· Group gross premiums written up 6.1% to $3,462.9 million, as strong rate momentum continues across all business segments.
· Hiscox Retail gross premiums written up 5.9% (1.4% in constant currency). The Retail go-forward portfolio grew by 5.7% on a constant currency basis, after planned reductions in sections of the US broker channel.
· Within Hiscox Retail there was continued strong growth in Digital Partnerships and Direct (DPD) business with gross premiums written up 19.3% (15.8% in constant currency). US DPD continues to perform particularly strongly, growing 26.6% to $326.9 million.
· Retail combined ratio is progressing in line with expectations.
· Hiscox London Market continues to benefit from aggregate rate increases across the portfolio, with gross premiums written up 7.2%.
· Improved rate outlook for January renewals in Hiscox Re & ILS following elevated natural catastrophe losses in the third quarter. Net premiums written grew 46.0%.
· Investment result of $62.7 million (1.2% annualised return), as mark-to-market losses on our bond portfolio from rising interest rate expectations largely offset interest income received during the quarter.
· $110 million net reserved for Hurricane Ida based on an insured market loss of $35 billion and $40 million net for European floods based on an insured market loss of $9 billion.
· Non-catastrophe loss experience across the Group remains favourable.
· The Group's net Covid-19 loss estimate remains unchanged at $475 million for 2020 and $17 million for lockdowns announced in 2021.
Bronek Masojada, Group Chief Executive Officer, commented:
"Hiscox London Market and Re & ILS are performing strongly and we continue to benefit from excellent growth in our Retail digital business. Our capital position is robust. As I make my last quarterly trading statement as CEO of Hiscox it is pleasing to see the business in such good shape."
Gross premiums written for the period:
Gross premiums written
to 30 September 2021
to 30 September 2020*
Growth in USD
Growth in constant currency
|Hiscox London Market||900.0||839.6||7.2||5.7|
|Hiscox Re & ILS||806.5||763.6||5.6||2.0|
*2020 gross premiums written have been represented to reflect reclassification of the Special Risks division.
Rate momentum continues to be favourable across all Hiscox businesses. Hiscox London Market achieved aggregate rate increases of 13% across the portfolio, with cyber growing at a significant double digit rate. In other lines, such as D&O, general liability and major property, rates remain double digit albeit momentum is slowing.
In Hiscox Re & ILS rates were up 8% on average. At mid-year we expected rate increases in the reinsurance business to moderate due to the abundance of capital and continued interest in the sector. However, European floods in July and Hurricane Ida's landfall in August are once again a useful reminder of loss costs borne by property catastrophe reinsurers. Hiscox Re & ILS will continue to be disciplined in the market to ensure business is rated to make a sustainable profit.
In Hiscox Retail, rates are rising across all regions. In Hiscox UK rates were up 7.5%, which is ahead of our claims inflation expectations and with the strongest momentum in contingency, cyber and traditional professional indemnity lines. In Hiscox Europe rates were up 4%, largely driven by cyber and traditional professional indemnity business. In Hiscox USA rates increased 6% on average, predominantly driven by the broker channel. This is broadly in line with our claims inflation expectations in the market.
We have been working closely with customers and brokers in the UK to pay business interruption claims as quickly as possible. As of 30 September 2021, we have made final or interim payments to 5,153 insured claimants, a 60% increase on 30 July 2021, and we expect to maintain the current claim settlement momentum in the fourth quarter. Whilst claims frequency is higher than estimated, the severity is lower, resulting in business interruption claims in aggregate continuing to settle within the actuarial best estimate.
Given the claims settlement patterns and reinsurance recoveries the Group's net Covid-19 loss estimate remains prudent and unchanged at $475 million for 2020 and $17 million for new lockdowns in 2021.The UK business interruption book has now been fully renewed with the appropriate pandemic exclusion terms. We have maintained continuous and transparent dialogue with our reinsurance panel throughout this period and the reinsurance recoveries are now being made.
The market has seen an active wind season in the third quarter. The Group has reserved $110 million net including reinstatement premiums for Hurricane Ida, based on an insured market loss of $35 billion. Hurricane Ida is the sixth costliest US landfalling Hurricane in history and the majority of our exposure is in big-ticket lines: $52 million net in London Market, $50 million net in Re & ILS, with Retail incurring a modest net loss of $8 million. In addition, the Group has reserved $40 million net including reinstatement premiums for European floods based on an insured market loss of $9 billion. Our Retail businesses benefits from reinsurance which contains the net loss to $20 million for Europe and the UK. The remaining $20 million net is in the Re & ILS business, mostly through our retrocession book, a modest impact in line with our underweight exposure to Europe.
Non-catastrophe experience across the Group remains positive, with claims frequency in many lines lower than expected. Increases in construction material and labour costs and the ongoing concern regarding casualty social inflation are making claims inflation a frequently discussed matter. While economic inflation has increased, we believe rates are being achieved in excess of inflation expectations across the majority of the business. In addition we are taking pre-emptive actions across the portfolios to ensure adequate sums insured to cover the inflationary impact on rebuild costs. We have also taken a more prudent view in our claims inflation assumptions across all of our portfolios.
The investment result for the first nine months of 2021 was $62.7 million (2020: $129.9 million), or 1.2% on an annualised basis (2020: 2.5%). This is largely unchanged since the six months to 30 June 2021, as mark-to-market losses on our bond portfolio from rising interest rate expectations offset interest income received over the quarter. Assets under management at 30 September 2021 were $7.4 billion (2020: $7.6 billion).
Earlier in 2021, bond market fears of inflation were calmed by reassurance from central banks that pressures were temporary. Markets are now less certain that price rises will be short lived and are again focused on the scaling back of asset purchases by policymakers and the potential for interest rates to rise faster than initially expected.
The third quarter ended more cautiously, with equity markets taking a breath and government bond yields moving back towards the highs seen earlier in the year. The current yield to maturity on the bond portfolio increased above 0.6%. The potential for interest rises earlier than initially thought may result in further mark to market losses in the fourth quarter, albeit improving future reinvestment opportunities.
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