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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hiscox Ltd | LSE:HSX | London | Ordinary Share | BMG4593F1389 | ORD 6.5P (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.00 | 0.17% | 1,174.00 | 1,171.00 | 1,173.00 | 1,175.00 | 1,144.00 | 1,144.00 | 3,315,562 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Ins Agents,brokers & Service | 967.8M | 712M | 2.0481 | 5.72 | 4.07B |
From Apr 2019 to Apr 2024
TIDMHSX
RNS Number : 5026M
Hiscox Ltd
31 July 2017
Hiscox Ltd interim results
For the six months ended 30 June 2017
"A good underwriting result despite on-going headwinds"
Hot Features
Premium
H1 2017 H1 2016
Gross premiums written GBP1,459.6m GBP1,288.5m
Net premiums earned GBP936.6m GBP767.5m
Profit before tax GBP102.6m GBP206.0m
Profit before tax excluding GBP133.5m GBP118.7m
FX
Earnings per share 34.9p 70.4p
Interim dividend per share 9.5p 8.5p
Net asset value per share 657.7p 591.7p
Group combined ratio 91.0% 80.7%
Group combined ratio excluding
FX 89.9% 88.4%
Return on equity (annualised) 11.1% 28.3%
Investment return (annualised) 2.3% 2.3%
Foreign exchange (losses)/gains GBP(30.9)m GBP87.3m
Highlights
-- Profits before tax up 12.5% excluding the impact of foreign exchange.
-- Hiscox Retail is the greatest contributor to profit in the first half, with Hiscox USA a stand-out performer, generating 31.1% premium growth in local currency.
-- Hiscox London Market reduced GWP by 8.2% in line with expectations, a disciplined response to challenging conditions.
-- In Hiscox Re and ILS, growth is coming from our ILS business, where assets under management have now reached US$1.35 billion.
Bronek Masojada, Chief Executive Officer, Hiscox Ltd, commented:
"We are managing the cycle and driving retail growth, as our long-held strategy of balancing the portfolio between volatile big-ticket business and steady retail business continues to deliver. Despite tough market conditions we are finding opportunities."
SContacts:
Hiscox Jeremy Pinchin, Company Secretary, Bermuda +1 441 278 8300 Kylie O'Connor, Head of Communications, London +44 (0) 20 7448 6656 Brunswick Tom Burns +44 (0)20 7404 5959 Simone Selzer +44 (0)20 7404 5959
Notes to editors
About The Hiscox Group
Hiscox is a global specialist insurer, headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). Our ambition is to be a respected specialist insurer with a diverse portfolio by product and geography. We believe that building balance between catastrophe-exposed business and less volatile local specialty business gives us opportunities for profitable growth throughout the insurance cycle. It's a long-standing strategy which in 2016 helped generate gross premiums written of GBP2,402.6 million and a record profit before tax of GBP354.5 million.
The Hiscox Group employs over 2,300 people in 13 countries, and has customers worldwide. Through the retail businesses in the UK, Europe, Asia and the US, we offer a range of specialist insurance for professionals and business customers as well as homeowners. Internationally traded, bigger ticket business and reinsurance is underwritten through Hiscox London Market and Hiscox Re and ILS.
Our values define our business, with a focus on people, quality, courage and excellence in execution. We pride ourselves on being true to our word and our award-winning claims service is testament to that. For more information, visit www.hiscoxgroup.com.
Chairman's statement
It has been a good first half, with the Group delivering a pre-tax profit of GBP102.6 million (2016: GBP206.0 million) and growing gross written premium by 13.3% to GBP1,459.6 million (2016: GBP1,288.5 million). In contrast to the prior year, foreign exchange has moved against us with a GBP30.9m negative impact on the result. Excluding the impact of foreign exchange we have seen an increase of 12.5% of profits to GBP133.5 million (2016: GBP118.7 million). Across the Group we have seen a more normalised claims pattern return, although the environment is still largely benign.
The retail operations we have been diligently building for more than 20 years are offsetting on-going volatility in bigger ticket lines, and it is pleasing to see that Hiscox Retail has made the biggest contribution to the bottom line in the first half for the second consecutive year. We now have more than 750,000 retail customers.
Conditions in the London Market continue to test our mettle. We have trimmed back in some of the most affected areas - making difficult but necessary decisions to reduce our involvement or withdraw completely from some lines of business. In Hiscox Re and ILS, we are benefitting from strong underwriting heritage and product innovation.
We are pleased with this result, but as usual we look forward with caution to the second half of the year as the hurricane season approaches.
Results
The half year result to 30 June 2017 was a pre-tax profit of GBP102.6 million (2016: GBP206.0 million), GBP133.5 million excluding foreign exchange gains/(losses) (2016: GBP118.7 million). Gross written premiums increased to GBP1,459.6 million (2016: GBP1,288.5 million) or 4.8% growth in constant currencies. Net earned premiums were GBP936.6 million (2016: GBP767.5 million). The impact of foreign exchange was a loss of GBP30.9 million (2016: gain of GBP87.3 million). The net combined ratio was 91.0% (2016: 80.7%) and was 89.9% (2016: 88.4%) excluding foreign exchange (losses)/gains. Earnings per share were 34.9p (2016: 70.4p) and net assets per share grew to 657.7p (2016: 591.7p). The annualised return on equity was 11.1% (2016: 28.3%).
Dividend, balance sheet and capital management
The Board of Hiscox Ltd has declared an interim dividend for 2017 of 9.5p per share (2016: 8.5p) reflecting the Group's decision in February to announce a 15% step-up in the full year dividend and associated commitment to a progressive dividend policy. The record date for the dividend will be 11 August 2017 and the payment date will be 13 September 2017.
The Board proposes to offer a scrip dividend alternative subject to the terms and conditions of Hiscox Ltd's 2016 Scrip Dividend Scheme. The last date for receipt of scrip elections will be 18 August 2017 and the reference price will be announced on 30 August 2017. Details of how to elect for the Scrip Dividend are provided on the Company's website.
We still see plenty of opportunities for profitable growth and will continue to deploy our capital to this end, As ever we will review our capital position at year end.
Rates
The rating environment for big ticket business has not improved but we remain agile, shrinking where rates have reduced and pursuing growth where margins have held up better. In our retail lines, rates are broadly stable.
In the London Market, rates are drifting down and stabilizing at a marginal level. As announced earlier in the year, we have exited political risks and materially reduced in other areas including aviation, extended warranty and big-ticket property.
In Hiscox Re and ILS, pressure on North American reinsurance rates was still evident during the important 1 June and 1 July renewal seasons but the rate of decline is slowing.
Claims
The weather has been good to us, and like others in the industry we have benefited from a benign catastrophe claims environment. We had minimal exposure to high-profile losses in the market, such as the tragic Grenfell Tower fire and Cyclone Debbie which hit parts of Australia and New Zealand in March. We have seen a more normalised loss environment across the Group.
Hiscox's prudent approach to reserving is reflected in reserve releases for the first half of GBP96.1 million (2016: GBP96.1 million).
Marketing
Our strong brand continues to differentiate us and is delivering good growth in key markets which is why we will be investing over GBP50 million in marketing during 2017 (2016: GBP42 million). To ensure we are managing this budget prudently around the globe, we have developed new econometric modeling to measure our marketing effectiveness.
The US and UK are the focus of most of our marketing investment. Our US small business brand continues to go from strength-to-strength, given this we have increased our marketing spend in this area by $12 million.
At the beginning of the year we launched a new brand campaign in the US which has delivered good results to date. I'mpossible highlights the courage of some of our small business customers with an advertising campaign telling their stories. In the UK in June we launched Ever Onwards a campaign with a rallying cry to consumers in pursuit of progress.
Hiscox Retail
The Hiscox Retail segment comprises Hiscox UK and Europe, and Hiscox International.
Gross written premiums GBP739.6 million (2016: GBP581.1 million) Profit before tax GBP73.4 million (2016: GBP92.3 million) Profit before tax excluding FX GBP71.4 million (2016: GBP68.2 million) Combined ratio 90.6% (2016: 84.1%) Combined ratio excluding FX 90.9% (2016: 89.4%)
Hiscox UK and Europe
This division provides personal lines cover - from high-value household, fine art and collectibles to luxury motor - and commercial insurance for small and medium-sized businesses, typically operating in white collar industries. These products are distributed via brokers and through a growing network of partnerships. Our schemes business offers insurance solutions to customers with similar risk profiles for example sports clubs and niche industry associations. For some simple risks we distribute policies direct-to-consumer in the UK, France and Germany.
Gross written premiums GBP405.8 million (2016: GBP345.6 million) Profit before tax GBP52.4 million (2016: GBP65.2 million) Profit before tax excluding FX GBP47.7 million (2016: GBP47.5 million) Combined ratio 86.6% (2016: 79.9%) Combined ratio excluding FX 88.0% (2016: 86.6%)
Hiscox UK and Ireland
Gross written premium grew by 13.9% to GBP278.4 million (2016: GBP244.4 million), or 12.9% in constant currency, driven by strong new business and retention rates.
In the broker channel, schemes and specialty commercial were particularly strong performers. We are benefiting from our niche position of working with non-standard 'specialist' retailers, and our on-going focus on technology business is paying off. Underwriting partnerships also achieved good growth, albeit from a low base. The migration of our broker channel business to a new IT platform continues apace and we hope to reap the same benefits in terms of conversion, pricing and service that we have seen in our direct business.
In the direct-to-consumer channel, there is good growth in our core direct commercial and home business. Our direct home business has an exciting new partnership with Barclays where we are providing home insurance products to their Premier customers.
Hiscox Europe
Gross written premiums grew by 25.8% to GBP127.4 million (2016: GBP101.2 million), or 12.2% in constant currency. This growth was mainly driven by commercial lines business in Germany and Spain.
Much of the growth in Germany is coming from cyber and classic car, two specialty areas in which we are building a reputation. In Spain, we are growing thanks to the performance of our professional indemnity, directors and officers' and management liability lines, and in partnerships with other financial service providers. We have also introduced a new commercial property product here, with promising early signs.
In France, growth in our professions book is pleasing, and a focus on specialty commercial schemes is paying off. Our Benelux business continues to focus on professionals and specialty commercial and we will consider adding to its product suite in time.
We continue to invest in digitising our business in every country across Europe, with broker extranet sites that enable us to distribute and service our products to brokers more efficiently. The 'My Hiscox' broker extranet site most recently launched in France, and has been well received.
Hiscox International
This division comprises Hiscox Special Risks, Hiscox USA and DirectAsia.
Gross written premiums GBP333.8 million (2016:
GBP235.5 million)
Profit before tax GBP21.0 million (2016:
Profit before tax excluding GBP27.1 million)
FX GBP23.7 million (2016:
GBP20.7 million)
Combined ratio 95.3% (2016: 89.7%)
Combined ratio excluding FX 94.3% (2016: 93.3 %)
Hiscox Special Risks
Hiscox Special Risks underwrites kidnap and ransom, security risks, personal accident, classic car, jewellery and fine art risks. Hiscox Special Risks has teams in London, Guernsey, Cologne, Munich, Paris, New York, Los Angeles and Miami.
Gross written premiums increased by 17.0% to GBP52.5 million (2016: GBP44.9 million), or 13.6% in constant currency. Following an exceptionally benign claims experience in 2016, we have seen a return to a normal loss environment. Similar to other parts of the business, we have established an underwriting centre for Special Risks and it is an approach that is paying off, boosting both new business and retention.
The Security Incident Response product we launched in January in the UK has been well-received by the market. It gives us opportunities with a wider range of clients who are focused on broader security issues beyond kidnap exposure, using additional distribution channels such as directors and officers' brokers. Building on this success, we have also recently launched the SIR product in Spain and the US.
Hiscox USA
Hiscox USA underwrites small-to-mid market commercial risks through brokers, other insurers and directly to businesses online and over the telephone.
Hiscox USA continues to be a major area of opportunity for the Group, with gross written premiums increasing by 50.3% to GBP275.6 million (2016: GBP183.4 million), or 31.1% in constant currency.
Our broker channel business and direct and partnerships division have both performed well. Good growth is coming from our professions, cyber and general liability lines.
Our small business operations continue to go from strength-to-strength and we now have more than 210,000 policies in force. We have introduced a new quote, bind and pay portal delivering Hiscox products to our distribution partners with their own branded interface. This system has already been adopted by a major online aggregator.
Work is well underway on the IT infrastructure changes we are undertaking to replace the existing policy and claims administration system in the US.
DirectAsia
DirectAsia is a direct-to-consumer business in Singapore and Thailand that sells predominantly motor insurance. Hiscox acquired the business in April 2014.
DirectAsia achieved gross written premiums of GBP5.7 million (2016: GBP7.2 million). As we've said before, most of this reduction can be attributed to the sale of the Hong Kong business in the second quarter of 2016.
In Singapore, we have extended our distribution in conjunction with a local aggregator, and a new partnership with a vehicle inspection centre is helping us to grow reach and sales.
Hiscox London Market
This segment uses the global licences, distribution network and credit rating available through Lloyd's to insure clients throughout the world.
Gross written premiums GBP314.6 million (2016: GBP342.7
million)
Profit before tax GBP17.2 million (2016: GBP37.1
Profit before tax excluding FX million)
GBP25.5 million (2016: GBP19.9
million)
Combined ratio 94.8% (2016: 85.3%)
Combined ratio excluding FX 91.0% (2016: 94.8%)
Gross written premiums in Hiscox London Market reduced by 8.2% to GBP314.6 million (2016: GBP342.7 million), or 16.9% in constant currency. This is in line with our previous guidance of reducing in areas under most pressure.
We are doing what we said we would do in our London Market business. We are reducing materially where margins are evaporating, such as aviation, big ticket property and London Market healthcare. We have not renewed the extended warranty business we wrote through White Oak and are writing a much reduced line on the physical damage portfolio. As announced earlier in the year, we have taken decisive action and exited political risks which has moved outside of our risk appetite.
We are holding our position in areas of strength and margin such as household and commercial property binders and terrorism.
We are investing where we see real opportunity; in US flood, where the market is deregulating, and good growth in cargo albeit from a low base. In casualty, our general liability team is bringing new business to London which previously would have been written elsewhere and we are benefiting from this.
Another significant area of opportunity of growth for Hiscox London Market is where we support other expert underwriters with capacity as well as our expertise in contracts, claims, wordings and pricing. For example, we are working with another Lloyd's coverholder on a niche California earthquake product that, by combining both of our specific areas of expertise, enables us to bridge an existing gap in the market.
Hiscox MGA continues to perform well, boosted by strong renewals in the yacht account, new talent in the marine team and the addition of our space business which transferred into the MGA during the period.
The Hiscox London Market team received recognition at the Reactions London Market Awards 2017, where they were awarded Marketing Campaign of the Year for their cyber campaign.
Hiscox Re and ILS
The Hiscox Re segment comprises the Group's reinsurance businesses in London, Paris and Bermuda and Insurance Linked Security (ILS) activity.
Gross written premiums GBP405.4 million (2016:
GBP364.7 million)
Profit before tax GBP38.2 million (2016: GBP54.6
Profit before tax excluding FX million)
GBP39.6 million (2016: GBP41.8
million)
Combined ratio 84.0% (2016: 56.0%)
Combined ratio excluding FX 81.8% (2016: 69.8%)
Gross written premiums grew by 11.2% to GBP405.4 million (2016: GBP364.7 million), or 4.3% in constant currency. This is the result of successful product innovation in Hiscox Re and on-going growth in the Hiscox ILS funds. At a net level, the top line has reduced by 8.7%, due to reductions in specialty and the closure of our healthcare business.
In Hiscox Re, a combination of disciplined underwriting, growth in key client partnerships and new opportunities to write well-rated business in areas such as Japan, US flood and cyber is paying off.
Assets under management in ILS funds and vehicles are now in excess of US$ 1.35 billion with continued demand from investors. The fully collateralized fund that launched at the start of the year has already fully deployed its assets under management. We were delighted that the ILS team was awarded ILS Fund Manager of the Year at the Reactions London Market Awards 2017.
Investments
The investment return for the first six months of the year is ahead of expectations, helped in part by the performance from our risk assets. The investment result before derivatives was GBP50.5 million (2016: GBP42.0 million), 2.3% on an annualised basis (2016: 2.3%). Assets under management at 30 June 2017 were GBP4,415 million (2016: GBP3,946 million).
In contrast to the corresponding period last year, market sentiment has been broadly positive with measures of volatility subdued at historically low levels. Equity markets have been strong and sector performance has been less diverse. The portfolio of risk assets has therefore made a good contribution in absolute and relative terms. Income from our bond portfolios overall is more in line with expectation and mainly derived from the US dollar allocation. Generating positive returns from sterling and euro bonds has been more challenging recently, with the marked increase in yields at the end of June.
Having largely ignored political outcomes, predicted or otherwise, investor attention has switched recently to the more hawkish rhetoric from a range of Central Banks as they prepare to join the Federal Reserve in gradually reducing their accommodative stance. Given valuations across asset classes and the likely moves towards normalising monetary policy, we remain cautious with the majority of our risk appetite focused on the exposure to risk assets which represents 7.4% of the portfolio.
The Board
Having served nine years on the Hiscox Ltd Board (at which point the UK Corporate Governance Code deems them not independent), Ernst Jansen and Gunnar Stokholm will retire from the Board with effect from 16 November 2017. Ernst and Gunnar have both provided a significant contribution to the Board over the years and I would like to thank them for their wisdom and insight which will be sorely missed.
I am delighted to say that we have appointed three new Board members; Michael Goodwin, Thomas Hüerlimann and Costas Miranthis. They will join the Hiscox Ltd Board as Independent Non Executive Directors from the same date.
Michael Goodwin has valuable experience from the Asia Pacific region, gained not only during his time as Asia Pacific CEO at QBE insurance but also as Vice President of the General Insurance Association of Singapore. Thomas Huerlimann brings important leadership experience, most recently as CEO of Zurich Global Corporate. Costas Miranthis is based in Bermuda and has extensive reinsurance experience from his time as President and CEO at Partner Re.
We will benefit from their impressive insurance industry experience, covering some of our key geographies (Bermuda, Asia and Europe) and I look forward to working with them alongside the rest of the Board.
Outlook
Our strategy was designed for this climate; managing the insurance cycle and driving retail growth. Finding attractive bigger-ticket business remains challenging, and there is no indication that will change anytime soon, but we are not afraid to make tough decisions where necessary.
As we announced in May, we plan to establish a new EU subsidiary in Luxembourg in response to Brexit. We are now working closely with the Luxembourg regulator on license approval, and local recruitment as well as sourcing office space is underway. Our plan means we will be well placed to continue to serve our sizeable European customer base after 1 April 2019.
However, Brexit is just one example of the increasing number of Group projects we are undertaking. Regulatory obligations such as the implementation of GDPR in Europe and cyber security regulations from the New York Department of Financial Services all require financial and human resource. The critical infrastructure projects that I have spoken about previously, such as upgrading our financial processes and the IT platform changes in our UK and US retail businesses, are equally necessary. These will impact our expense ratio in the short-term, but in the long-term they will ensure we operate efficiently and effectively - matching our capabilities with our ambitions.
We continue to execute our plan successfully. We have plenty of room for growth in Hiscox Retail, and the selective approach we have taken within Hiscox London Market and Hiscox Re and ILS continues to yield opportunities.
Robert Childs
31 July 2017
Additional performance measures
The Group has identified additional performance measures (APM) that are not defined in accordance with Generally Accepted Accounting Principles (GAAP), being International Financial Reporting Standards (IFRS), and may not necessarily have standardised meanings for ease of comparability across other organisations in the industry. These non-GAAP measures are used within these interim financial statements. These APMs are: profit excluding foreign exchange gains/(losses), combined claims and expense ratios, return on equity, net asset value pence per share and reserve releases. These are standard measures used across the industry, and allow the reader of the half year report to compare across peer companies.
- Profit excluding foreign exchange gains/(losses)
This represents the profit for the period after deducting foreign exchange gains or adding back foreign exchange losses in the relevant period. This enables the reader of these financial statements, and the Group, to measure the comparability of underlying profitability without the foreign exchange volatility. To obtain the value, the reader of these financial statements should remove the foreign exchange gains/(losses), as identified in the income statement, from the profit for the period.
- Combined claims and expense ratios
The Combined claims and expense ratios are a common measure enabling comparability across the insurance industry, that measures the relevant underwriting profitability of the business by reference to its costs as a proportion of its net earned premium. The Group calculates the combined ratio as if the Group owned all of the business, including the 27.5% of Syndicate 33 that the Group does not own. The Group does this to enable comparability from period to period as the business mix may change in a segment between insurance carriers, and this enables us to measure all of our underwriting businesses on an equal measure. The calculation is discussed further in note 8, operating segments. The combined ratio excluding foreign exchange gains is calculated as the sum of the claims ratio and the expense ratio.
- Return on Equity (ROE)
As is common within the financial services industry, the Group uses ROE as one of its key performance metrics. Whilst the measure enables the company to compare itself against other peer companies in the immediate industry, it is also a key measure internally where it is used to compare the profitability of business segments, and underpins the performance related pay and shared based payment structures, as discussed within the remuneration policy report in the annual Report and Accounts. The ROE is shown in note 10, along with an explanation of the calculation.
- Net asset value (NAV) pence per share
The Group uses NAV pence per share as one of its key performance metrics. This is a widely used key measure for management and also for users of the financial statements to provide comparability across peers in the market. NAV pence per share is shown in note 9, along with an explanation of the calculation.
- Reserve releases
Reserve releases are a measure of favourable development on claims reserves that existed at the prior balance sheet date. It enables the users of the financial statements to compare and contrast our performance relative to peer companies. The Group maintains a prudent approach to reserving, to help mitigate the uncertainty within the reserve estimates. The release is calculated as the movement in ultimate losses on prior accident years between the current and prior year balance sheet date, as shown in note 15, as a result of better than expected outcomes of the estimates booked at the prior period close.
Condensed consolidated interim income statement
For the six month period ended 30 June 2017
Note 6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
------------------------------------- ----- ---------- ---------- ------------
Income
Gross premiums written 8 1,459,601 1,288,478 2,402,579
Outward reinsurance premiums (446,056) (399,368) (614,636)
------------------------------------- ----- ---------- ---------- ------------
Net premiums written 1,013,545 889,110 1,787,943
Gross premiums earned 1,243,813 1,014,461 2,220,853
Premiums ceded to reinsurers (307,181) (246,920) (545,840)
------------------------------------- ----- ---------- ---------- ------------
Net premiums earned 936,632 767,541 1,675,013
Investment result 11 48,957 39,907 74,991
Other income 12 21,954 18,549 37,594
------------------------------------- ----- ---------- ---------- ------------
Total income 1,007,543 825,997 1,787,598
------------------------------------- ----- ---------- ---------- ------------ Expenses Claims and claim adjustment expenses (559,667) (449,941) (1,004,601) Reinsurance recoveries 116,459 121,572 264,829 ------------------------------------- ----- ---------- ---------- ------------ Claims and claim adjustment expenses, net of reinsurance (443,208) (328,369) (739,772) Expenses for the acquisition of insurance contracts (299,072) (244,351) (538,467) Reinsurance commission income 82,522 52,052 128,627 Operational expenses 12 (204,218) (176,429) (415,719) Net foreign exchange (losses)/gains 20 (30,871) 87,323 152,408 ------------------------------------- ----- ---------- ---------- ------------ Total expenses (894,847) (609,774) (1,412,923) ------------------------------------- ----- ---------- ---------- ------------ Results of operating activities 112,696 216,223 374,675 Finance costs 13 (9,882) (10,206) (20,266) Share of profit of associates after tax (191) 4 134 ------------------------------------- ----- ---------- ---------- ------------ Profit before tax 102,623 206,021 354,543 Tax expense 14 (4,716) (8,395) (17,557) ------------------------------------- ----- ---------- ---------- ------------ Profit for the period (all attributable to owners of the Company) 97,907 197,626 336,986 ------------------------------------- ----- ---------- ---------- ------------ Earnings per share on profit attributable to owners of the Company Basic 16 34.9p 70.4p 119.8p Diluted 16 33.9p 68.2p 116.0p ------------------------------------- ----- ---------- ---------- ------------ The notes to the condensed consolidated interim financial statements are an integral part of this document.
Condensed consolidated interim statement of comprehensive income
For the six month period ended 30 June 2017
6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
---------------------------------------------- --------- --------- ---------
Profit for the period 97,907 197,626 336,986
Other comprehensive income
Items that will not be reclassified
to profit and loss:
Remeasurements of the net defined benefit
obligation - (36,081) (46,531)
Income tax on the remeasurement of other
comprehensive income - 7,786 9,502
----------------------------------------------- --------- --------- ---------
- (28,295) (37,029)
----------------------------------------------- --------- --------- ---------
Items that may be reclassified subsequently
to profit and loss:
Exchange differences on translating
foreign operations (23,979) 56,383 111,094
Income tax on the remeasurement of other - - -
comprehensive income
----------------------------------------------- --------- --------- ---------
(23,979) 56,383 111,094
Other comprehensive income net of tax (23,979) 28,088 74,065
----------------------------------------------- --------- --------- ---------
Total comprehensive income for the year
(all attributable to owners of the Company) 73,928 225,714 411,051
----------------------------------------------- --------- --------- ---------
The notes to the condensed consolidated interim financial statements
are an integral part of this document.
Condensed consolidated interim balance sheet
At 30 June 2017
Note 30 June 30 June 31 Dec 2016
2017 2016
GBP000 GBP000 GBP000
--------------------------------- ----- ---------- ---------- ------------
Assets
Goodwill and intangible assets 132,062 130,653 123,724
Property, plant and equipment 46,861 47,019 48,425
Investments in associates 7,948 13,523 13,835
Asset held for sale 3 5,593 12,010 -
Deferred tax 39,404 38,452 41,392
Deferred acquisition costs 378,008 344,308 346,592
Financial assets carried at
fair value 18 3,689,938 3,305,812 3,792,033
Reinsurance assets 15 925,389 793,606 805,649
Loans and receivables including
insurance receivables 969,203 865,068 802,906
Current tax asset 5,782 1,311 2,406
Cash and cash equivalents 770,571 685,859 664,816
--------------------------------- ----- ---------- ---------- ------------
Total assets 6,970,759 6,237,621 6,641,778
--------------------------------- ----- ---------- ---------- ------------
Equity and liabilities
Shareholders' equity
Share capital 19,102 19,042 19,060
Share premium 23,081 16,069 18,035
Contributed surplus 89,864 89,864 89,864
Currency translation reserve 178,293 147,561 202,272
Retained earnings 1,547,637 1,394,301 1,488,306
--------------------------------- ----- ---------- ---------- ------------
Equity attributable to owners
of the Company 1,857,977 1,666,837 1,817,537
--------------------------------- ----- ---------- ---------- ------------
Non-controlling interest 866 866 866
Total equity 1,858,843 1,667,703 1,818,403
Employee retirement benefit
obligation 56,139 43,414 56,139
Deferred tax 7,537 20,109 17,030
Insurance liabilities 15 4,051,411 3,618,881 3,852,976
Financial liabilities 18 284,371 284,877 276,293
Current tax 10,309 9,253 21,735
Trade and other payables 702,149 593,384 599,202
--------------------------------- ----- ---------- ---------- ------------
Total liabilities 5,111,916 4,569,918 4,823,375
--------------------------------- ----- ---------- ---------- ------------
Total equity and liabilities 6,970,759 6,237,621 6,641,778
--------------------------------- ----- ---------- ---------- ------------
The notes to the condensed consolidated interim financial statements
are an integral part of this document.
Condensed consolidated interim statement of changes in equity
For the six month period ended 30 June 2017
Share Share Contributed Currency Retained Non Total
capital premium surplus translation earnings controlling
reserve interest
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- --------- ----------------- ------------ ------------- ---------- -------------- ----------
Balance at 1
January
2017 19,060 18,035 89,864 202,272 1,488,306 866 1,818,403
Profit for the
period
(all attributable
to owners of the
company) - - - - 97,907 - 97,907
Other
comprehensive
income/(expense)
net of tax (all
attributable to
owners of the
company) - - - (23,979) - - (23,979)
Employee share
options:
Equity settled
share-based
payments - - - - 13,648 - 13,648
Proceeds from
shares
issued 26 2,027 - - - - 2,053
Deferred and
current
tax on employee
share options - - - - 3,308 - 3,308
Shares purchased
by Trust - - - - (1,249) - (1,249)
Shares issued in
relation to Scrip
dividends 16 3,019 - - - - 3,035
Dividends paid to
owners of the
Company - - - - (54,283) - (54,283) Balance at 30 June 2017 19,102 23,081 89,864 178,293 1,547,637 866 1,858,843 ------------------- --------- ----------------- ------------ ------------- ---------- -------------- ---------- The equity attributable to owners of the Company is GBP1,857,977,000 at 30 June 2017.
Condensed consolidated interim statement of changes in equity
For the six month period ended 30 June 2016
Share Share Contributed Currency Retained Non controlling Total
capital premium surplus translation earnings interest
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- --------- --------- ------------ ------------- ---------- ---------------- ----------
Balance at 1 January
2016 19,030 15,231 89,864 91,178 1,312,660 866 1,528,829
Profit for the period
(all attributable
to owners of the
company) - - - - 197,626 - 197,626
Other comprehensive
income/(expense)
net of tax (all
attributable to
owners of the company) - - - 56,383 (28,295) - 28,088
Employee share options:
Equity settled
share-based
payments - - - - 10,669 - 10,669
Proceeds from shares
issued 12 838 - - - - 850
Deferred and current
tax on employee
share options - - - - 1,260 - 1,260
Shares purchased
by Trust - - - - (9,945) - (9,945)
Dividends paid to
Owners of the Company - - - - (89,674) - (89,674)
Balance at 30 June
2016 19,042 16,069 89,864 147,561 1,394,301 866 1,667,703
------------------------- --------- --------- ------------ ------------- ---------- ---------------- ----------
The equity attributable to owners of the Company is GBP1,666,837,000 at 30 June 2016.
Condensed consolidated interim statement of changes in equity
For the year ended 31 December 2016
Share Share Contributed Currency Retained Non controlling Total
capital premium surplus translation earnings interest
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- --------- --------- ------------ ------------- ---------- ---------------- ----------
Balance at 1
January 2016 19,030 15,231 89,864 91,178 1,312,660 866 1,528,829
Profit for the
year (all
attributable
to owners of
the company) - - - - 336,986 - 336,986
Other comprehensive
income net of
tax (all attributable
to owners of
the company) - - - 111,094 (37,029) - 74,065
Employee share
options:
Equity settled
share-based payments - - - - 26,274 - 26,274
Proceeds from
shares issued 22 1,534 - - - - 1,556
Deferred and
current tax on
employee share
options - - - - 1,907 - 1,907
Shares purchased
by Trust - - - - (38,558) - (38,558)
Shares issued
in relation to
Scrip dividends 8 1,270 - - - - 1,278
Dividends paid
to owners of
the Company - - - - (113,934) - (113,934)
----------------------- --------- --------- ------------ ------------- ---------- ---------------- ----------
Balance at 31
December 2016 19,060 18,035 89,864 202,272 1,488,306 866 1,818,403
----------------------- --------- --------- ------------ ------------- ---------- ---------------- ----------
The notes to the condensed consolidated interim financial statements are an integral part of this document.
The equity attributable to owners of the Company is GBP1,817,537,000 at 31 December 2016.
Condensed consolidated interim cash flow statement
For the six month period ended 30 June 2017
Note 6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
-------------------------------------- ----- --------- ---------- ----------
Profit before tax 102,623 206,021 354,543
Adjustments for:
Net foreign exchange losses/(gains) 30,871 (87,323) (152,408)
Interest and equity dividend income (30,435) (23,280) (54,789)
Interest expense 13 9,882 10,206 20,266
Net fair value gains on financial
assets and liabilities (21,600) (16,302) (13,786)
Depreciation, amortisation and
impairment 9,599 7,299 28,162
Charges in respect of share based
payments 13,648 10,669 26,274
Changes in operational assets
and liabilities:
Insurance and reinsurance contracts 56,301 72,887 251,836
Financial assets carried at fair
value 12,359 (133,212) (431,324)
Financial liabilities carried
at fair value (329) 745 458
Financial liabilities carried
at amortised cost 8,407 8,453 156
Other assets and liabilities (27,324) (11,111) 3,687
Interest received 29,114 19,368 55,273
Equity dividends received 333 174 505
Interest paid (2,003) (3,180) (21,852)
Current tax paid (23,715) (5,484) (6,108)
Cash flows from subscriptions
(paid)/received in advance - - (4,000)
-------------------------------------- ----- --------- ---------- ----------
Net cash flows from operating
activities 167,731 55,930 56,893
Cash flow from the purchase and
sale of subsidiaries 13,772 (17,477) (3,881)
Cash flow from the sale and purchase
of associates - - (448)
Cash flows from the purchase of
property, plant and equipment (1,948) (158) (5,770)
Cash flows from the purchase of
intangible assets (12,831) (11,307) (20,909)
-------------------------------------- ----- --------- ---------- ----------
Net cash flows from investing
activities (1,007) (28,942) (31,008)
Proceeds from the issue of ordinary
shares 2,052 850 1,556
Shares repurchased (1,249) (9,945) (38,558)
Distributions paid to owners of
the Company 17 (51,247) (89,674) (112,656)
Net cash flows from financing
activities (50,444) (98,769) (149,658)
-------------------------------------- ----- --------- ---------- ----------
Net increase/(decrease) in cash
and cash equivalents 116,280 (71,781) (123,773)
-------------------------------------- ----- --------- ---------- ----------
Cash and cash equivalents at 1
January 664,816 727,880 727,880
Net increase/(decrease) in cash
and cash equivalents 116,280 (71,781) (123,773)
Effect of exchange rate fluctuations
on cash and cash equivalents (10,525) 29,760 60,709
-------------------------------------- ----- --------- ---------- ----------
Cash and cash equivalents at end
of period 21 770,571 685,859 664,816
-------------------------------------- ----- --------- ---------- ----------
The notes to the condensed consolidated interim financial statements
are an integral part of this document.
Notes to the condensed consolidated interim financial statements
1. Reporting entity
Hiscox Ltd (the 'Company') is a public limited company registered and
domiciled in Bermuda. The condensed consolidated interim financial
statements for the Company as at, and for the six months ended, 30
June 2017 comprise the Company and its subsidiaries (together referred
to as the 'Group') and the Group's interest in associates. The Chairman's
statement accompanying these condensed consolidated interim financial
statements forms the Interim Management Report for the half year ended
30 June 2017.
The Directors of Hiscox Ltd are listed in the Group's 2016 Report and
Accounts. A list of current Directors is maintained and available for
inspection at the registered office of the Company located at 4th Floor,
Wessex House, 45 Reid Street, Hamilton, HM 12, Bermuda.
2. Basis of preparation
These condensed consolidated interim financial statements have been
prepared in accordance with the Listing Rules issued by the Financial
Conduct Authority. The information presented herein does not include
all of the disclosures typically required for full consolidated financial
statements. Consequently these condensed consolidated interim financial
statements should be read in conjunction with the full consolidated
financial statements of the Group as at, and for the year ended, 31
December 2016 which are available from the Company's registered office
or at www.hiscoxgroup.com. Except where otherwise indicated, all amounts
are presented in Pounds Sterling and rounded to the nearest thousand.
After making enquiries, the Directors have an expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. For this reason the condensed
consolidated interim financial statements have been prepared on a going
concern basis and are prepared on the historical cost basis except
that pension scheme assets included in the measurement of the employee
retirement benefit obligation, and certain financial instruments including
derivative instruments are measured at fair value.
Taxes on income for the interim period are accrued using the estimated
effective tax rate that would be applicable to estimated total annual
earnings.
Within the condensed consolidated interim cash flow statement, the
Group has allocated the cash derecognised on loss of control out of
cash flows from operating activities and provided a netted down position
under cash flow from the purchase and sale of subsidiaries under investing
activities.
The independent auditors, have reported on the Group's full consolidated
financial statements as at, and for the year ended, 31 December 2016.
The report of the independent auditors was not qualified. The amounts
presented for the 30 June 2017 and 30 June 2016 periods are unaudited.
These condensed consolidated interim financial statements were approved
on behalf of the Board of Directors by the Chief Executive, B E Masojada
and the Chairman, R S Childs. Accordingly the Half Yearly Report to
the London Stock Exchange was approved for issue on Monday, 31 July
2017 following receipt of confirmation from the auditors that they
had reviewed the final content.
3. Basis of consolidation
On 1 May 2017, the Group disposed of its subsidiary Blue Hill Specialty
Insurance Company Inc.
As a result of the disposal, the Group has derecognised the assets
and liabilities relating to the company. Below is a table disclosing
the impact to the consolidated financial statement following the disposal.
GBP000
Total assets no longer recognised in the consolidated
balance sheet (12,021)
Total currency translation reserve no longer recognised
in the consolidated balance sheet 1
Cash received on disposal 14,571
Profit recognised in other income in the consolidated
income statement 2,561
In addition, on 30 June 2017, the Group entered into an agreement for
the disposal of one of its associate holdings Lark (2012) Limited.
The sale is subject to regulatory approval, and as such, the Group
have assessed that the sale is not complete. The Group has concluded
that the transaction meets the criteria of IFRS 5, in that it shall
be recognised as an asset held for sale on the balance sheet at its
current carrying value.
4. Accounting policies and methods of computation
The accounting policies applied in these condensed consolidated interim
financial statements are consistent with those applied by the Group
in its consolidated financial statements as at, and for the year ended,
31 December 2016. The consolidated financial statements as at, and
for the year ended, 31 December 2016 were compliant with International
Financial Reporting Standards as adopted by the European Union and
in accordance with the provisions of the Bermuda Companies Act 1981.
The Interim Report is compliant with IAS 34 Interim Financial Reporting
as adopted by the European Union.
In preparing these interim financial statements, Management make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. The significant
judgments made by Management in applying the Group's accounting policies
and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements as at and for
the year ended 31 December 2016.
5. Financial, insurance and other risk management
The Group's financial, insurance and other risk management objectives
and policies are consistent with that disclosed in note 3 of the full
consolidated financial statements as at, and for the year ended, 31
December 2016. The principal risks and uncertainties are unchanged
and may be summarised as underwriting risk, reserving risk, reliability
of fair values, equity price risk, interest rate risk, liquidity risk,
credit risk, currency risk and capital risk. The Group recognises that
following the decision of the UK to leave the European Union, it may
continue to face greater volatility in credit, currency and liquidity
risk whilst uncertainty remains.
The Group continues to monitor all aspects of its financial risk appetite
and the resultant exposure taken with caution, and has consequently
suffered insignificant defaults on investments held, and other third-party
balances during the period under review.
As detailed in note 18, the Group's investment allocation is broadly
comparable to that at 31 December 2016 as outlined in the Group Report
and Accounts. The Group also continues to be mindful of the processes
required for establishing the reliability of fair values obtained for
some classes of financial assets affected by ongoing periods of diminished
liquidity. In order to assist users, the Group has disclosed the measurement
attributes of its investment portfolio in a fair value hierarchy in
note 19 in accordance with IFRS 13 Fair Value Measurement.
The Group remains susceptible to fluctuations in rates of foreign exchange,
in particular between Pound Sterling and the US Dollar.
Strong treasury management has ensured that the Group's balance sheet
remains well capitalised and its operations are financed to accommodate
foreseen liquidity demands together with a high level of capital sufficient
to meet future catastrophe obligations even if difficult investment
market conditions were to prevail for a period of time.
6. Seasonality and weather
Historically the Group's most material exposure to catastrophe losses
on certain lines of business such as reinsurance inwards and marine
and major property risk have been greater during the second half of
the calendar year, broadly in line with the most active period of the
North Atlantic hurricane season. In contrast, a majority of gross premium
income written in these lines of business occurs during the first half
of the calendar year. The Group actively participates in many regions
and if any catastrophic events do occur, it is likely that the Group
will share some of the market's losses. Consequently, the potential
for significantly greater volatility in expected returns remains during
the second half of the year. Details of the Group's recent exposures
to these classes of business are disclosed in the Group's 2016 Report
and Accounts.
7. Related party transactions
Transactions with related parties during the period are consistent
in nature and scope with those disclosed in note 36 of the Group's
2016 Report and Accounts.
8. Operating segments
The Group's operating segment reporting follows the organisational
structure and management's internal reporting systems, which form the
basis for assessing the financial reporting performance of, and allocation
of resource to each business segment. The Group's four primary business
segments are identified as follows:
Hiscox Retail brings together the results of the UK and Europe, and
Hiscox International being the US, Special Risks and Asia retail business
divisions.
Hiscox UK and Europe underwrite European personal and commercial lines
of business through Hiscox Insurance Company Limited, together with
the fine art and non-US household insurance business written through
Syndicate 33. In addition, Hiscox UK includes elements of specialty
and international employees and officers' insurance written by Syndicate
3624, but excludes the European kidnap and ransom business written
by Hiscox Insurance Company Limited.
Hiscox International comprises the specialty and fine art lines written
through Hiscox Insurance Company (Guernsey) Limited, and the motor
business written via DirectAsia, together with US commercial, property
and specialty business written by Syndicate 3624 and Hiscox Insurance
Company Inc. via the Hiscox USA business division. It also includes
the European kidnap and ransom business written by Hiscox Insurance
Company Limited and Syndicate 33.
Hiscox London Market comprises the internationally traded insurance
business written by the Group's London based underwriters via Syndicate
33, including lines in property, marine and energy, casualty and other
specialty insurance lines, excluding the kidnap and ransom business.
In addition, the segment includes elements of business written by Syndicate
3624 being auto physical damage, auto extended warranty and aviation
business.
Hiscox Re and ILS is the Reinsurance division of the Hiscox Group,
combining the underwriting platforms in Bermuda, London and Paris.
The segment comprises the performance of Hiscox Insurance Company (Bermuda)
Limited with the reinsurance contracts written by Syndicate 33. In
addition, the healthcare and casualty reinsurance contracts written
in the Bermuda hub on Syndicate capacity are also included.
Corporate Centre comprises the investment return, finance costs and
administrative costs associated with Group management activities. Corporate
Centre also includes the majority of foreign currency items on economic
hedges and intragroup borrowings, further details of these can be found
in note 13 of the Group's Report and Accounts for the year ended 31
December 2016. Corporate Centre forms a reportable segment due to its
investment activities which earn significant external returns.
All amounts reported below represent transactions with external parties
only. In the normal course of trade, the Group's entities enter into
various reinsurance arrangements with one another. The related results
of these transactions are eliminated on consolidation and are not included
within the results of the segments. This is consistent with the information
used by the chief operating decision-maker when evaluating the results
of the Group. Performance is measured based on each reportable segment's
profit before tax.
6 months ended 30 June 2017
-----------------------------------------------------------------------------------------------
Hiscox Retail Hiscox London Hiscox Re Corporate Total
Market and ILS centre
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- -------------- -------------- ---------- ---------- ----------
Gross premiums written 739,555 314,602 405,444 - 1,459,601
Net premiums written 681,686 199,750 132,109 - 1,013,545
Net premiums earned 602,392 230,158 104,082 - 936,632
--------------------------- -------------- -------------- ---------- ---------- ----------
Investment result 12,304 8,329 13,659 14,665 48,957
Other income 9,174 6,060 6,613 107 21,954
--------------------------- -------------- -------------- ---------- ---------- ----------
Total income 623,870 244,547 124,354 14,772 1,007,543
--------------------------- -------------- -------------- ---------- ---------- ----------
Claims and claim
adjustment expenses,
net of reinsurance (261,443) (123,396) (58,369) - (443,208)
Expenses for the
acquisition of insurance
contracts (143,820) (67,749) (4,981) - (216,550)
Operational expenses (147,011) (27,908) (20,751) (8,548) (204,218)
Foreign exchange
gains/(losses) 1,985 (8,247) (1,472) (23,137) (30,871)
--------------------------- -------------- -------------- ---------- ---------- ----------
Total expenses (550,289) (227,300) (85,573) (31,685) (894,847)
--------------------------- -------------- -------------- ---------- ---------- ----------
Results of operating
activities 73,581 17,247 38,781 (16,913) 112,696
Finance costs (4) - (618) (9,260) (9,882)
Share of profit
of associates after
tax (197) - - 6 (191)
--------------------------- -------------- -------------- ---------- ---------- ----------
Profit before tax 73,380 17,247 38,163 (26,167) 102,623
--------------------------- -------------- -------------- ---------- ---------- ----------
Profit before tax
and foreign exchange
gains/(losses) 71,395 25,494 39,635 (3,030) 133,494
--------------------------- -------------- -------------- ---------- ---------- ----------
100% ratio analysis*
--------------------------- -------------- -------------- ---------- ---------- ----------
Claims ratio (%) 43.1 50.4 58.5 - 46.9
Expense ratio (%) 47.8 40.6 23.3 - 43.0
--------------------------- -------------- -------------- ---------- ---------- ----------
Combined ratio excluding
foreign exchange
impact (%) 90.9 91.0 81.8 - 89.9
Foreign exchange
impact (%) (0.3) 3.8 2.2 - 1.1
--------------------------- -------------- -------------- ---------- ---------- ----------
Combined ratio (%)^ 90.6 94.8 84.0 - 91.0
--------------------------- -------------- -------------- ---------- ---------- ----------
6 months ended 30 June 2016
-----------------------------------------------------------------------------------------------
Hiscox Retail Hiscox London Hiscox Re Corporate Total
Market and ILS centre
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- -------------- -------------- ---------- ---------- ----------
Gross premiums written 581,065 342,665 364,748 - 1,288,478
Net premiums written 528,200 216,188 144,722 - 889,110
Net premiums earned 470,391 198,154 98,996 - 767,541
--------------------------- -------------- -------------- ---------- ---------- ----------
Investment result 15,325 10,142 7,658 6,782 39,907
Other income 7,517 4,518 5,815 699 18,549
--------------------------- -------------- -------------- ---------- ---------- ----------
Total income 493,233 212,814 112,469 7,481 825,997
--------------------------- -------------- -------------- ---------- ---------- ----------
Claims and claim
adjustment expenses,
net of reinsurance (174,651) (109,714) (44,004) - (328,369)
Expenses for the
acquisition of insurance
contracts (125,309) (62,374) (4,616) - (192,299)
Operational expenses (125,038) (20,846) (21,095) (9,450) (176,429)
Foreign exchange
gains 24,039 17,215 12,803 33,266 87,323
--------------------------- -------------- -------------- ---------- ---------- ----------
Total expenses (400,959) (175,719) (56,912) 23,816 (609,774)
--------------------------- -------------- -------------- ---------- ---------- ----------
Results of operating
activities 92,274 37,095 55,557 31,297 216,223
Finance costs - - (919) (9,287) (10,206)
Share of profit
of associates after
tax 4 - - - 4
--------------------------- -------------- -------------- ---------- ---------- ----------
Profit before tax 92,278 37,095 54,638 22,010 206,021
--------------------------- -------------- -------------- ---------- ---------- ----------
Profit before tax
and foreign exchange
gains 68,239 19,880 41,835 (11,256) 118,698
--------------------------- -------------- -------------- ---------- ---------- ----------
100% ratio analysis*
--------------------------- -------------- -------------- ---------- ---------- ----------
Claims ratio (%) 36.5 54.3 45.0 - 42.9
Expense ratio (%) 52.9 40.5 24.8 - 45.5
--------------------------- -------------- -------------- ---------- ---------- ----------
Combined ratio excluding
foreign exchange
impact (%) 89.4 94.8 69.8 - 88.4
Foreign exchange
impact (%) (5.3) (9.5) (13.8) - (7.7)
--------------------------- -------------- -------------- ---------- ---------- ----------
Combined ratio (%)^ 84.1 85.3 56.0 80.7
--------------------------- -------------- -------------- ---------- ---------- ----------
Year ended 31 December 2016
---------------------------------------------------------------------------------------------
Hiscox Hiscox London Hiscox Re Corporate Total
Retail Market and ILS centre
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ---------- -------------- ---------- ---------- ------------
Gross premiums written 1,181,384 726,045 495,150 - 2,402,579
Net premiums written 1,091,969 469,143 226,831 - 1,787,943
Net premiums earned 1,020,531 443,129 211,353 - 1,675,013
--------------------------- ---------- -------------- ---------- ---------- ------------
Investment result 31,328 13,351 11,749 18,563 74,991
Other income 14,075 9,121 13,704 694 37,594
--------------------------- ---------- -------------- ---------- ---------- ------------
Total income 1,065,934 465,601 236,806 19,257 1,787,598
--------------------------- ---------- -------------- ---------- ---------- ------------
Claims and claim
adjustment expenses,
net of reinsurance (396,137) (260,468) (83,167) - (739,772)
Expenses for the
acquisition of insurance
contracts (262,545) (137,177) (10,118) - (409,840)
Operational expenses (287,642) (57,933) (49,335) (20,809) (415,719)
Foreign exchange
gains 37,248 34,991 22,959 57,210 152,408
--------------------------- ---------- -------------- ---------- ---------- ------------
Total expenses (909,076) (420,587) (119,661) 36,401 (1,412,923)
--------------------------- ---------- -------------- ---------- ---------- ------------
Results of operating
activities 156,858 45,014 117,145 55,658 374,675
Finance costs - - (1,654) (18,612) (20,266)
Share of profit
of associates after
tax 1,137 (1,003) - - 134
--------------------------- ---------- -------------- ---------- ---------- ------------
Profit before tax 157,995 44,011 115,491 37,046 354,543
--------------------------- ---------- -------------- ---------- ---------- ------------
Profit before tax
and foreign exchange
gains 120,747 9,020 92,532 (20,164) 202,135
--------------------------- ---------- -------------- ---------- ---------- ------------
100% ratio analysis*
--------------------------- ---------- -------------- ---------- ---------- ------------
Claims ratio (%) 38.4 57.4 39.1 - 44.2
Expense ratio (%) 53.5 42.3 26.5 - 46.6
--------------------------- ---------- -------------- ---------- ---------- ------------
Combined ratio excluding
foreign exchange
impact (%) 91.9 99.7 65.6 - 90.8
Foreign exchange
impact (%) (3.8) (8.7) (11.9) - (6.4)
--------------------------- ---------- -------------- ---------- ---------- ------------
Combined ratio (%)^ 88.1 91.0 53.7 - 84.4
--------------------------- ---------- -------------- ---------- ---------- ------------
* The Group's percentage participation in Syndicate 33 can fluctuate from year to year and consequently, presentation of the ratios at the 100% level removes any distortions arising therefrom.
^ The combined ratio is made up of the aggregation of the claims ratio, the expense ratio and the impact of foreign exchange. The claims ratio is calculated as claims and claim adjustment expenses, net of reinsurance, as a proportion of net premiums earned. The expense ratio is calculated as the total of expenses for the acquisition of insurance contracts, and operational expenses as a proportion of net premiums earned. The foreign exchange impact ratio is calculated as the foreign exchange gains or losses as a proportion of net premiums earned. All ratios are calculated using the 100% results. Costs allocated to the Corporate Centre are non-underwriting related costs and are not included within the combined ratio.
The tables presented below contain the net earned premium, claims, expenses and foreign exchange items at 100% ownership, to enable calculation of the underling ratios included in the operating segments.
Period ended 30 June 2017
-------------------------------------------------------------------------------------------
Hiscox Hiscox London Hiscox Re Corporate Total
Retail Market and ILS centre
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ---------- -------------- ---------- ---------- ----------
Net premium earned 616,856 286,680 118,514 - 1,022,050
Claims and claim
adjustment expenses,
net of reinsurance (265,757) (144,377) (69,336) - (479,470)
Expenses for the
acquisition of insurance
contracts (147,272) (83,228) (4,300) - (234,800)
Operational expenses (147,860) (33,056) (23,270) - (204,186)
Foreign exchange
gains/(losses) 1,807 (10,919) (2,641) - (11,753)
--------------------------- ---------- -------------- ---------- ---------- ----------
Period ended 30 June 2016
-------------------------------------------------------------------------------------------
Hiscox Hiscox London Hiscox Re Corporate Total
Retail Market and ILS centre
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ---------- -------------- ---------- ---------- ----------
Net premium earned 483,613 246,989 113,409 - 844,011
Claims and claim
adjustment expenses,
net of reinsurance (176,779) (134,091) (51,083) - (361,953)
Expenses for the
acquisition of insurance
contracts (124,671) (75,236) (4,652) - (204,559)
Operational expenses (131,198) (24,735) (23,479) - (179,412)
Foreign exchange
gains 25,825 23,412 15,673 - 64,910
--------------------------- ---------- -------------- ---------- ---------- ----------
Year ended 31 December 2016
-------------------------------------------------------------------------------------------
Hiscox Hiscox London Hiscox Re Corporate Total
Retail Market and ILS centre
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ---------- -------------- ---------- ---------- ----------
Net premium earned 1,046,838 550,229 242,462 - 1,839,529
Claims and claim
adjustment expenses,
net of reinsurance (402,508) (315,951) (94,819) - (813,278)
Expenses for the
acquisition of insurance
contracts (270,986) (165,131) (10,337) - (446,454)
Operational expenses (289,028) (67,376) (54,015) - (410,419)
Foreign exchange
gains 40,115 48,101 28,927 - 117,143
--------------------------- ---------- -------------- ---------- ---------- ----------
9. Net asset value
per share
30 June 2017 30 June 2016 31 Dec 2016
----------------------- ----------------------- -----------------------
Net asset NAV Net asset NAV Net asset NAV
value per share value per share value per share
(total pence (total pence (total pence
equity) equity) equity)
GBP000 GBP000 GBP000
-------------------- ---------- ----------- ---------- ----------- ---------- -----------
Net asset value 1,858,843 657.7 1,667,703 591.7 1,818,403 649.9
Net tangible asset
value 1,726,781 611.0 1,537,050 545.3 1,694,679 605.7
-------------------- ---------- ----------- ---------- ----------- ---------- -----------
The net asset value per share is based on 282,632,166 shares (30 June
2016: 281,862,040; 31 December 2016: 279,805,393), being the shares
in issue at 30 June, less those held in treasury and those held by
the Group Employee Benefit Trust. Net tangible assets comprise total
equity excluding intangible assets.
10. Return on equity
6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
------------------------------------------ ---------- ---------- ----------
Profit for the period 97,907 197,626 336,986
Opening total equity 1,818,403 1,528,829 1,528,829
Adjusted for the time weighted impact
of capital distributions and issuance
of shares (2,407) (38,154) (60,742)
------------------------------------------ ---------- ---------- ----------
Adjusted opening total equity 1,815,996 1,490,675 1,468,087
------------------------------------------ ---------- ---------- ----------
Annualised return on equity (%) 11.1 28.3 23.0
------------------------------------------ ---------- ---------- ----------
The return on equity is calculated by using profit for the period divided by the adjusted opening shareholders' equity. The adjusted opening shareholders' equity represents the equity on 1 January of the relevant year as adjusted for time weighted aspects of capital distributions and issuing of shares or treasury share purchases during the period. The time weighted positions are calculated on a daily basis with reference to the proportion of time from the transaction to the end of the period. The Company annualises the ROE by using a standard compound formula for the half year periods, being the profit for the period divided by the adjusted opening total equity, to the power of 2 to annualise for a full year comparison.
11. Investment result
i. Analysis of investment result
The total investment result for the 6 months 6 months Year to
Group before taxation comprises: to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
------------------------------------ -------------------------- ----------------- -----------------------
Investment income including
interest
receivable 30,435 23,280 54,789
Net realised (losses)/gains on
financial
investments at fair value through
profit
or loss (3,078) 325 6,416
Net fair value gains on financial
investments
at fair value through profit or
loss 23,169 18,353 13,631
------------------------------------ -------------------------- ----------------- -----------------------
Investment result - financial
assets 50,526 41,958 74,836
Fair value (losses)/gains on
derivative
financial instruments (1,569) (2,051) 155
------------------------------------ -------------------------- ----------------- -----------------------
Total result 48,957 39,907 74,991
------------------------------------ -------------------------- ----------------- -----------------------
Investment expenses are presented within other expenses (note 12).
ii. Annualised investment return
6 months 6 months Year to
to to 31 Dec 2016
30 June 30 June
2017 2016
GBP000 GBP000 GBP000
------------------------------------ -------------------------- --------- -------------------------------
Return Yield Return Yield Return Yield
GBP000 % GBP000 % GBP000 %
------------------------------------ -------- ---------------- --------- ------ -------- -------------
Debt and fixed income securities 25,480 1.5 43,581 3.2 55,709 1.9
Equities and shares in unit trusts 23,607 15.7 (2,737) (2.0) 17,246 6.2
Deposits with credit
institutions/cash
and cash equivalents 1,439 0.4 1,114 0.3 1,881 0.3
------------------------------------ -------- ---------------- --------- ------ -------- -------------
50,526 2.3 41,958 2.3 74,836 1.9
------------------------------------ -------- ---------------- --------- ------ -------- -------------
Weighted average assets (GBPm) 4,454 3,629 4,041
------------------------------------ -------- ---------------- --------- ------ -------- -------------
12. Other income and operational expenses
6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
------------------------------------------- --------- --------- --------
Agency related income 8,740 6,443 11,743
Profit commission 2,820 6,189 11,720
Other underwriting income 1,083 2,986 3,666
Other income 9,311 2,931 10,465
------------------------------------------- --------- --------- --------
Other income 21,954 18,549 37,594
------------------------------------------- --------- --------- --------
Wages and salaries 65,561 65,947 145,997
Social security costs 10,147 9,487 23,288
Pension cost - defined contribution 4,813 3,775 8,243
Pension cost - defined benefit - 80 172
Share based payments 13,648 10,669 26,274
Marketing expenses 25,349 23,130 42,051
Investment expenses 2,428 1,825 4,361
Depreciation, amortisation and impairment 9,599 7,299 28,162
Other expenses 72,673 54,217 137,171
------------------------------------------- --------- --------- --------
Operational expenses 204,218 176,429 415,719
------------------------------------------- --------- --------- --------
Wages and salaries have been shown net of transfers to acquisition and claims expenses.
Other expenses include, but are not limited to, legal and professional costs, computer costs, contractor-based costs and property costs. None of the items are individually material.
13. Finance costs
6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
----------------------------------------------- ---------- --------- --------
Interest charge associated with long-term
debt 8,353 8,399 16,844
Interest and expenses associated with
bank borrowing facilities 898 839 1,703
Interest and charges associated with
Letters of Credit 261 311 580
Interest charges on experience account 370 657 1,139
9,882 10,206 20,266
----------------------------------------------- ---------- --------- --------
As at 30 June 2017, the total amount drawn by way of Letter of Credit
to support the Funds at Lloyd's requirement was $10.0 million (30 June
2016: $10.0 million, 31 December 2016: $10.0 million).
14. Tax expense
The Company and its subsidiaries are subject to enacted tax laws in
the jurisdictions in which they are incorporated and domiciled.
The amounts charged in the condensed consolidated income statement
comprise the following:
6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
-------------------------------------------------- ---------- ------------- -------------
Current tax
Expense for the year 10,556 14,618 32,240
Adjustments in respect of prior years (325) (1,279) (5,010)
-------------------------------------------------- ---------- ------------- -------------
Total current tax 10,231 13,339 27,230
-------------------------------------------------- ---------- ------------- -------------
Deferred tax
Credit for the year (5,830) (5,140) (5,055)
Adjustments in respect of prior years 315 196 (3,786)
Effect of rate change - - (832)
-------------------------------------------------- ---------- ------------- -------------
Total deferred tax (5,515) (4,944) (9,673)
-------------------------------------------------- ---------- ------------- -------------
Total tax charged to the income statement 4,716 8,395 17,557
-------------------------------------------------- ---------- ------------- -------------
The Group records its income tax expense based on the expected effective
rate for the full year.
15. Insurance liabilities and reinsurance assets
30 June 30 June 2016 31 Dec 2016
2017
GBP000 GBP000 GBP000
-------------------------------------------------- ---------- ------------- -------------
Gross
Claims and claim adjustment expenses
outstanding 2,578,583 2,280,309 2,565,824
Unearned premiums 1,472,828 1,338,572 1,287,152
-------------------------------------------------- ---------- ------------- -------------
Total insurance liabilities, gross 4,051,411 3,618,881 3,852,976
-------------------------------------------------- ---------- ------------- -------------
Recoverable from reinsurers
Claims and claim adjustment expenses
outstanding 530,733 454,270 543,115
Unearned premiums 394,656 339,336 262,534
-------------------------------------------------- ---------- ------------- -------------
Total reinsurers' share of insurance
liabilities 925,389 793,606 805,649
-------------------------------------------------- ---------- ------------- -------------
Net
Claims and claim adjustment expenses
outstanding 2,047,850 1,826,039 2,022,709
Unearned premiums 1,078,172 999,236 1,024,618
-------------------------------------------------- ---------- ------------- -------------
Total insurance liabilities, net 3,126,022 2,825,275 3,047,327
-------------------------------------------------- ---------- ------------- -------------
Net claims and claim adjustment expenses include releases of GBP96.1m
(30 June 2016: GBP96.1m; 31 December 2016: GBP212.9m) of reserves established
in prior reporting periods.
The development of net claims reserves by accident years are detailed
below.
Insurance claims and claims expenses reserves - net at 100%
Accident 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total
year
ending
31 December
**
------------
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------
Estimate
of ultimate
claims
costs
as adjusted
for foreign
exchange*:
at end
of
accident
year** 894,635 785,227 927,802 1,158,193 917,051 870,342 903,661 961,467 1,123,423 586,216 9,128,017
one period
later** 795,286 651,426 808,229 1,068,836 806,156 769,424 786,891 884,092 1,065,854 - 7,636,194
two periods
later** 793,442 620,960 761,569 1,025,160 747,003 690,527 716,433 854,090 - - 6,209,184
three
periods
later** 746,317 623,804 741,513 1,023,186 720,972 640,219 701,652 - - - 5,197,663
four
periods
later** 710,614 612,821 718,384 1,016,446 714,647 640,512 - - - - 4,413,424
five
periods
later** 697,281 610,038 714,352 978,314 707,617 - - - - - 3,707,602
six periods
later** 688,487 597,092 691,657 970,303 - - - - - - 2,947,539
seven
periods
later** 673,838 594,610 692,287 - - - - - - - 1,960,735
eight
periods
later** 666,210 590,301 - - - - - - - - 1,256,511
nine
periods
later** 661,100 - - - - - - - - - 661,100
Current
estimate
of
cumulative
claims 661,100 590,301 692,287 970,303 707,617 640,512 701,652 854,090 1,065,854 586,216 7,469,932
Cumulative
payments
to date (639,982) (539,468) (630,661) (867,272) (564,655) (531,903) (499,235) (469,033) (402,073) (121,987) (5,266,269)
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
Liability
recognised
at 100%
level 21,118 50,833 61,626 103,031 142,962 108,609 202,417 385,057 663,781 464,229 2,203,663
Liability
recognised
in respect
of prior
accident
years
at 100%
level 130,815
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
Total net liability to external
parties at 100% 2,334,478
------------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- --------------
* The foreign exchange adjustment arises from the retranslation of the estimates at each date using the exchange rate ruling at 30 June 2017.
** With the exception of the most recent development data for each accident year, which only relates to the six months ending 30 June 2017, the term period refers to one full calendar year.
Reconciliation of 100% disclosures above to Group's share - net
Accident 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total
year
--------------
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------------ ---------- ----------- ------------
Current
estimate
of
cumulative
claims 661,100 590,301 692,287 970,303 707,617 640,512 701,652 854,090 1,065,854 586,216 7,469,932
Less:
attributable
to external
Names (119,360) (97,418) (99,242) (132,460) (77,022) (65,840) (75,097) (91,183) (106,932) (52,459) (917,013)
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------------ ---------- ----------- ------------
Group
share
of current
ultimate
claims
estimate 541,740 492,883 593,045 837,843 630,595 574,672 626,555 762,907 958,922 533,757 6,552,919
Cumulative
payments
to date (639,982) (539,468) (630,661) (867,272) (564,655) (531,903) (499,235) (469,033) (402,073) (121,987) (5,266,269)
Less:
attributable
to external
Names 116,028 88,218 86,973 115,384 58,311 54,538 51,480 46,658 36,481 8,867 662,938
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------------------ ---------- ----------- ------------
Group
share
of
cumulative
payments (523,954) (451,250) (543,688) (751,888) (506,344) (477,365) (447,755) (422,375) (365,592) (113,120) (4,603,331)
Liability
for 2008
to 2017
accident
years
recognised
on Group's
balance
sheet 17,786 41,633 49,357 85,955 124,251 97,307 178,800 340,532 593,330 420,637 1,949,588
Liability
for accident
years
before
2008
recognised
on Group's
balance
sheet 98,262
-------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ------ ---------- -------------------------------------
Total Group liability to external parties
included in the balance sheet, net 2,047,850
-------------------------------------------------------------------------- ---------- ---------- -------------- -------------------------------------
This represents the claims element of the Group's insurance liabilities
and reinsurance assets.
16. Earnings per
share
Basic
Basic earnings per share is calculated by dividing the profit attributable
to equity holders of the Company by the weighted average number of
ordinary shares in issue during the period, excluding ordinary shares
purchased by the Group and held in treasury as own shares.
6 months 6 months Year to
to to 31 Dec 2016
30 June 30 June
2017 2016
Profit for the period attributable to
owners of the Company (GBP000) 97,907 197,626 336,986
-------------------------------------------- ---------- ---------- --------------
Weighted average number of ordinary
shares in issue (thousands) 280,445 280,835 281,175
Basic earnings per share (pence per
share) 34.9p 70.4p 119.8p
-------------------------------------------- ---------- ---------- --------------
Diluted
Diluted earnings per share is calculated by adjusting the assumed conversion
of all dilutive potential ordinary shares. The Company has one category
of dilutive potential ordinary shares, share options and awards. For
the share options, a calculation is made to determine the number of
shares that could have been acquired at fair value (determined as the
average annual market share price of the Company's shares) based on
the monetary value of the subscription rights attached to outstanding
share options. The number of shares calculated as above is compared
with the number of shares that would have been issued assuming the
exercise of the share options.
6 months 6 months Year to
to to 31 Dec 2016
30 June 30 June
2017 2016
Profit for the period attributable to
owners of the Company (GBP000) 97,907 197,626 336,986
---------------------------------------------- ---------- --------- --------------
Weighted average number of ordinary
shares in issue (thousands) 280,445 280,835 281,175
Adjustment for share options (thousands) 8,477 8,824 9,402
---------------------------------------------- ---------- --------- --------------
Weighted average number of ordinary
shares for diluted earnings per share
(thousands) 288,922 289,659 290,577
---------------------------------------------- ---------- --------- --------------
Diluted earnings per share (pence per
share) 33.9p 68.2p 116.0p
---------------------------------------------- ---------- --------- --------------
Diluted earnings per share has been calculated after taking account
of outstanding options and awards under employee share option and performance
plan schemes and also options under save as you earn schemes.
17. Dividends paid to owners of the Company
6 months 6 months Year to
to to 31 Dec 2016
30 June 30 June
2017 2016
GBP000 GBP000 GBP000
----------------------------------------------------- --------- --------- -------------
Final dividend for the year ended:
31 December 2016 of 19.0p (net) per 54,283 - -
share
Second interim dividend for the year
ended:
31 December 2015 of 32.0p (net) per
share - 89,674 89,674
Interim dividend for the year ended:
31 December 2016 of 8.5p (net) per share - - 24,260
54,283 89,674 113,934
----------------------------------------------------- --------- --------- -------------
The final dividend for the year ended 31 December 2016 was paid in
cash of GBP51,247,000 and 251,000 shares for the scrip dividend. The
interim dividend for the year ended 31 December 2016 was paid in cash
of GBP22,983,000 and 119,302 shares for the scrip dividend.
An interim dividend of 9.5p (net) per ordinary share has been declared
payable on 13 September 2017 to shareholders registered on 11 August
2017 in respect of the six months to 30 June 2017 (30 June 2016: 8.5p
(net) per ordinary share). A scrip dividend alternative will be offered
to the owners of the Company. The dividend was declared in Bermuda
on 28 July 2017 and accordingly has not been included as a distribution
or liability in this interim consolidated financial information in
accordance with IAS 10 Events after the balance sheet date.
18. Financial assets and liabilities
i. Analysis of financial assets carried at fair value
30 June 30 June 31 Dec 2016
2017 2016
GBP000 GBP000 GBP000
--------------------------------------------------------- ------------- ---------- -------------
Debt and fixed income securities 3,308,379 2,980,654 3,414,949
Equities and shares in unit trusts 325,685 270,669 305,342
Deposits with credit institutions 10,574 9,051 24,592
--------------------------------------------------------- ------------- ---------- -------------
Total investments 3,644,638 3,260,374 3,744,883
--------------------------------------------------------- ------------- ---------- -------------
Insurance linked funds 45,181 44,983 46,821
Derivative financial instruments 119 455 329
--------------------------------------------------------- ------------- ---------- -------------
Total financial assets carried at fair
value 3,689,938 3,305,812 3,792,033
--------------------------------------------------------- ------------- ---------- -------------
ii. Analysis of financial liabilities carried at fair value
30 June 30 June 31 Dec 2016
2017 2016 GBP000
GBP000 GBP000
--------------------------------------------------------- ------------- ---------- -------------
Derivative financial instruments 145 761 474
--------------------------------------------------------- ------------- ---------- -------------
Total financial liabilities carried
at fair value 145 761 474
--------------------------------------------------------- ------------- ---------- -------------
iii. Analysis of financial liabilities carried at amortised cost
30 June 2017 30 June 31 Dec 2016
GBP000 2016 GBP000
GBP000
--------------------------------------------- -------------- -------- ------------
Long-term debt 274,074 273,964 274,019
Accrued interest on long-term debt 10,152 10,152 1,800
---------------------------------------------- ------------- -------- ------------
Total financial liabilities carried at
amortised cost 284,226 284,116 275,819
---------------------------------------------- ------------- -------- ------------
iv. Investment and cash allocation
30 June 2017 30 June 2016 31 Dec 2016
-------------------- ----------------------------------- ------------------------- --------------------
GBP000 % GBP000 % GBP000 %
Debt and fixed
income securities 3,308,379 74.9 2,980,654 75.5 3,414,949 77.5
Equities and shares
in unit trusts 325,685 7.4 270,669 6.9 305,342 6.9
Deposits with
credit
institutions/cash
and cash
equivalents 781,145 17.7 694,910 17.6 689,408 15.6
-------------------- ---------------- ----------------- ------------- ---------- ------------- -----
Total 4,415,209 3,946,233 4,409,699
-------------------- ---------------- ----------------- ------------- ---------- ------------- -----
On 24 November 2015, the group issued GBP275.0 million 6.125% fixed-to-floating rate callable subordinated notes due 2045, with a first call date of 2025.
The notes bear interest from and including 24 November 2015 at a fixed rate of 6.125% per annum annually in arrears starting 24 November 2016 up until the first call date in November 2025, and thereafter at a floating rate of interest equal to three-month LIBOR plus 5.076% payable quarterly in arrears on each floating interest payment date. The Group will be exposed to interest rate risk on its long-term debt.
On 25 November 2015 the notes were admitted for trading on the London Stock Exchange's regulated market. The notes were rated BBB- by S&P as well as by Fitch.
The interest accrued on the long-term debt was GBP10.2 million at the balance sheet date (30 June 2016 : GBP10.2 million; 31 December 2016 : GBP1.8 million) and is included in financial liabilities.
v. Investment and cash allocation by currency
30 June 30 June 31 Dec
2017 2016 2016
% % %
---------------------------- ----------------- ---------------- ----------
Sterling 22.2 24.0 23.1
US Dollars 65.1 61.9 64.7
Euro and other currencies 12.7 14.1 12.2
---------------------------- ----------------- ---------------- ----------
19. Fair value measurements
In accordance with IFRS 13 Fair Value Measurement, the fair value of
financial instruments based on a three-level fair value hierarchy that
reflects the significance of the inputs used in measuring the fair
value, is set out below:
As at 30 June 2017 Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
----------------------------------- -------- ---------- -------- ----------
Financial Assets
Debt and fixed income securities 986,043 2,322,336 - 3,308,379
Equities and shares in unit
trusts - 314,382 11,303 325,685
Deposits with credit institutions 10,574 - - 10,574
Insurance linked fund - - 45,181 45,181
Derivative financial instruments - 119 - 119
Total 996,617 2,636,837 56,484 3,689,938
----------------------------------- -------- ---------- -------- ----------
Financial Liabilities
Derivative financial instruments - 145 - 145
----------------------------------- -------- ---------- -------- ----------
Total - 145 - 145
----------------------------------- -------- ---------- -------- ----------
As at 30 June 2016 Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
----------------------------------- -------- ---------- -------- ----------
Financial Assets
Debt and fixed income securities 800,260 2,180,394 - 2,980,654
Equities and shares in unit
trusts - 258,216 12,453 270,669
Deposits with credit institutions 9,051 - - 9,051
Insurance linked fund - - 44,983 44,983
Derivative financial instruments - 455 - 455
----------------------------------- -------- ---------- -------- ----------
Total 809,311 2,439,065 57,436 3,305,812
----------------------------------- -------- ---------- -------- ----------
Financial Liabilities
Derivative financial instruments - 761 - 761
Total - 761 - 761
----------------------------------- -------- ---------- -------- ----------
As at 31 December 2016 Level 1 Level 2 Level 3 Total
GBP000 GBP000 GBP000 GBP000
------------------------------------ ---------- ---------- -------- ----------
Debt and fixed income securities 1,005,111 2,409,838 - 3,414,949
Equities and shares in unit
trusts - 293,187 12,155 305,342
Deposits with credit institutions 24,592 - - 24,592
Insurance linked fund - - 46,821 46,821
Derivative financial instruments - 329 - 329
------------------------------------ ---------- ---------- -------- ----------
Total 1,029,703 2,703,354 58,976 3,792,033
------------------------------------ ---------- ---------- -------- ----------
Financial Liabilities
Derivative financial instruments - 474 - 474
------------------------------------ ---------- ---------- -------- ----------
Total - 474 - 474
------------------------------------ ---------- ---------- -------- ----------
The levels of the fair value hierarchy are defined by the standard
as follows:
-- level 1 - fair values measured using quoted prices (unadjusted)
in active markets for identical instruments;
-- level 2 - fair values measured using directly or indirectly observable
inputs or other similar valuation techniques for which all significant
inputs are based on market observable data;
-- level 3 - fair values measured using valuation techniques for which
significant inputs are not based on market observable data.
The fair values of the Group's financial assets are based on prices
provided by investment managers who obtain market data from numerous
independent pricing services. The pricing services used by the investment
managers obtain actual transaction prices for securities that have
quoted prices in active markets. For those securities which are not
actively traded, the pricing services use common market valuation pricing
models. Observable inputs used in common market valuation pricing models
include, but are not limited to, broker quotes, credit ratings, interest
rates and yield curves, prepayment speeds, default rates and other
such inputs which are available from market sources.
Investments in mutual funds, which are included in equities and shares
in unit trusts, comprise a portfolio of stock investments in trading
entities which are invested in various quoted investments. The fair
value of shares in unit trusts are based on the net asset value of
the fund reported by independent pricing sources or the fund manager.
Included within Level 1 of the fair value hierarchy are certain government
bonds, treasury bills, long-term debt and exchange traded equities
which are measured based on quoted prices in active markets.
Level 2 of the hierarchy contains certain government bonds, US government
agencies, corporate securities, asset backed securities and mortgage
backed securities. The fair value of these assets are based on the
prices obtained from both investment managers and investment custodians
as discussed above. The Group records the unadjusted price provided
and validates the price through a number of methods including a comparison
of the prices provided by the investment managers with the investment
custodians and the valuation used by external parties to derive fair
value. Quoted prices for US government agencies and corporate securities
are based on a limited number of transactions for those securities
and as such the Group considers these instruments to have similar characteristics
as those instruments classified as Level 2. Also included within Level
2 are units held in traditional long funds and long and short special
funds and over the counter derivatives.
Level 3 contains investments in a limited partnership and unquoted
equity securities and an insurance linked fund which have limited observable
inputs on which to measure fair value. Unquoted equities, including
equity instruments in limited partnerships, are carried at fair value.
Fair value is determined to be net asset value for the limited partnerships,
and for the equity holdings it is determined to be the latest available
traded price. The effect of changing one or more of the inputs used
in the measurement of fair value of these instruments to another reasonably
possible assumption would not be significant. At 30 June 2017, the
insurance linked fund of GBP45,181,000 (30 June 2016 : GBP44,983,000;
31 December 2016 GBP46,821,000) represents the Group's investment in
Kiskadee Funds.
The fair value of the Kiskadee Funds is estimated to be the net asset
value as at the balance sheet date. The net asset value is based on
the fair value of the assets and liabilities in the Funds. Significant
inputs and assumptions in calculating the fair value of the assets
and liabilities associated with reinsurance contracts written by the
Kiskadee Funds include the amount and timing of claims payable in respect
of claims incurred and periods of unexpired risk. The Group has considered
changes in the net asset valuation of the Kiskadee Funds if reasonably
different inputs and assumptions were used and has found no significant
changes in the valuation.
In certain cases, the inputs used to measure the fair value of a financial
instrument may fall into more than one level within the fair value
hierarchy. In this instance, the fair value of the instrument in its
entirety is classified based on the lowest level of input that is significant
to the fair value measurement.
During the period, there were no significant transfers made between
Level 1, Level 2 or Level 3 of the fair value hierarchy. The following
table sets forth a reconciliation of opening and closing balances for
financial instruments classified under Level 3 of the fair value hierarchy: 30 June 2017
Financial assets
Equities and
shares in unit Insurance
trusts linked fund Total
GBP000 GBP000 GBP000
-------------
Balance at 1 January 12,155 46,821 58,976
Fair value gains or
losses through profit
or loss (175) 1,083 908
Foreign exchange gains (119) (2,279) (2,398)
Purchases 215 4,000 4,215
Settlements (773) (4,444) (5,217)
------------------------- ---------------- ------------- --------
Closing balance 11,303 45,181 56,484
------------------------- ---------------- ------------- --------
Unrealised gains and
losses in the period
on securities held
at the end of the
period (246) 1,083 837
------------------------- ---------------- ------------- --------
30 June 2016
Financial assets
Equities and
shares in unit Insurance
trusts linked fund Total
GBP000 GBP000 GBP000
-------------
Balance at 1 January 13,640 40,045 53,685
Fair value gains or
losses through profit
or loss (603) 979 376
Foreign exchange gains
and losses 334 3,959 4,293
Purchases 652 - 652
Settlements (1,570) - (1,570)
------------------------- ---------------- ------------- --------
Closing balance 12,453 44,983 57,436
------------------------- ---------------- ------------- --------
Unrealised gains and
losses in the year
on securities held
at the end of the
year (645) 979 334
------------------------- ---------------- ------------- --------
20. Impact of foreign exchange related items
The net foreign exchange (losses)/gains for the year include the following
amounts:
6 months 6 months Year to
to to 31 Dec
30 June 30 June 2016
2017 2016
GBP000 GBP000 GBP000
------------------------------------------------- ----------- ---------- --------
Exchange (losses)/gains recognised in
the consolidated income statement (30,871) 87,323 152,408
Exchange (losses)/gains classified as
a separate component of equity (23,979) 56,383 111,094
------------------------------------------------- ----------- ---------- --------
Overall impact of foreign exchange related
items on net assets (54,850) 143,706 263,502
------------------------------------------------- ----------- ---------- --------
The above excludes profit or losses on foreign exchange derivative contracts which are included within the investment result.
21. Condensed consolidated interim cash flow statement The purchase, maturity and disposal of financial assets and liabilities, including derivatives, is part of the Group's insurance activities and is therefore classified as an operating cash flow. Included within cash and cash equivalents held by the Group are balances totalling GBP134 million (30 June 2016: GBP162 million; 31 December 2016: GBP136 million) not available for use by the Group outside of the Lloyd's Syndicates within which they are held. Additionally, GBP39 million (30 June 2016: GBP76 million; 31 December 2016: GBP38 million) is pledged cash against Funds at Lloyd's, and GBP8 million (30 June 2016: GBP8 million; 31 December 2016: GBP13 million) is held within trust funds against reinsurance arrangements
Directors' responsibilities statement
The Directors confirm, to the best of our knowledge, that the Chairman's
statement and condensed consolidated interim financial statements have
been prepared in accordance with IAS 34 as adopted by the European
Union and the Interim Statement includes a fair review of the information
required by sections 4.2.7R and 4.2.8R of the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority, being:
1. an indication of important events during the first six months of
the current financial year and their impact on the condensed consolidated
interim financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
2. related-party transactions that have taken place in the first six
months of the current year and that have materially affected the
consolidated financial position or performance of Hiscox Ltd during
that period, and any changes in the related party transactions described
in the last annual report that could have such a material effect.
The individuals responsible for authorising the responsibility statement
on behalf of the Board are the Chief Executive, B E Masojada and the
Chairman, R S Childs. Accordingly the Half Yearly Report to the London
Stock Exchange was approved for issue on Monday, 31 July 2017 following
receipt of confirmation from the auditors that they had reviewed the
final content.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DBGDRLBDBGRI
(END) Dow Jones Newswires
July 31, 2017 02:01 ET (06:01 GMT)
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