Hiscox shrugs off catastrophe claims to post pre-tax profit of $343.3m – The Royal Gazette | Bermuda News, Business, Sports, Events, & Community

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Hiscox shrugs off catastrophe claims to post pre-tax profit of $343.3m

Bermuda-based re/insurer Hiscox Ltd posted strong net earnings for 2010, despite being hit with catastrophe claims of £165.5 million ($268.7 million).

The London-listed company yesterday announced a pre-tax profit of £211.4 million ($343.3 million), compared to £320.6 million in 2009.

Chairman Robert Hiscox said: “Mother Nature has well and truly tested us further in the second half and a full-year pre-tax profit of £211.4 million is further strong evidence of the resilience of our business.”

The company's group chief executive officer Bronek Masojada told

The Royal Gazette yesterday that the business had performed well when faced with the double test of heavy catastrophe claims and a record-low interest rate environment.

“On the catastrophe side, we were hit with a £165 million loss, but we there was also a big reduction in investment income from £182 million to £98 million,” Mr Masojada said.

“If you consider that after all that, our profits are down by only about £100 million, then it really shows the underlying strength of the business.”

Hiscox Bermuda's reinsurance unit, which is based at Wessex House, in Reid Street, Hamilton, grew its income by 15.6 percent to $303.8 million, compared to $262.9 million in 2009. But the unit's profits were hit by last year's earthquakes in Chile and New Zealand.

Mr Masojada said after the marked increase in business last year and challenging conditions in the reinsurance market continuing, then Hiscox would write less business on the Island this year.

Hiscox's business model is made up of two distinct parts its retail business and its international business. The less volatile retail business grew strongly in the UK and Europe, which helped to counter the impact of the catastrophe losses and the low interest rates. The CEO put the increase in business down a to a strong marketing campaign in the UK and a big effort to knock on doors and rum up business in continental Europe.

Hiscox is one of many Bermuda reinsurers to have some exposure to last week's deadly New Zealand earthquake, which killed more than 100 people in Christchurch.

Asked whether he thought the event could cause reinsurance rates to rise, Mr Masojada said: “I hope it will, but I doubt it.”

New Zealand and Australia have more than their share of catastrophes over the past few months and reinsurance renewals for that part of the world tend to happen in the middle of the year. Mr Masojada expected to see regional upward pressure on rates, but not global.

Hiscox still sees reinsurance rates as being generally at attractive levels.

“The markets in which we operate have become progressively more challenging over the past three years, and we expect the trend of increasing competition and falling prices to continue. In this environment our strategy of building our retail businesses to balance the more volatile big-ticket businesses will come into its own,” Mr Masojada said in commentary attached to the preliminary earnings statement.

“We will allow our big-ticket businesses in Bermuda and London to shrink as they focus on margin over volume, while at the same time we expect our specialist retail businesses to grow their revenue and profits.”

In the statement, Mr Masojada also mentioned the uncertainty surrounding the new Solvency II rules, due to take effect in the European Union from 2013. He said Bermuda was making good progress in its efforts to gain equivalence.

“At the moment we are assuming that Bermuda will achieve equivalence and that we will implement the Solvency II approach across the whole group,” the CEO said. “We are therefore in constant communication with the BMA, the UK's FSA and Lloyd's of London on the path to implementing Solvency II within Hiscox.”

Last week, this newspaper published an interview with Mr Masojada in which he revealed the company's plans to increase its office space by 50 percent and hire more people. In the few days since, Mr Masojada said the company has been contacted by several job seekers and landlords.

Useful website: www.hiscox.com

Hiscox Ltd. CEO Bronek Masojada: 'Shows underlying strength of the business.'

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Published March 01, 2011 at 1:00 am (Updated March 01, 2011 at 9:08 am)

Hiscox shrugs off catastrophe claims to post pre-tax profit of $343.3m

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