 Geographical Split 2005 Currency Split 1.4% Non-EU Europe & Russia CAD EUEurope (exc. UK) 1.8% EUR USA 11.9% 11.4% 39.2% 43.5% 31.4% 42.8% UK 3.4% Canada GBP USD 4.4% Other 1.5% Australia 0.3% Israel 2.0% Asia (exc. Japan & China) 1.2% Caribbean 0.4% Middle East (exc. Israel) 1.4% Central & South America 1.0% China & Japan 1.0% Africa 35

  36. Loss Ratios as a % of Syndicate Premiums Syndicate 33 incurred losses as a percentage of signed premium (excluding WTC) 36

  37. Capacity Hiscox plc Ownership QQS Syndicate 33 Capacity & Hiscox plc Ownership 900 25 48 800 775 846 842 700 55065% 55071% 547 65% 201 600 £ m 500 504 360 360 400 277 55% 300 191 53% 191 53% 200 100 0 2000 2001 2002 2003 2004 2005 E 37

  38. AAA A 11% 51% AA 38% Group Reinsurance Security 2005 Programme • Successful commutations • Bad debt provision: £7.5m • Reinsurance receivables 10.6% of total assets Receivables at 31/12/04 of £196m AAA 1% Other 14% AA 36% A 49% • 25% self-insurance on large proportion of reinsurance bought 38

  39. Reinsurance Reinsurance as a % of GWP (ex. QQS) Reinsurance Receivables as a % of Total Assets 35.3% 26.9% 27.3% 26.0% 18.2% % % 15.4% 17.3% 11.8% 10.6% 13.7% 39

  40. Background - Hiscox Pedigree • Established in 1901 • Hiscox Syndicate 33 has been a leading underwriter at Lloyd’s for many years. Now a top 3 syndicate in the market. Rating; A from AM Best, A from Standard & Poor’s • Hiscox Insurance Company acquired in 1996. Rating: A- from A M Best, A- from Standard & Poor’s • We have built up a sound reputation in the US, UK and internationally • Involved at senior levels at Lloyd’s • RRS Hiscox, Deputy Chairman, 1993-95 • B E Masojada, Currently Deputy Chairman • R S Childs, Currently Chairman, Lloyd’s Market Association 40

  41. Background - Group Strategy • Build a successful European based insurer known for its specialist policies, customer focus and financial performance • Build a retail business to complement the Lloyd’s business • Allocate capital between Syndicate 33 and retail business according to prevailing market opportunities 41

  42. Hiscox plc Lloyd’sbusiness UK Retail business International business • Hiscox Syndicates Ltd • 71% of Syndicate 33 • Hiscox Corporate Names • Colchester • Birmingham • Glasgow • Leeds • London • Maidenhead • Hiscox Direct • Belgium • France • Germany • Guernsey • Ireland • Netherlands Background - Hiscox Structure 42

  43. Background - Building a Balanced Business Grow Lloyd’s Grow Insurance Company Grow Lloyd’s Maintain Lloyd’s Develop Insurance Company 1083 1051 941 780 603 514 Lloyd's 480 Hiscox Insurance Company 422 413 403 379 378 370 244 190 132 101 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Controlled Gross Written Premium £m 43

  44. Glossary of Terms Annual Venture The system used for running a Lloyd’s syndicate under which each “year of account” is treated separately. Members own capacity on a syndicate for a “year of account” and the results are declared when the year is closed by the RITC mechanism, usually after 3 years. Claims ratio Net claims incurred, including IBNR, as a percentage of net earned premiums. Combined ratio The total of the claims and expenses ratios. Equalisation provision This a provision made to cover future catastrophe losses and is calculated in accordance with a set sector formula, which has the effect of smoothing the profit cycle. Expenses ratio Expenses as a percentage of net written premiums. Funds at Lloyd’s The amount of assets, which can be cash, investments or letters of credit, that a syndicate member has to deposit with Lloyd’s to support their share of the capacity on a syndicate. The minimum amount is 40% of the capacity owned by the member. Gross written premium Premiums contracted for before any deductions. Group controlled The total gross written premium controlled by the group including the 35% of the syndicate capacity not owned by Hiscox in 2004 (29% in 2005). IBNR Incurred but not reported. An estimate made at the end of each accounting period to cover the expected cost of losses that have occurred but have not yet been reported to the insurer or reinsurer. Incurred loss ratio Paid and outstanding losses as a percentage of premiums. Gross incurred loss ratio is before deducting any reinsurance and net is after deducting reinsurance. gross written premium 44

  45. Glossary of Terms Long-tail A term used to describe an insurance risk that has the potential for claims development or new claims to be reported a number of years after expiry of the term of the policy. Member or Name The companies or individuals who own the capacity of a syndicate and who belong to the membership of the Society of Lloyd’s. Net premiums earned Premiums received after the cost of reinsurance and adjustment for unearned premium. Unearned premium covers the future period of risk of an insurance policy. Net premiums written Premiums contracted for after deduction of reinsurance. Open year A Year of Account of a syndicate which has not been closed by Reinsurance To Close (RITC). RITC usually occurs at the end of the third year. A Year of Account can be left open beyond the third year if the extent of the future liability cannot be accurately quantified. Qualifying quota share These are quota share reinsurance policies, which Lloyd’s allow in certain circumstances, that enable a syndicate to write gross premium in excess of its capacity. Reinsurance to close – RITC The reinsurance to close comprises a premium payable by the closing year to the members on the next open year of account and a contract which transfers the liability for all claims in respect of the closing year to the next open year. Run-off account At Lloyd’s, a year of account which is kept open after the date on which it would normally have been closed. Subrogation The right of the underwriter to “stand in the shoes of the insured” and take over the Insured's rights, following payment of a claim, to recover the payment of an incurred loss from a third party responsible for the loss. It is limited to the amount of loss paid by the insurance policy. Syndicate Capacity Also referred to as the ‘stamp’. The maximum amount of business that a syndicate in Lloyd’s can write per year, aggregated from all its members. reinsurance 45

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