Although 2010 was marked by many significant and expensive catastrophes, most of these occurred in areas where Hiscox had deliberately reduced exposure due to weak rates. On the 16 March 2010 Hiscox estimated net claims of £100 million for two of these events, the Chilean earthquake and Windstorm Xynthia. Currently the net estimate for Chile, Xynthia and the New Zealand earthquake combined is approximately £115 million. This includes estimated net claims for the New Zealand earthquake of approximately £37 million, based on an insured market loss of NZD 6 billion (NZD 4 billion from the New Zealand Earthquake Commission, December 2010).
Hiscox estimates net claims arising from the UK’s winter freeze during November and December will reach £16 million. These claims are in addition to the UK winter freeze last January. Despite this, Hiscox UK’s household business remains on track to make a healthy profit.
Hiscox’s position on the Australian floods is still evolving, however we believe we are underweight in this area.
Renewal rates
During the January renewal period the Hiscox London Market division, which underwrites a mix of reinsurance and insurance, saw an average rate reduction of -1.5% on renewal business. Hiscox Bermuda’s open market reinsurance business saw an average rate reduction of -7.5% on renewal business. Hiscox will continue to mitigate falling rates by actively managing the book: walking away from risks that are poorly rated and increasing capacity in areas where rates are more attractive.
Investment return
The investment return for 2010 is approximately 3.6% calculated on the average value of the portfolio over the year. Faced with signs of stronger US economic growth, investors generally sold government bonds and bought equities in the fourth quarter. Our bond portfolios were protected by their short duration and allocation to credit, whilst our equities provided a useful return for the period. The value of the portfolio at the end of the year was approximately £2.8 billion.
Hiscox will report its preliminary results for the financial year ending December 2010 on 28 February 2011.
Source : Hiscox Press Release
