Transcript Slide 1

Presentation to analysts
and investors
June 2007
Welcome
14.30 - 15.15
Introduction
Robert Hiscox
Hiscox Global Markets
Richard Watson
Hiscox Bermuda
Rob Childs
Questions
15.15 - 15.45
Coffee
15.45 - 17.00
Hiscox USA
Ed Donnelly
Hiscox Europe
Marc van der Veer
Hiscox UK
Steve Langan
Conclusion
Bronek Masojada
Questions
17.00
Drinks and canapés
Hiscox 2002
2002 gross written premium £677 million
Hiscox plc
Hiscox International
Hiscox UK and Hiscox Europe
Hiscox
Global Markets
Hiscox
Guernsey
Hiscox
UK
One location
- Reinsurance
- Property
- Marine and
Energy
- Specialty
- Space
- Technology and
Media PI
One location
- Art and
Private Client
- Kidnap and
Ransom
Four locations
- Art and
Private Client
- PI and
Specialty
Commercial
- Technology
and Media PI
- Direct
Hiscox
Europe
Three locations
- Art and Private
Client
- PI and
Specialty
Commercial
Hiscox 2007
2006 gross written premium £1,126 million
Hiscox Ltd
Hiscox UK and Hiscox Europe
Hiscox International
Hiscox
Global Markets
Hiscox
Bermuda
Hiscox
Guernsey
Four locations
- Reinsurance
- Property
- Marine and
Energy
- Specialty
- Space
- Technology and
Media PI
One location
- Reinsurance
- Group
Capital
Support
One location
- Art and
Private Client
- Kidnap and
Ransom
Hiscox
USA
Three locations
- Art and
Private Client
- PI and
Specialty
Commercial
- Regional
Media and
Technology
Hiscox
UK
Hiscox
Europe
Nine locations
- Art and
Private Client
- PI and
Specialty
Commercial
- Regional
Media and
Technology
- Direct
Ten locations
- Art and
Private Client
- PI and
Specialty
Commercial
- Regional
Media and
Technology
Business growth
Gross written premium for the five months to May
2006 £m 2007 £m
%
Global Markets
335
352
5
UK
87
92
5
Europe
30
36
20
Bermuda (external reinsurance)
41
82
100
Guernsey
21
20
(1)
USA
1
8
800
GWP total
515
590
15
Panther Re
-
27
-
515
563
9
GWP total (excluding Panther Re)
IFRS Hiscox Group share
Hiscox Global Markets
Richard Watson
What do we do?
Characteristics of what we do
•
Larger individual risks
•
Bundles of small risks
•
Catastrophe exposed risks
•
Specialist lines
Characteristics of what we do not do
•
Process orientated
•
High volume, small margin
•
Direct to consumer
Offices in London, Paris and New York
An experienced underwriting team
Division
Director
Years'
experience
Years at Hiscox
Active
Underwriter
Richard Watson
26
21
Reinsurance
Russell Merrett
17
10
Property
Paul Lawrence
21
15
Marine and
Energy
Simon Williams
22
12
Specialty
David Bruce
35
35
Space
Bruno Ritchie
13
9
Technology and
Media PI
Neil Bolton
16
13
Reinsurance
May-06 to Apr-07
Jan-06 to Dec-06
Sep-05 to Aug-06
May-05 to Apr-06
Jan-05 to Dec-05
Property
Sep-04 to Aug-05
May-04 to Apr-05
Jan-04 to Dec-04
Sep-03 to Aug-04
Professional Indemnity
May-03 to Apr-04
Jan-03 to Dec-03
Sep-02 to Aug-03
May-02 to Apr-03
Jan-02 to Dec-02
Sep-01 to Aug-02
May-01 to Apr-02
Marine and Energy
Jan-01 to Dec-01
Sep-00 to Aug-01
May-00 to Apr-01
Jan-00 to Dec-00
Sep-99 to Aug-00
May-99 to Apr-00
Jan-99 to Dec-99
Sep-98 to Aug-99
May-98 to Apr-99
Jan-88 to Dec-98
Rolling 12 month index of rates
Rates
Hiscox Global Markets - divisional 12 month rolling rate since 1998
Specialty and other
900%
800%
700%
600%
500%
400%
300%
200%
100%
0%
Reinsurance - Panther Re
Panther Re created with W L Ross & Company
•
Special purpose reinsurer, capitalised at $360m, $144m of equity and two
debt tranches totalling $216m, rated BBB+ and BB+ by Standard and Poor's
•
Underwrites a 40% pro-rata quota share of property catastrophe account
•
Hiscox Syndicate 33 receives an over-rider and profit commission
•
Arrangements cover 2007 and 2008, but with appropriate mid-term
protections
Good opportunities at January renewals
•
May 07 GWP £224m
•
May 06 GWP £168m
•
June renewals went well
Market share for reinsurance business in Lloyd's increased
from 6.0% to 10.9%
Good prices and volume in Florida
Looking ahead
• Across the board reductions
• Reduction of Syndicate capacity for 2008
- First cut business plan for Lloyd's sets capacity for 2008 at
£700 million (2007: £875 million)
- Trimming of exposure of less profitable classes
- Maintain exposure in well rated catastrophe business
• Continue to develop hub offices in Paris and New York
Hiscox Bermuda
Rob Childs
Established team
Rob Childs
Chief Executive Officer, Hiscox Bermuda; Chairman, Hiscox USA; Chief Underwriting Officer, Hiscox
•
21 years at Hiscox, active underwriter of Syndicate 33 from 1993 to 2005
Chris Sharpe
Senior Vice President
•
Ten years at Hiscox as a treaty reinsurance underwriter, writing catastrophe and risk
excess of loss and pro rata reinsurance worldwide
Robin Mehta
Chief Financial Officer and Chief Operating Officer; Company Secretary, Hiscox Ltd
•
Joined Hiscox in 2006, 17 years with the Munich Re group of companies
Krystalle Tobin
Financial Controller and Treasurer
•
Joined Hiscox in 2006 with nine years experience in the reinsurance industry, previously
worked with the Munich Re group of companies
Hiscox Bermuda written premium 2006
Gross written premium 2006 - $310 million
Kidnap and Ransom
23%
Reinsurance
Hiscox Insurance Company (Guernsey) Limited
56%
9%
UK errors and omissions
Hiscox Insurance Company Limited
8%
Share of Hiscox Syndicate 33
4%
Hiscox Dedicated Corporate Member
Fine Art
Hiscox Insurance Company (Guernsey) Limited
External business
Internal Group business
$173 million
$137 million
Nov 2007
Apr 2007
Oct 2006
Mar 2006
Sep 2005
Feb 2005
Aug 2004
Jan 2004
Jun 2003
Dec 2002
May 2002
Nov 2001
Apr 2001
2000 - 2006
Syndicate 33 rating catastrophe exposed index
350%
300%
250%
200%
150%
100%
50%
0%
Hiscox Bermuda written premium 2007 YTD
External reinsurance
Proportional treaties
18%
17%
60%
Catastrophe excess of loss
Total $239 million
Risk excess of loss
Industry loss warranty 2%
Aggregate excess of loss 1%
Stop loss 1%
Where we get our business from
Gross written premium by broker 2007 YTD
Guy Carpenter
Aon
29%
25%
13%
20%
Other
13%
Willis
Benfield
Looking ahead
• Future prospects
• Maintain underwriting discipline
• Internal quota shares depends on my colleagues!
• External: catastrophe market firm in 2007, will it
continue in 2008?
• Bermuda under no pressure to follow market down
Questions
Coffee
Hiscox USA
Ed Donnelly
The intellectual capital
Edward Donnelly
President
•
•
•
•
Over 24 years insurance experience
Formally with AIG
Started and grew professional lines with Houston Casualty Company
Underwrote on behalf of Lloyd's for 17 years as a PI coverholder
Gavin Watson
CFO
•
Joined Hiscox in 1998, FD of Hiscox Insurance Company for four years
Eric Pruss
COO
•
Ten years in the insurance industry, five years of management consulting, most
recently with Chubb
Admitted vs. surplus lines
Admitted
Surplus lines
• $470 billion market
• $33 billion market
• Intense regulation of rates
and wordings, less
flexibility
• Less regulation of rates
and wordings
• State guarantee funds
available
• No guarantee funds
• No individual risk filings
• Heavy administration/
documentation on heavy
risks
• More direct client and
broker relationships
• Must deal through surplus
brokers
• More cost-efficient at the
right scale
• Less cost-efficient
Phased approach to growth
Phase 1
- Scale through
reputation of
staff
- Small
wholesale
surplus lines
business
Phase 2
- More surplus
lines business
- Entry to the
admitted market
- Build reputation
of Hiscox
Phase 3
- Rollout
products into
the admitted
market
Core Hiscox products
• Non-profit Directors and Officers' Liability
• Public Officials' Liability
• Terrorism
• Professional Indemnity (E&O)
- Allied Healthcare
- Architect and Engineers
- Miscellaneous
• Media and Broadcasters' Liability
• Technology and Privacy Liability
American Live Stock Insurance Company
Acquired, subject to regulatory consents (closing expected in July)
•
Purchase price of $55m: net tangible assets of $45m
•
2006: GWP of $16.9m, combined ratio of 80.9%
Admitted in all 50 states
•
Licences for all livestock products
•
Application process for Hiscox products will begin immediately
Presence in the important mid-west market
•
Located just outside Chicago, a key insurance hub
Strong brand and complimentary business
•
Recognised as a leading livestock insurer in the USA
•
Hiscox active in bloodstock insurance for 15 years
Looking ahead
• Roll out admitted PI products across the whole of US
• Kidnap and Ransom product coming
• Hiscox Global Markets integration
• Extend geographic spread
- New office in Chicago
Hiscox Europe
Marc van der Veer
European management team
Marc van der Veer
Managing Director
•
13 years' insurance experience, previously with XL Capital
Marianda Quadakkers
European Operations Manager
•
Previously with Deutsche Asset Management managing the start up
of new operations in Europe and the UK
Heino Hovingh
Head of Sales and Marketing
•
Previously with Axa and Coca-Cola
Paul Cooper
Finance Director
•
Previously with Ernst and Young
Changing business mix
Business split 2000
Business split 2007
27%
3%
97%
Art and private client
Professions and specialty commercial
73%
Growing distribution
• Focus within core
countries
• Regional offices to get
closer to local brokers and
leverage scale
• Distribution partnerships
with other insurers and
private banks
• 20% YTD growth
Quote volume
Quote volume YTD
5012
Europe
5966
2504
France
2876
1633
Germany
2088
520
Netherlands
605
355
2006
Belgium
397
2007
1000
2000
3000
4000
5000
6000
Improving the expense ratio
Difference in growth between GWP and expenses YTD 2007
12.7%
12.6%
11.4%
11.1%
10%
7.5%
0%
France
Germany
Belgium
Netherlands Europe total
Moy-06 to Apr-07
Nov-05 to Oct-06
Mar-05 to Feb-06
Europe rate index for Europe
Jul-04 to Jun-05
Nov-03 to Oct-04
Mar-03 to Feb-04
Jul-02 to Jun-03
Nov-01 to Oct-02
Mar-01 to Feb-02
Jul-00 to Jun-01
Rolling 12 month index of rates
Pricing environment
Europe property
Europe PI
180%
160%
140%
120%
100%
80%
64
111.3
107.4
103.2
99.7
98.7
2003
2004
2005
2006
119.4
2002
2001
111.1
Gross written premium: million
2000
85
120
2006
80
41
2005
29
81
0
2004
2003
20
60
2002
2001
2000
GWP and combined ratio
Combined ratio: %
Hiscox UK
Steve Langan
88.5
87.2
2005
2006
93.6
2003
92.6
97.9
2002
2004
97.8
2001
102.6
97.7
60
2000
1999
107.9
118.0
120
1998
242.4
232.8
231.3
Gross written premium: £million
1997
2006
2005
2004
218.7
176.4
163.9
250
2003
2002
2001
127.3
97.8
1999
2000
90.0
1998
74.7
100
1997
Hiscox Insurance Company
Combined ratio: %
Core
Non-core
Brand and underwriting experience
Steve Langan
Managing Director and Group Marketing Director
•
Ten years with Diageo and Coca-Cola
Gary Head
UK Underwriting Manager
•
Ten years broking, 11 years at Hiscox
Austyn Tusler
Head of Art and Private Client
•
17 years in the insurance industry, three years with AIG
Glenn Caton
Commercial Director
•
Ten years with Proctor and Gamble
Alan Millard
Chief Operating Officer
•
Ten years with GSK, previously with JP Morgan
Paul Cooper
Finance Director
•
12 years at PWC and Ernst and Young
Retail distribution model complete
•
Market leading products
•
Focus on:
-
emerging wealth and
high net worth
individuals
-
Professions/Specialty
Commercial SMEs
•
250 employees in nine
locations
•
Nine underwriting offices
plus Colchester
(underwriting and claims
processing)
Market opportunities - personal lines
Policy volume
UK contents > £75k
The facts
1,000,000
•
2.8m M/HNW households
in UK: c17% of total
750,000
•
39% of all household
sums insured
500,000
•
Only 25% of these
households have a
specialist policy
•
Hiscox = market leaders
250,000
0
£1m +
£75k
Contents sum insured
Source: Hiscox, Datamonitor, ABI
Market opportunities - commercial lines
SMEs in the UK (2005)
The facts
3,500,000
No. of businesses
3,000,000
•
95%+ UK companies
employ <250 people
•
Explosive growth in
insurance opportunity
•
Cost effective service is key
2,500,000
2,000,000
1,500,000
1,000,000
500,000
Self employed
Micro
Small
Medium
Large
1-9
employees
10-49
employees
50-249
employees
250+
employees
Source: DTI SME stats 2005
Apr-06 to May-07
Jan-06 to Dec-06
Oct-05 to Sep-06
Jul-05 to Jun-06
Apr-05 to Mar-06
Jan-05 to Dec-05
Oct-04 to Sep-05
Retail rates
Jul-04 to Jun-05
Apr-04 to Mar-05
Jan-04 to Dec-04
Oct-03 to Sep-04
Jul-03 to Jun-04
Apr-03 to Mar-04
Jan-03 to Dec-03
Oct-02 to Sep-03
Jul-02 to Jun-03
Apr-02 to Mar-03
Jan-02 to Dec-02
Oct-01 to Sep-02
Jul-01 to Jun-02
Apr-01 to Mar-02
Jan-01 to Dec-01
Oct-00 to Sep-01
Jul-00 to Jun-01
Rolling 12 month index of rates
Rates
UK PI
UK Personal Lines (inc. DPD)
180%
160%
140%
120%
100%
80%
60%
Building the brand
Direct
Direct marketing cost per sale total brand awareness growth
and policy count (Jan-06 to May-07)
350%
55,000
300%
50,000
35,000
200%
30,000
150%
25,000
20,000
100%
15,000
10,000
50%
5,000
0%
Home Direct policy count
Commercial Direct policy count
May-07
Apr-07
Mar-07
Feb-07
Jan-07
Dec-06
Nov-06
Oct-06
Sep-06
Aug-06
Jul-06
Jun-06
May-06
Apr-06
Mar-06
Feb-06
0
Jan-06
Index
40,000
Policy count
45,000
250%
Brand awareness index
Cost per sale index
Outlook: choppy!
• New marketing campaign
• Steady growth of regions
• Grow commercial lines
• Walk away from unprofitable business
• Ongoing management of costs
Conclusion
Bronek Masojada
Hiscox 2007
2006 gross written premium £1,126 million
Hiscox Ltd
Hiscox UK and Hiscox Europe
Hiscox International
Hiscox
Global Markets
Hiscox
Bermuda
Hiscox
Guernsey
Four locations
- Reinsurance
- Property
- Marine and
Energy
- Specialty
- Space
- Technology and
Media PI
One location
- Reinsurance
- Group
Capital
Support
One location
- Art and
Private Client
- Kidnap and
Ransom
Hiscox
USA
Three locations
- Art and
Private Client
- PI and
Specialty
Commercial
- Regional
Media and
Technology
Hiscox
UK
Hiscox
Europe
Nine locations
- Art and
Private Client
- PI and
Specialty
Commercial
- Regional
Media and
Technology
- Direct
Ten locations
- Art and
Private Client
- PI and
Specialty
Commercial
- Regional
Media and
Technology
Business growth
Gross written premium for the five months to May
2006 £m 2007 £m
%
Global Markets
335
352
5
UK
87
92
5
Europe
30
36
20
Bermuda (external reinsurance)
41
82
100
Guernsey
21
20
(1)
USA
1
8
800
GWP total
515
590
15
Panther Re
-
27
-
515
563
9
GWP total (excluding Panther Re)
IFRS Hiscox Group share
Balance sheet
Current debt arrangements
Capital management
•
•
Announced 2007 target
dividend of 12p
(2006:10p)
•
Gained shareholder
approval to buy back up
to 10% of shares into
treasury
•
Capital management
decision dependent on
2007 performance
Current debt facilities:
-
Syndicated Letter of
Credit (LoC) Facility £137.5 million
-
Revolving Credit Facility
- $91 million
-
Term Loan - $91 million
•
Gearing at 31/12/06
(including LoC) - 25%
•
Looking to extend Facility
duration
Jan-07 to Dec-07
Jul-06 to Jun-07
Jan-06 to Dec-06
Jul-05 to Jun-06
Jan-05 to Dec-05
Jul-04 to Jun-05
Jan-04 to Dec-04
Jul-03 to Jun-04
Jan-03 to Dec-03
Jul-02 to Jun-03
Jan-02 to Dec-02
Jul-01 to Jun-02
Jan-01 to Dec-01
Jul-00 to Jun-01
Jan-00 to Dec-00
Jul-99 to Jun-00
Jan-99 to Dec-99
Rolling 12 month index of rates
Group rating index
Catastrophe exposed index
Group composite index
Non cat exposed index
300%
250%
200%
150%
100%
50%
0%
Clear strategic focus
100% = £1,407m
Total group controlled income for 2006
TMT
London
Market
6%
Art and
Private Client
27%
14%
6%
30%
Reinsurance
and Major
Property
London Market
Syndicate 33 and
Hiscox Bermuda
Professions
and Specialty
Commercial
17%
Specialty
Regional
Syndicate 33, Hiscox
Insurance Company,
Hiscox Guernsey
and Hiscox USA
Questions