The Bermuda-based Hiscox Group was yesterday upgraded by Standard & Poor's on the expectation of "robust earnings" going forward.

S&P upgraded both Hiscox's financial strength rating and its counterparty credit rating to A from A-. The outlook is stable.

In a statement released yesterday, the rating agency said: "The upgrade is based on Hiscox' strong recent operating performance, and expectations for continued underwriting discipline and robust earnings going forward."

Hiscox, which writes business through Lloyd's Syndicate 033, as well as through Bermuda and the US, had "differentiated itself from its peers", S&P said, and had enhanced its competitive position brand development and innovation.

"Offsetting these positive factors is the recent decline in the group's financial flexibility related to the challenging economic environment, which is expected to persist for the next 12 to 24 months," S&P added.

The agency also said Hiscox was well capitalised, adding: "Capital adequacy at year-end 2008, measured using Standard & Poor's risk-based model, is forecast to be in the 'A' range, similar to the level at year-end 2007.

"This demonstrates the resilience of the group's capital position to the extreme turbulence seen in global financial markets during 2008. The quality of capital is high, reserves are satisfactory, and reinsurance is prudently managed."

Operating performance over the last two years had continued the strong trend established since 2001, with an average return on equity of 20 percent over the past five years, S&P said.

However, S&P said Hiscox's financial flexibility is considered to be a weakness for the rating at its current level. "Hiscox does not hold as much excess capital as a number of its similarly rated peers," S&P said. "In our view, this makes it somewhat more exposed than peers to the systemic decline seen in the level of access to capital markets over the past 15 months.

"This could place downward pressure on the ratings were Hiscox to experience a shock loss, on either side of the balance sheet, over the next 12 to 18 months."