Final Results
Monday 28 February 2011
Hiscox Ltd
Full year results for the year ended 31 December 2010
"A resilient result"
|
|
2010 |
2009 |
|
Gross premiums written |
£1,432.7m |
£1,435.4m |
|
Net premiums earned |
£1,131.2m |
£1,098.1m |
|
Profit before tax |
£211.4m |
£320.6m |
|
Profit after tax |
£178.8m |
£280.5m |
|
Earnings per share |
47.2p |
75.2p |
|
Total dividend per share for year |
16.5p |
15.0p |
|
Net asset value per share |
332.7p |
299.2p |
|
Group combined ratio excluding foreign exchange |
89.8% |
82.2% |
|
Group combined ratio |
89.3% |
86.0% |
|
Return on equity |
16.5% |
30.1% |
Financial highlights
· A strong pre-tax profit of £211.4 million (2009: £320.6 million) despite specific catastrophe claims of £165 million
· Profit after tax £178.8 million (2009: £280.5 million);15.4% effective tax rate
· Gross written premiums remain flat at £1,432.7 million (2009: £1,435.4 million)
· Investment return of 3.6% (2009: 7.2%)
· Earnings per share 47.2p (2009: 75.2p)
· Total dividend for the year increased by 10% to 16.5p (2009: 15.0p)
· Net assets per share increased by 11.2% to 332.7p (2009: 299.2p)
· Combined ratio 89.3% (2009: 86.0%)
· Return on equity 16.5% (2009: 30.1%)
Operational highlights
· Hiscox London Market focused on margin over growth reducing income by 13.6%, delivering profits of £121.4 million despite catastrophes.
· Specialist retail businesses in the UK and Europe delivered good growth and doubled profits, again despite catastrophes.
· Rates still attractive in reinsurance and stable in other specialty lines.
· The first 'direct from insurer' small business offering in the US launched with promising early results.
Robert Hiscox, Chairman of Hiscox Ltd, commented: "Mother Nature has well and truly tested us this year and a pre-tax profit of £211.4 million is further strong evidence of the resilience of our business."
For further information:
Hiscox Ltd
Charles Dupplin, Group Company Secretary +1 441 278 8300
Kylie O'Connor, Head of Group Communications, London +44 (0)20 7448 6656
Brunswick +44 (0)20 7404 5959
Tom Burns
Daniel Thole
Notes to editors
About Hiscox
Hiscox, the international specialist insurer, is headquartered in Bermuda and listed on the London Stock Exchange (LSE:HSX). There are three main underwriting parts of the Group - Hiscox London Market, Hiscox UK and Europe and Hiscox International. Hiscox London Market underwrites internationally traded business in the London Market - generally large or complex business which needs to be shared with other insurers or needs the international licences of Lloyd's. Hiscox UK and Hiscox Europe offer a range of specialist insurance for professionals and business customers, as well as high net worth individuals. Hiscox International includes operations in Bermuda, Guernsey and USA.
For further information, visit www.hiscox.com.
Chairman's statement
In our 2010 Interim Statement I said that a half-year profit of £97.2 million was a testament to the strength of our business given the unnatural number of natural catastrophes (and one massive oil-spill) during the period. Well, 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.
Our long-term strategy has been to build a balanced book of international businesses, retreating from any area when the competition gets foolish and advancing when we can charge the proper price. It seems an immutable rule of insurance that a big loss will hit the area of weakest rates, and this year has proved the rule. We were underweight in Chile, New Zealand and Australia, had declined a significant insured in the oil-spill and had pruned our UK household book, as our view was that each area was under-rated for just the catastrophes which have occurred.
Results
The result for the year ending 31 December 2010 was a profit before tax of £211.4 million (2009: £320.6 million) on a gross written premium of £1,432.7 million (2009: £1,435.4 million). The combined ratio was 89.3% (2009: 86.0%). Earnings per share on profits after tax were 47.2p (2009: 75.2p) and net assets per share increased to 332.7p (2009: 299.2p). The return on equity was 16.5% (2009: 30.1%).
Dividend, balance sheet and capital management
The Board proposes to pay a final dividend of 11.5p (2009: 10.5p) on 21 June 2011 to shareholders on the register on 13 May 2011, making total dividends for the year of 16.5p (2009: 15.0p) an increase of 10%, in line with our policy of steady dividend growth. Subject to shareholder approval at the forthcoming Annual General Meeting, a scrip dividend alternative to the cash dividend is to be offered to shareholders and the Company's Dividend Access Plan will be suspended. The balance of profit retained helps to increase the net asset value per share which, combined with dividend growth, underpins the share price. Growth in net assets per share will inexorably drive the share price up whatever rating Mr Market puts on our shares or the sector.
New Directors
In December we appointed two distinguished and very experienced new non-executive directors, Richard Gillingwater and Robert (Bob) McMillan, to the Hiscox Ltd board. Richard Gillingwater is currently the Dean of Cass Business School and brings vital knowledge from his experience in the financial services sector. Richard has now been appointed Senior Independent Director replacing Andrea Rosen who was acting in the role following the death of Sir Mervyn Pedelty in January 2010. Bob McMillan has been a member of our US board since 2007 and his knowledge of retail insurance from his time with the Progressive Insurance Company has proved invaluable.
Courage and creativity
It takes courage to go against the herd, to pioneer in new areas, or to say no to major suppliers of business. In 1993, when Bronek Masojada joined, we were a simple underwriting agency. It would have been easy to remain so, solely managing syndicates in Lloyd's. It would have been easy to have expanded through Lloyd's only, or outside Lloyd's in the UK only; it would have been easy to accept business only from brokers. As it is, since 1993, we have raised the capital to go from agent to principal, formed insurance companies, opened offices in Bermuda, throughout the UK, Europe and the USA, expanded our distribution channels to include direct offerings, and moved our domicile to Bermuda. Our leading value is courage, and we will continue to develop the business in our own way while watching closely, but not following, the herd.
Our emphasis has always been on organic growth and start-ups which are tougher than the instant gratification of acquisitions, but mean that we build what we want. Investing is a word used by politicians to cover expenditure so I am reluctant to use it on our expansion in new areas, but new ventures take time to grow to profitability and I do consider them an excellent investment. We have written off the cost of building businesses against the profits of the day, and those businesses are now in many cases yielding a handsome return. Our UK and European regional offices are now an indispensable and profitable part of our distribution, and I believe our US offices will be so too when they reach critical mass. Our direct business in the UK now makes good money and has enormous growth potential. Our new direct offering in the US - the first direct commercial policy from an insurer - is in pre-marketing phase and showing promise.
The insurance cycle
General insurance is a great business as there is an insatiable and constantly growing demand for it. What drives rates up and down is supply of capital in the industry, combined with management weakness.
A small example of management weakness: the premium for piracy of ships in the Gulf of Aden can be calculated very roughly by relating the number of journeys through the gulf to the number of successful kidnaps by pirates. We had built a rating for this and were trading successfully when the competition decided to under-cut our rates by about 50%. At the same time, the pirates doubled their demands. How can any management allow an underwriter to compete at a quarter of the rates of the established market? We have continued to quote the sensible rate which effectively leads to our retreating from the business. We will be back when our competitors realise their folly and withdraw from the market, as some already have.
Fortunately the reinsurance market is more disciplined as are many of the areas in which we specialise. We will not compete to hold market share but will underwrite selectively regardless of top line. There is talk that a major market loss is needed to turn the market, and it would appear that some competitors are hanging on to business at the wrong rate hoping that a big bang somewhere will enable them to increase the price. I personally hope that there continues to be a constant attrition of medium losses and no major event so that discipline has to be learnt the hard way.
Broker remuneration
The vast majority of our business comes from brokers and undoubtedly always will. Their job is a difficult one. They have to assess the risks of their diverse clients and transfer those risks to insurers at a reasonable price. Their definition of reasonable and ours will obviously sometimes conflict, and we must have the discipline to say no - sometimes not easy to do to a robust provider of business.
A deficiency in the insurance market has long been how the broker is remunerated. The clients should pay the broker, as they do their other advisers, for the advice given and the work done to transfer the risks. However, in our market, the insurer has traditionally paid the brokers through giving them a slice of the premium as brokerage or commission. This not only leads to obvious conflicts (the higher the premium, the bigger the pay; the placing of business with the highest payer of commission not the best insurer), but also made the clients believe that they got the services of brokers for nothing. As fees have properly grown to be the correct way to pay the broker, the broker fraternity have had to learn how to cost their services, and have been reluctant to charge the proper fee. They have also competed with each other to a ridiculous extent on fees. Not getting enough revenue as a result, they bring pressure on the insurers to make up the deficiency. This is a big issue at the moment, and I just hope that it will be resolved sensibly before a solution is imposed either by the law, or again by a crusading regulator.
The future
We are building a business with a brand based on trust. We strive to offer flexible, intelligent underwriting backed by great service which people will want to buy for peace of mind, knowing they will be made good in times of loss, and definitely not because it is the cheapest in the market. But our brand has to be built on the behaviour of our people, and I am very grateful to them for their excellent work which led us to be voted the most trusted insurer in the UK. When I see the calibre of the staff throughout the Group, I am confident that the creativity and growth of the last decade will continue strongly over the next.
Robert Hiscox
28 February 2011
Chief Executive's report
In 2010 Hiscox made a pre-tax profit of £211.4 million, a good result considering the low returns on offer in the investment markets and the large number of catastrophes the industry faced this year. This result reflects the diverse strengths of our businesses: Hiscox London Market and Hiscox Bermuda showed outstanding discipline in their risk selection, while our specialist retail businesses in the UK, Europe and Guernsey strengthened their market positions by focusing on quality products sold at a fair price with a fast and friendly claims service; our US business continues to build critical mass in a difficult market.
2011 will test the industry further as prices remain under pressure and investment returns diminish. Our long-term strategy of balance and diversification has built a business designed for these conditions. Hiscox always plans for profit throughout the cycle, so our London Market and Bermudian businesses will maintain the same excellent underwriting discipline they showed in 2010 and it will be the turn of our specialist retail businesses to drive the Group forward.
Hiscox London Market
Our London Market business has been the powerhouse of the Group. It delivered a pre-tax profit of £121.4 million (2009: £179.9 million). This result, though lower than 2010, was helped by some canny underwriting decisions, particularly around Deepwater Horizon and the Chilean earthquake. In each case disciplined underwriting, with a focus on margin over volume, led us to incur claims that were substantially below the market average. This discipline also led to a reduced premium income of £572.7 million (2009: £663.0 million), a trend that will continue in 2011.
The London Market business is managed through the following six product lines:
- Reinsurance: This remains our largest line of business, accounting for £234.9 million of premium income. This division took the brunt of Hiscox losses arising from Chile and New Zealand - amongst others - but the fact that it still made a profit shows the excellence of its people and portfolio. It enjoys a great reputation in the market, which has enabled it to attract substantial quota share reinsurance support from other syndicates and major European and global insurers. This allows us to play an influential role in the market while keeping within our risk appetite. The important January 1 renewals were largely within our expectations, with modest reductions in pricing. Margins remain attractive but this line of business will shrink gradually as we trim our exposures in response to lower rates.
- Property: Our primary focus is catastrophe-exposed property risks of global companies, homeowners and small businesses. Property rates have been under pressure for some time and we have substantially reduced premium income to £95.7 million (2009: £137.4 million). Our experience is that good underwriting decisions like these, although painful to execute in the short term, serve the business well over the long term. We will return to serve customers with our previous risk appetite when our competitors, who have made this segment uneconomic, retreat nursing their losses, as they inevitably will. As regards our non-catastrophe exposed activities, during the year we entered the mechanical equipment insurance market through a relationship with a respected underwriting team.
- Marine and energy: Good disciplined underwriting based on sound appreciation of the technical facts meant we had minimal exposure to those affected by the Deepwater Horizon loss. We have achieved good results in this sector and have the risk appetite to expand if rates rise during the course of 2011.
- Specialty: Our specialty lines benefit from operating in niche markets including personal accident, event cancellation and abandonment, terrorism, political risks and kidnap and ransom. Specialty continues to perform well and has enjoyed significant releases from reserves as recoveries were made on political risk claims.
- Casualty: This market, particularly US casualty, remains under pressure and so this line shrank during the year. We had expected to see some losses arising out of the global financial crisis but, so far, these have not materialised. We expect to remain a modest participant in this market for as long as rates remain at their current levels.
- Aviation and aerospace: Hiscox has had a long-standing participation in the insurance of satellites, both at launch and in orbit. Savvy technical ability meant that we were not involved in some of the major losses that affected this class during the year. We also welcomed to Hiscox a specialist aviation team, who came on board in the second half of the year. Our goal is to build a material business, but only when conditions are right.
Looking forward, we expect pricing in the London Market to remain challenging. Generally market prices are under pressure, so it is only through increasingly selective underwriting that we can retain business at attractive prices. We are convinced this is the right approach, even though it may mean that our premium income (and exposure) falls in the year ahead.
Hiscox UK and Europe
Our businesses in the UK and mainland Europe have a focus on art and private client insurance for wealthy individuals, property and liability insurance of small commercial enterprises, and on errors and omissions insurance for technology and media businesses. We market our products through brokers and direct to our customers. In the year we have seen continued growth while increasing our profitability. Total profit before tax for the year was £39.6 million (2009: £20.6 million) on total premium income of £454.7 million (2009: £421.0 million).
- Hiscox UK: Hiscox UK's premium income grew by 7.6% to £327.0 million (2009: £304.0 million) and the combined ratio improved to 94.6% (2009: 97.9%). Profits remained virtually flat at £28.8 million (2009: £29.1 million) despite total catastrophe losses of £28 million arising from the UK freezes in January and November/December and event cancellation losses arising from the Icelandic volcanic ash cloud. In addition, Hiscox UK experienced some recession related errors and omission losses. This good performance shows the resilience of our business. The art and private client team deserves to be singled out for praise. In late 2009 they decided that on technical grounds prices were inadequate and implemented price rises of approximately 5% in a falling market. Their discipline was rewarded by a profitable result despite the many challenges of the year. Our commercial area achieved profits, albeit at lower levels than 2009. The direct business continues to expand with the top line growing by almost 20%. This business achieved a good level of profit in aggregate. In addition to the benefits of good underwriting, Hiscox UK has also seen the fruits of a sustained focus on expense ratio.
We are positive about the future. We have entered a new underwriting partnership with Dual, an established MGA, where we have taken a 25% share of their existing book of business. We also expect to see our direct business continue to develop. We are cautious about our broker-generated business as we believe that the market will remain soft. The ability of Hiscox UK to withstand market pressures in 2010 shows the strength of our specialist market position and we are confident that it will continue to enhance the value of the Group going forward.
- Hiscox Europe: Hiscox Europe had a tremendous year and made a profit of €11.9 million (2009: €0.4 million). The top line grew by 11.5% to €146.7 million (2009: €131.6 million), and it achieved a combined ratio of 97.4% (2009: 114.6%). This improvement was driven by a number of factors. First, we have made progress in breaking down the silos separating country units ensuring that lessons learned in one market are rapidly transferred to the others. Second, our creation of a pan-European service centre in Lisbon has allowed us to take advantage of pan-European economies of scale. Third, our decision to invest in the growth of our smaller commercial and technology businesses has paid off; and, fourth, the art and private client teams improved the quality of their book with the application of a more sophisticated pricing approach. We also created a new specialty line that sells kidnap and ransom and related products from our local offices to local brokers and experimented with a direct offering in France. In aggregate, these actions drove growth, improved the loss ratio and reduced the expense ratio. Hiscox Europe is, I believe, now in a position to become a sustainable contributor to the Group.
Hiscox International
Hiscox International comprises our businesses in Bermuda, Guernsey and the US. Aggregate premium written grew by 15.3% to £405.2 million (2009: £351.4 million), though profits dropped to £43.1 million (2009: £124.2 million).
- Hiscox Bermuda: Our Bermudian business, supported by a significant third party quota share reinsurance, was able to grow its income by 15.6% to $303.8 million (2009: $262.9 million). After a relatively loss free 2009, profits were hit by the Chilean and New Zealand earthquakes. During the year our healthcare team established itself as a sensible player in the market. In 2011 we expect to see pricing in the reinsurance market remain under pressure and as a result our Bermuda business will shrink.
- Hiscox Guernsey: The team showed great discipline in the piracy market, increasing prices in the face of increasing attacks, higher demands from pirates and the bizarre decision of some of our competitors to slash their prices. This inevitably led to a reduction in piracy revenues but Hiscox Guernsey remained overall flat. Our fine art business had a very good year with modest growth in premiums and increased profits. Our team in Guernsey also provides product leadership for kidnap and ransom across the Group, and their hard work during the year saw us consolidate our position as a worldwide leader in this field, with particular growth in Europe, the US and Latin America.
- Hiscox USA: Hiscox USA had a tough year. Premiums grew 22.4% to $198.3 million (2009: $162.1 million), but profitability was weak, in part due to some claims from longstanding large technology risks. In early 2009 we made a significant investment in the operation, believing that the financial crisis would allow us to recruit good people and that customers' concerns about financial stability would lead to a re-rating in the market. We were correct in our first assumption and are very pleased with the strength of talent we attracted, but the effective guarantee given by the government to some of the weaker players meant that rather than a market re-rating, prices actually fell further. Our philosophy of underwriting for profit over volume meant that in this challenging pricing environment we did not reach the scale we expected. In the middle of 2010 we took decisive action and adapted accordingly. We decided to focus our errors and omissions and property business through wholesale brokers only and to concentrate our specialist lines (kidnap and ransom, terrorism, construction, media and not-for-profit directors and officers) on major brokers in those niches. This led to the sale of our animal mortality business and the closure of our Boston office. These swift but necessary actions will allow us to keep focusing on building a quality business in what remains a very difficult market.
A milestone was the launch of our US direct commercial business. Our test site opened for business in November 2010, selling errors and omissions, commercial general liability and property owners' business to zero to ten employee firms in 15 states. We expect to work on improving our processes and infrastructure during the first quarter of 2011 and once this is stable and working effectively we will support the business with a significant marketing investment. We expect that in time we will see a repeat of the success we enjoy in the UK.
Claims
It is only when a customer claims that you can live up to your brand promise. Our claims operations across the world were tested during 2010 and the team rose to the challenge. The year began with the challenges of Windstorm Xynthia and a freeze in the UK. It was followed by the earthquake in Chile and losses arising from the Icelandic volcanic ash cloud. The year continued with Deepwater Horizon, the New Zealand earthquake, riots in Thailand, the December freeze in the UK and finally, the beginning of the Australian floods. Throughout this succession of calamities our claims teams have paid claims with the utmost efficiency and effectiveness. We strongly believe that a claim paid fairly and fast creates a competitive advantage, and judging by customer feedback we largely achieve this goal.
In my statement last year I expressed our concerns about the proposed Lloyd's Claims Scheme. Some of these seem to have been recognised now by others in the market and we hope that as Lloyd's finalises changes in 2011 it takes these concerns on board. We firmly believe that the need to provide a single point of notification for all claims, to differentiate between large and small claims and to provide a market-wide service for small claims must be recognised. Lloyd's claims handling, particularly on syndicated risks, is the cornerstone of its enviable reputation, so it is imperative that the market provides an effective unified solution.
Investments
During the year our investment portfolio, excluding derivatives, delivered a return of £98.8 million, a yield of 3.6% on an average portfolio of £2,717.5 million. The market was testing but on balance rewarded those prepared to take some measured risk. As a result our bond portfolio performed well, as our decision to maintain a healthy allocation to credit paid off. Our risk assets, a selection of equity and hedge funds, produced a good return but in aggregate under-performed their long only equity benchmark. The composition and benchmarking of risk assets will be a focus of attention in 2011. We expect market returns in the near term, particularly from bonds and cash, to remain low. However, we prefer to preserve the balance sheet, accepting the lower income on offer, rather than to stretch further for yield in credit, duration or structured products.
Operations and IT
As our specialist retail businesses have grown we have needed to increase the robustness of our processes. Last year, across the Group, we issued 370,000 policies and settled 40,000 claims. We rely on the efforts of many dedicated and professional operations and IT staff to deliver the services and infrastructure to do this effectively. Their high standards and those of our front line underwriters and claims handlers have helped us build the best reputation of any UK insurer, according to a 2010 consumer study by the Reputation Institute. The reduction in our expense ratios in the UK and Europe reflects the improving efficiency of their processes. Over a four year period this has dropped by 6%, making a substantial contribution to profits.
We can never be satisfied with how we are doing. During 2010 we conducted a 'lean' process review of a number of areas. In each case we identified significant improvements, whether in the timeliness of our underwriting reviews, the quality of our data or the cost of our service. The implementation of these recommendations will, over time, lead to continued improvements in our expense ratio.
Solvency II
The European insurance industry is in the midst of a tremendous change driven by the introduction of a new regulatory framework called Solvency II. The framework has three essential elements called 'pillars': Pillar 1 covers the amount of capital we must hold; Pillar 2 focuses on governance and risk management; Pillar 3 on transparency and disclosure. As a Bermuda domiciled group we are in a slightly anomalous situation. We expect to apply Solvency II principles consistently across our Group, with the Bermuda Monetary Authority (BMA) acting as our lead regulator, but with collaboration with the Financial Services Authority (FSA) and Lloyd's in the UK, and other regulators in other jurisdictions. The BMA has applied to the EU for approval as an 'equivalent regulator' - effectively that European supervisors can rely on its judgment - and it is making great progress on meeting the various tests which will be applied to it. Success in achieving equivalence will mean that Hiscox is able to apply a single consistent framework across the Group.
In many ways Solvency II is simply a formalisation of existing risk management systems used within our business. We have a well developed enterprise risk management approach which has been judged effective by some of the rating agencies. We have also been very transparent to shareholders on the underwriting risks we run. For many years we have published on our website and annual report our 'boxplot and whisker' chart which gives shareholders a clear view of the estimated losses we could suffer in the event of major catastrophes. At the moment we are assuming that Bermuda will achieve equivalence and that we will implement the Solvency II approach across the whole Group. 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.
The challenges of Solvency II arise from the fact that its rules are yet to be fully formulated, from the UK's well known tendency to 'gold plate' European Directives, and that the FSA itself is undergoing wrenching organisational and philosophical changes at the same time as Solvency II is being formulated and implemented. The challenges for all those involved in the process can be summed up by the fact that our application for approval under Solvency II is expected to reach 5,000 pages, and it is thought that the FSA will receive over 100 similar applications. One has to feel sorry for the teams who have to read and approve all the applications.
Achieving effective implementation of Solvency II is one of the Group's top priorities in 2011 and 2012.
People
Insurance is an industry where the decisions and actions by staff on the front line make a crucial difference to the performance of their businesses. We are lucky at Hiscox in having staff who not only enjoy this responsibility and the challenges which it brings, but who also make the right decisions for our business and its customers. Our exposure to Deepwater Horizon is minimal thanks to a single sound underwriting decision. Our US catastrophe exposed property portfolio has shrunk thanks to a team exercising discipline. Our UK art and private client business has performed well despite some terrible weather and thanks to brave underwriting decisions going against the market trend. Our European art and private client business has improved the quality of its business thanks to co-ordinated actions over an extended period. Our claims teams make difficult decisions every day - whether resolving a coverage dispute between terrorism and property insurers without the client being adversely affected or dealing with many personal difficulties arising from the UK freeze. It is our ambition to ensure that Hiscox remains a place where the individual makes the difference no matter how much we grow - and with the quality and dedication of the staff who work for us across the globe I feel confident that this ethos will continue to be central to our business.
Outlook
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. 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. These specialist retail businesses offer products that are clearly distinct from those of their competitors; they have developed reputations for excellent standards of service and for paying claims fairly. This combination will stand our employees, customers and shareholders in good stead.
Bronek Masojada
28 February 2011
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2010
|
|
|
Note |
2010 Total £000 |
|
2009 Total £000 |
Income |
|
|
|
|
|
|
Gross premiums written |
|
4 |
1,432,674 |
|
1,435,401 |
|
Outward reinsurance premiums |
|
|
(301,047) |
|
(278,378) |
|
Net premiums written |
|
4 |
1,131,627 |
|
1,157,023 |
|
|
|
|
|
|
|
|
Gross premiums earned |
|
|
1,435,118 |
|
1,363,698 |
|
Premiums ceded to reinsurers |
|
|
(303,960) |
|
(265,596) |
|
Net premiums earned |
|
4 |
1,131,158 |
|
1,098,102 |
|
|
|
|
|
|
|
|
Investment result |
|
7 |
100,249 |
|
183,165 |
|
Other revenues |
|
9 |
22,079 |
|
19,498 |
|
Revenue |
|
|
1,253,486 |
|
1,300,765 |
|
Expenses |
|
|
|
|
|
|
Claims and claim adjustment expenses, net of reinsurance |
|
17 |
(570,997) |
|
(463,218) |
|
Expenses for the acquisition of insurance contracts |
|
|
(269,891) |
|
(256,634) |
Operational expenses |
|
9 |
(206,403) |
|
(229,566) |
|
Foreign exchange gains/(losses) |
|
|
15,484 |
|
(25,554) |
|
Total expenses |
|
|
(1,031,807) |
|
(974,972) |
|
|
|
|
|
|
|
|
Results of operating activities |
|
|
221,679 |
|
325,793 |
|
Finance costs |
|
|
(10,090) |
|
(5,293) |
|
Share of (loss)/profit of associates after tax |
|
|
(223) |
|
118 |
|
Profit before tax |
|
|
211,366 |
|
320,618 |
|
Tax expense |
|
19 |
(32,566) |
|
(40,121) |
|
Profit for the year (all attributable to owners of the Company) |
|
|
178,800 |
|
280,497 |
|
Earnings per share on profit attributable to owners of the Company |
|
|
|
|
|
|
Basic |
|
20 |
47.2p |
|
75.2p |
|
Diluted |
|
20 |
45.4p |
|
72.3p |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2010, AFTER TAX
|
|
|
|
2010 Total £000 |
|
2009 Total £000 |
|
|
|
|
|
|
|
|
Profit for the year |
|
|
178,800 |
|
280,497 |
|
Other comprehensive income |
|
|
|
|
|
|
Currency translation gains/(losses) (net of tax of £nil (2009: £nil)) |
|
|
11,729 |
|
(69,589) |
|
Total other comprehensive income/(loss) |
|
|
11,729 |
|
(69,589) |
|
Total comprehensive income recognised for the year (all attributable to owners of Company) |
|
|
190,529 |
|
210,908 |
The related notes 1 to 23 are an integral part of this document.
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2010
|
|
Note |
2010 £000 |
2009 £000 |
|
Assets |
|
|
|
|
|
|
|
|
|
Intangible assets |
|
64,108 |
50,413 |
|
Property, plant and equipment |
|
19,742 |
22,244 |
|
Investments in associates |
|
6,886 |
7,318 |
|
Deferred tax |
|
14,077 |
14,077 |
|
Deferred acquisition costs |
|
142,736 |
141,505 |
|
Financial assets carried at fair value |
12 |
2,459,107 |
2,413,300 |
|
Reinsurance assets |
11 |
462,765 |
420,126 |
|
Loans and receivables including insurance receivables |
13 |
485,414 |
488,782 |
|
Cash and cash equivalents |
16 |
336,017 |
259,647 |
|
Total assets |
|
3,990,852 |
3,817,412 |
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
Share capital |
|
20,297 |
20,158 |
|
Share premium |
|
15,800 |
11,831 |
|
Contributed surplus |
|
245,005 |
303,465 |
|
Currency translation reserve |
|
49,457 |
37,728 |
|
Retained earnings |
|
935,555 |
748,104 |
|
Total equity (all attributable to owners of the Company) |
|
1,266,114 |
1,121,286 |
|
|
|
|
|
|
Employee retirement benefit obligations |
|
- |
- |
|
Deferred tax |
|
45,421 |
69,673 |
|
Insurance liabilities |
17 |
2,279,867 |
2,122,351 |
|
Financial liabilities |
12 |
20,457 |
138,539 |
|
Current tax |
|
29,995 |
26,080 |
|
Trade and other payables |
18 |
348,998 |
339,483 |
|
Total liabilities |
|
2,724,738 |
2,696,126 |
|
Total equity and liabilities |
|
3,990,852 |
3,817,412 |
The related notes 1 to 23 are an integral part of this document.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
|
|
|
Note |
Share Capital £000 |
Share Premium £000 |
Contributed Surplus £000 |
Currency Translation Reserve £000 |
Retained Earnings £000 |
Total £000 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2009
|
|
|
20,067 |
9,418 |
352,078 |
107,317 |
462,146 |
951,026 |
|
Total recognised comprehensive income/(expense) for the year (all attributable to owners of the Company)
|
|
|
- |
- |
- |
(69,589) |
280,497 |
210,908 |
|
Employee share options: |
|
|
|
|
|
|
|
|
|
Equity settled share based payments |
|
|
- |
- |
- |
- |
5,260 |
5,260 |
|
Proceeds from shares issued |
|
|
91 |
2,413 |
- |
- |
- |
2,504 |
|
Deferred tax |
|
|
- |
- |
- |
- |
201 |
201 |
|
Dividends paid to owners of the Company |
|
21 |
- |
- |
(48,613) |
- |
- |
(48,613) |
|
Balance at 31 December 2009 |
|
|
20,158 |
11,831 |
303,465 |
37,728 |
748,104 |
1,121,286 |
|
Total recognised comprehensive income/(expense) for the year (all attributable to owners of the Company)
|
|
|
- |
- |
- |
11,729 |
178,800 |
190,529 |
|
Employee share options: |
|
|
|
|
|
|
|
|
|
Equity settled share based payments |
|
|
- |
- |
- |
- |
9,000 |
9,000 |
|
Proceeds from shares issued |
|
|
139 |
3,969 |
- |
- |
- |
4,108 |
|
Deferred tax |
|
|
- |
- |
- |
- |
(349) |
(349) |
|
Dividends paid to owners of the Company |
|
21 |
- |
- |
(58,460) |
- |
- |
(58,460) |
|
Balance at 31 December 2010 |
|
|
20,297 |
15,800 |
245,005 |
49,457 |
935,555 |
1,266,114 |
The related notes 1 to 23 are an integral part of this document.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2010
|
|
|
2010 £000 |
2009 £000 |
|
Profit before tax |
|
211,366 |
320,618 |
|
Adjustments for: |
|
|
|
|
Interest and equity dividend income |
|
(61,606) |
(78,298) |
|
Interest expense |
|
10,090 |
5,293 |
|
Net fair value gains on financial assets |
|
(25,672) |
(87,692) |
|
Depreciation and amortisation |
|
7,065 |
6,046 |
|
Charges in respect of share based payments |
|
8,047 |
5,260 |
|
Other non-cash movements |
|
1,323 |
(975) |
|
Effect of exchange rate fluctuations on cash presented separately |
|
(508) |
30,844 |
|
|
|
|
|
|
Changes in operational assets and liabilities: |
|
|
|
|
Insurance and reinsurance contracts |
|
141,646 |
(58,366) |
|
Financial assets carried at fair value |
|
(2,527) |
(338,556) |
|
Financial liabilities carried at fair value |
|
82 |
(52,533) |
|
Other assets and liabilities |
|
(23,704) |
36,560 |
|
Cash flows from operations |
|
265,602 |
(211,799) |
|
Interest received |
|
60,332 |
74,584 |
|
Equity dividends received |
|
1,274 |
3,714 |
|
Interest paid |
|
(4,628) |
(5,066) |
|
Current tax paid |
|
(51,580) |
(1,463) |
|
Net cash flows from operating activities |
|
271,000 |
(140,030) |
|
Cash flows from the acquisition of subsidiaries |
|
(3,662) |
- |
|
Cash flows from the sale and purchase of associates |
|
468 |
- |
|
Cash flows from the purchase of property, plant and equipment |
|
(3,462) |
(8,802) |
|
Cash flows from the purchase of intangible assets |
|
(15,591) |
(2,911) |
|
Net cash flows from investing activities |
|
(22,247) |
(11,713) |
|
Proceeds from the issue of ordinary shares |
|
4,108 |
2,504 |
|
Dividends paid to owners of the Company |
|
(58,460) |
(48,613) |
|
Net (repayments)/receipts of borrowings |
|
(118,539) |
47,721 |
|
Net cash flows from financing activities |
|
(172,891) |
1,612 |
|
Net increase/(decrease) in cash and cash equivalents |
|
75,862 |
(150,131) |
|
Cash and cash equivalents at 1 January |
|
259,647 |
440,622 |
|
Net increase/(decrease) in cash and cash equivalents |
|
75,862 |
(150,131) |
|
Effect of exchange rate fluctuations on cash and cash equivalents |
|
508 |
(30,844) |
|
Cash and cash equivalents at 31 December |
|
336,017 |
259,647 |
The purchase, maturity and disposal of financial assets is part of the Group's insurance activities and is therefore classified as an operating cash flow. The purchase, maturity and disposal of derivative contracts is also classified as an operating cash flow. Included within cash and cash equivalents held by the Group are balances totalling £63,447,000 (2009: £31,607,000) not available for immediate use by the Group outside of the Lloyd's Syndicate within which they are held.
The related notes 1 to 23 are an integral part of this document.
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The financial information set out in this statement is extracted from the Group's consolidated financial statements for the year ended 31 December 2010. The auditors have reported on those 2010 financial statements which include comparative amounts for 2009. Their report was unqualified.
The Hiscox Group, which is headquartered in Hamilton, Bermuda, comprises Hiscox Ltd (the parent Company, referred to herein as the 'Company') and its subsidiaries (collectively, the 'Hiscox Group' or the 'Group'). For the period under review the Group provided insurance and reinsurance services to its clients worldwide. It has operations in Bermuda, the UK, Europe, and USA and employs over 1100 people.
The Company is registered and domiciled in Bermuda and on 12 December 2006 its ordinary shares were listed on the London Stock Exchange. As such it is required to prepare its annual audited financial information in accordance with Section 4.1 of the Disclosure and Transparency Rules and the Listing Rules, both issued by the Financial Services Authority (FSA), in addition to the Bermuda Companies Act 1981. The first two pronouncements issued by the FSA require the Group to prepare financial statements which comprise the consolidated income statement, the consolidated statement of other comprehensive income, the
consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the related notes 1 to 23 in accordance with International Financial Reporting Standards ('IFRS') adopted by the European Union.
The consolidated financial statements for the year ended 31 December 2010 include all of the Group's subsidiary companies and the Group's interest in associates. All amounts relate to continuing operations. The financial statements were approved for issue by the Board of Directors on 28 February 2011.
2. Significant accounting policies
The accounting policies adopted are consistent with those of the previous financial year except as follows:
The Group has adopted, for the first time, the following new and amended Standards and Interpretations issued by the IASB and endorsed by the EU as of 1 January 2010
IFRS 3 (Revised) Business Combinations and IAS 27 (Amended) Consolidated and Separate Financial Statements (endorsed)
The revised standards were issued in January 2008 and are applicable for accounting periods commencing on or after 1 July 2009. IFRS 3 incorporates a number of changes in accounting for business combinations which will impact the amount of goodwill recognised and the results reported in the period of the combination and future reporting periods. IAS 27 requires that a change in the ownership interest of a subsidiary, provided that control is maintained, to be accounted for as an equity transaction. As such, a transaction of this nature will no longer give rise to goodwill nor gain or loss.
In April 2010, the IASB issued its annual amendments to International Financial Reporting Standards. Such amendments remove inconsistencies and clarify wording and unless otherwise stated are effective for financial years beginning on or after beginning on or after 1 January 2010. The Group has adopted these changes where relevant.
Adoption of the changes had no material effect on the financial performance or position of the Group.
The following standards and interpretations have been issued but are not yet effective.
In October 2009 the IASB issued an Amendment to IAS 32 Financial Instruments, Disclosures and Presentations, Classification of Rights Issues. The amendment changes the definition of a financial liability in order to classify rights issues as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity's non derivative equity instruments. The amendment is effective for annual periods beginning on or after 1 February 2010. Adoption of this standard will have no impact on the financial position of the Group.
The amendment to IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirements is effective for annual periods beginning on or after 1 January 2011. The amendment provides guidance on assessing the recoverable amount of a net pension asset in a defined benefit scheme and permits an entity to treat the prepayment of a minimum funding requirement as an asset. Adoption of this standard will have no impact on the financial position of the Group.
IAS 24 Related Party Disclosure (Amendment) is effective for annual periods beginning on or after 1 January 2011. The amendment clarifies the definition of a related party in order to simplify the identification of such relationships and to eliminate inconsistencies in application. Adoption of this standard will have no impact on the financial position of the Group.
2.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with IFRS as adopted by the European Union and in accordance with the provisions of the Bermuda Companies Act 1981.
Since 2002, the standards adopted by the International Accounting Standards Board have been referred to as IFRS. The standards from prior years continue to bear the title 'International Accounting Standards' (IAS). Insofar as a particular standard is not explicitly referred to, the two terms are used in these financial statements synonymously. Compliance with IFRS includes the adoption of interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC).
In March 2004, the IASB issued the Insurance Contracts project which specifies the financial reporting for insurance contracts by an insurer. The standard is only the first phase in the IASB's insurance contract project and as such is only a stepping stone to Phase II, introducing limited improvements to accounting for insurance contracts. Accordingly, to the extent that IFRS 4 does not specify the recognition or measurement of insurance contracts, transactions reported in these consolidated financial statements have been prepared in accordance with another comprehensive body of accounting principles for insurance contracts, namely accounting principles generally accepted in the UK.
In July 2010 the IASB published an exposure draft for Phase II of the Insurance Contracts project. The exposure draft was open for comment until 30 November 2010 and the IASB aim to issue a final standard by mid 2011.
The exposure draft proposes a number of significant changes to the measurement of insurance contracts and as such adoption of a final standard in a form similar to the exposure draft will likely have a significant impact on the results of the Group. As yet, there is no effective date agreed for a new standard however transitional provisions propose that it should be applied retrospectively with opening differences accounted for in equity.
The Group are generally supportive of the proposed measurement principles for short duration contracts however we have submitted a comment letter to the IASB outlining our concerns and issues with some of the definitions and detail included within the exposure draft. We continue to monitor the progress of the project.
In April 2010, the IASB published an exposure draft containing proposals on recognition, presentation and disclosure of defined benefit plans as currently defined by IAS 19. The exposure draft was open to comment until September 2010 and it is expected that a finalised standard will be issued during the first quarter of 2011.
The exposure draft proposes that the defined employee benefit cost is recognised immediately and removes the option of the corridor method which the Group currently applies. In addition, the exposure draft proposes that companies present the defined employee benefit cost as follows:-
· Service costs within employment expenses
· Net interest income or expense within finance costs
· Re-measurement within other comprehensive income
The effective date for the new standard has not been determined however retrospective application will be required. Should IAS 19 be amended to reflect the proposed changes, the Group will no longer be permitted to apply the corridor approach and as such should the proposals be included within the new standard, we expect there to be an impact to the financial position of the Group.
2.2 Basis of preparation
The financial statements are presented in Pounds Sterling and are rounded to the nearest thousand unless otherwise stated.
They are compiled on a going concern basis and prepared on the historical cost basis except that pension scheme assets included in the measurement of the employee retirement benefit obligation, and financial instruments including derivative instruments, are measured at fair value. Employee retirement benefit obligations are determined using actuarial analysis.
The balance sheet of the Group is presented in order of increasing liquidity. The accounting policies have been applied consistently by all Group entities and to all periods presented, solely for the purpose of producing the consolidated Group financial statements.
The Group elected to apply the transitional arrangements contained in IFRS 4 that permitted the disclosure of only five years of data in claims development tables, in the year ended 31 December 2005 which was the year of adoption. The number of years of data presented was increased from nine in the prior year, to the maximum of ten in the current year.
The Group has financial assets and cash of over £2.78 billion. The portfolio is predominantly invested in liquid short dated bonds and cash to ensure significant liquidity to the Group and to reduce risk from the financial markets. In addition the Group has significant borrowing facilities in place.
The Group writes a balanced book of insurance and reinsurance business spread by product and geography. As such, the Directors believe that the Group is well placed to manage its business risk and continue to trade succesffully.
The Directors therefore have an expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.
2.3 Reporting of additional performance measures
The Directors consider that the claims ratio, expense ratio and combined ratio measures reported in respect of operating segments and the Group overall at note 4 provide useful information regarding the underlying performance of the Group's businesses. These measures are widely recognised by the insurance industry and are consistent with internal performance measures reviewed by senior management including the chief operating decision maker. However, these three measures are not defined within the IFRS framework and body of standards and interpretations and therefore may not be directly comparable with similarly titled additional performance measures reported by other companies. Net asset value per share and return on equity measures, disclosed at notes 5 and 6, are likewise considered to be additional performance measures.
3. Financial risk
Credit risk
The Group mitigates counterparty credit risk by concentrating debt and fixed income investments in high quality instruments, including a particular emphasis on government gilts issued mainly by European Union and North American countries.
An analysis of the Group's major exposures to counterparty credit risk excluding loans and receivables, based on Standard & Poor's or equivalent rating, is presented below:
|
As at 31 December 2010 |
AAA £000 |
AA £000 |
A £000 |
Other / not rated £000 |
Total £000 |
|
|
|
|
|
|
|
|
Debt and fixed income securities |
1,530,973 |
202,410 |
308,966 |
242,164 |
2,284,513 |
|
Deposits with credit institutions |
3,819 |
207 |
- |
254 |
4,280 |
|
Catastrophe bonds |
- |
- |
- |
15,452 |
15,452 |
|
Reinsurance assets |
22,931 |
169,083 |
253,810 |
16,941 |
462,765 |
|
Cash and cash equivalents |
35,874 |
137,223 |
160,382 |
2,538 |
336,017 |
|
Total |
1,593,597 |
508,923 |
723,158 |
277,349 |
3,103,027 |
|
Amounts attributable to largest single counterparty |
252,213 |
76,466 |
43,420 |
16,583 |
|
|
As at 31 December 2009 |
AAA £000 |
AA £000 |
A £000 |
Other / not rated £000 |
Total £000 |
|
|
|
|
|
|
|
|
Debt and fixed income securities |
1,555,636 |
198,001 |
256,120 |
245,980 |
2,255,737 |
|
Deposits with credit institutions |
62 |
2,860 |
8,472 |
- |
11,394 |
|
Catastrophe bonds |
- |
- |
- |
11,310 |
11,310 |
|
Derivative financial instruments |
- |
- |
- |
1,018 |
1,018 |
|
Reinsurance assets |
8,120 |
151,803 |
230,462 |
29,741 |
420,126 |
|
Cash and cash equivalents |
27,456 |
136,214 |
93,999 |
1,978 |
259,647 |
|
Total |
1,591,274 |
488,878 |
589,053 |
290,027 |
2,959,232 |
|
Amounts attributable to largest single counterparty |
308,569 |
57,859 |
17,424 |
10,619 |
|
An analysis of the Group's debt and fixed income securities at 31 December by class is detailed below:
|
|
|
|
|
2010 % |
2009 % |
|
|
|
|
|
|
|
|
Government issued bonds and instruments |
|
|
|
22 |
28 |
|
Agency and Government supported debt |
|
|
|
31 |
28 |
|
Asset backed securities |
|
|
|
8 |
6 |
|
Mortgage backed instruments - Agency |
|
|
|
4 |
4 |
|
Mortgage backed instruments - Non-Agency |
|
|
|
6 |
6 |
|
Corporate bonds |
|
|
|
27 |
26 |
|
Lloyd's and money market deposits |
|
|
|
2 |
2 |
The largest counterparty exposure within AAA rating is with the US Treasury. Catastrophe bonds included within other/non rated are rated BB or above. A significant proportion of 'other/not rated' reinsurance assets at 31 December 2010 and 31 December 2009 are supported by Letter of Credit guarantees issued by financial institutions with Standard & Poor's or equivalent credit or financial strength ratings of A or better.
Liquidity risk
A significant proportion of the Group's investments are in highly liquid assets which could be converted to cash in a prompt fashion and at minimal expense. The deposits with credit institutions largely comprise short dated certificates for which an active market exists and which the Group can easily access. The Group's exposure to equities is concentrated on shares and funds that are frequently traded on internationally recognised stock exchanges.
The main focus of the investment portfolio is on high quality short duration debt and fixed income securities, and cash. There are no significant holdings of investments with specific repricing dates. Notwithstanding the regular interest receipts and also the Group's ability to liquidate these securities and the majority of its other financial instrument assets, for cash in a prompt and reasonable manner, the contractual maturity profile of the fair value of these securities at 31 December was as follows :
|
|
|
Debt and fixed income securities £000 |
Deposits with credit institutions £000 |
Catastrophe bonds £000 |
Cash and cash equivalents £000 |
2010 Total £000 |
2009 Total £000 |
|
|
|
|
|
|
|
|
|
|
Less than one year |
|
484,885 |
525 |
3,759 |
336,017 |
825,186 |
733,946 |
|
Between one and two years |
|
807,481 |
3,755 |
5,606 |
- |
816,842 |
719,700 |
|
Between two and five years |
|
648,551 |
- |
6,087 |
- |
654,638 |
672,198 |
|
Over five years |
|
290,083 |
- |
- |
- |
290,083 |
359,094 |
|
Other non-dated instruments |
|
53,513 |
- |
- |
- |
53,513 |
54,168 |
|
Total |
|
2,284,513 |
4,280 |
15,452 |
336,017 |
2,640,262 |
2,539,106 |
The Group's equities and shares in unit trusts and other non-dated instruments have no contractual maturity terms but could also be liquidated in an orderly manner for cash in a prompt and reasonable time frame within one year of the balance sheet date.
4. Operating segments
The Group's operating segments consist of four segments which recognise the differences between products and services, customer groupings and geographical areas. Financial information is used in this format by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The format is representative of the management structure of the segments.
The Group's four operating segments are:
London Market comprises the results of Syndicate 33, excluding the results of fine art, UK regional events coverage and non US household business which is included within the results of UK and Europe. It also includes the fire and aviation businesses from Syndicate 3624. In addition, it excludes the larger TMT business which is allocated to the International segment and an element of kidnap and ransom and terrorism included in UK and Europe.
UK and Europe comprises the results of Hiscox Insurance Company Limited, the results of Syndicate 33's fine art, UK regional events coverage and non US household business, together with the income and expenses arising from the Group's retail agency activities in the UK and in continental Europe. In addition, it includes the European errors and omissions business from Syndicate 3624. It excludes the results of the larger retail TMT business written by Hiscox Insurance Company Limited. It also includes an element of kidnap and ransom and terrorism written in Syndicate 33.
International comprises the results of Hiscox Insurance Company (Guernsey) Limited, Hiscox Insurance Company (Bermuda) Limited, Hiscox Inc., Hiscox Insurance Company Inc. and Syndicate 3624 excluding the European errors and omissions, fire and aviation businesses. It also includes the results of the larger TMT business written by Hiscox Insurance Company Limited and Syndicate 33.
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. These relate to certain foreign currency items on economic hedges and intragroup borrowings, further details of which are given at note 22. Corporate Centre forms a reportable segment due to its investment activities which earn significant external coupon revenues.
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.
a) Profit before tax by segment
|
|
|
|
|
|
Year ended 31 December 2010 |
||||
|
|
London Market £000 |
UK and Europe £000 |
International £000 |
Corporate Centre £000 |
Total £000 |
||||
|
|
|
|
|
|
|
||||
|
Gross premiums written |
572,748 |
454,692 |
405,234 |
- |
1,432,674 |
||||
|
Net premiums written
|
389,581 |
428,032 |
314,014 |
- |
1,131,627 |
||||
|
Net premiums earned
|
396,096 |
422,180 |
312,882 |
- |
1,131,158 |
||||
|
|
|
|
|
|
|
||||
|
Investment result* |
39,068 |
17,244 |
27,624 |
16,313 |
100,249 |
||||
|
Other revenues |
12,054 |
3,671 |
5,836 |
518 |
22,079 |
||||
|
Revenue |
447,218 |
443,095 |
346,342 |
16,831 |
1,253,486 |
||||
|
|
|
|
|
|
|
||||
|
Claims and claim adjustment expenses, net of reinsurance |
(195,570) |
(213,001) |
(162,426) |
- |
(570,997) |
||||
|
Expenses for the acquisition of insurance contracts |
(92,832) |
(99,069) |
(77,990) |
- |
(269,891) |
||||
|
Operational expenses |
(44,733) |
(89,440) |
(59,419) |
(12,811) |
(206,403) |
||||
|
Foreign exchange gains/(losses) |
11,669 |
(1,972) |
(2,610) |
8,397 |
15,484 |
||||
|
Total expenses |
(321,466) |
(403,482) |
(302,445) |
(4,414) |
(1,031,807) |
||||
|
|
|
|
|
|
|
||||
|
Results of operating activities |
125,752 |
39,613 |
43,897 |
12,417 |
221,679 |
||||
|
Finance costs |
(4,392) |
(9) |
(433) |
(5,256) |
(10,090) |
||||
|
Share of (loss)/profit of associates after tax |
- |
- |
(323) |
100 |
(223) |
||||
|
Profit before tax |
121,360 |
39,604 |
43,141 |
7,261 |
211,366 |
||||
|
*Includes interest received of £60,332,000 |
|
|
|
|
|
||||
|
|
|
|
|
|
Year ended 31 December 2009 |
||||
|
|
London Market £000 |
UK and Europe £000 |
International £000 |
Corporate Centre £000 |
Total £000 |
||||
|
Gross premiums written |
663,034 |
420,982 |
351,385 |
- |
1,435,401 |
||||
|
Net premiums written |
483,611 |
391,461 |
281,951 |
- |
1,157,023 |
||||
|
Net premiums earned |
453,281 |
367,326 |
277,495 |
- |
1,098,102 |
||||
|
|
|
|
|
|
|
||||
|
Investment result* |
79,709 |
36,902 |
57,682 |
8,872 |
183,165 |
||||
|
Other revenues |
12,841 |
3,955 |
2,700 |
2 |
19,498 |
||||
|
Revenue |
545,831 |
408,183 |
337,877 |
8,874 |
1,300,765 |
||||
|
|
|
|
|
|
|
||||
|
Claims and claim adjustment expenses, net of reinsurance |
(175,823) |
(195,967) |
(91,428) |
- |
(463,218) |
||||
|
Expenses for the acquisition of insurance contracts |
(101,518) |
(87,393) |
(67,723) |
- |
(256,634) |
||||
|
Operational expenses |
(52,178) |
(97,193) |
(61,128) |
(19,067) |
(229,566) |
||||
|
Foreign exchange (losses)/gains |
(35,800) |
(7,065) |
6,989 |
10,322 |
(25,554) |
||||
|
Total expenses |
(365,319) |
(387,618) |
(213,290) |
(8,745) |
(974,972) |
||||
|
|
|
|
|
|
|
||||
|
Results of operating activities |
180,512 |
20,565 |
124,587 |
129 |
325,793 |
||||
|
Finance costs |
(616) |
(20) |
(407) |
(4,250) |
(5,293) |
||||
|
Share of profit of associate after tax |
- |
- |
- |
118 |
118 |
||||
|
Profit before tax |
179,896 |
20,545 |
124,180 |
(4,003) |
320,618 |
||||
|
*Includes interest received of £74,584,000 |
|
|
|
|
|
||||
b) 100% operating results by segment
The Group's wholly owned subsidiary, Hiscox Syndicates Limited, oversees the operation of Syndicate 33 at Lloyd's. The Group's percentage participation in Syndicate 33 can fluctuate from year to year and consequently presentation of the results at the 100% level removes any distortions arising there from.
|
|
|
|
Year ended 31 December 2010
|
||
|
|
London Market £000 |
UK and Europe £000 |
International £000 |
Corporate Centre £000 |
Total £000
|
|
Gross premiums written |
782,523 |
472,247 |
416,103 |
- |
1,670,873 |
|
Net premiums written |
524,658 |
443,693 |
321,236 |
- |
1,289,587 |
|
Net premiums earned |
545,945 |
438,773 |
322,341 |
- |
1,307,059 |
|
|
|
|
|
|
|
|
Investment result |
53,870 |
17,848 |
28,572 |
16,313 |
116,603 |
|
Other revenues |
- |
3,029 |
4,393 |
518 |
7,940 |
|
Claims and claim adjustment expenses, net of reinsurance |
(263,610) |
(220,101) |
(171,347) |
- |
(655,058) |
|
Expenses for the acquisition of insurance contracts |
(127,202) |
(105,394) |
(78,611) |
- |
(311,207) |
|
Operational expenses |
(55,873) |
(90,489) |
(60,755) |
(12,811) |
(219,928) |
|
Foreign exchange gains/ (losses) |
11,272 |
(1,983) |
(2,892) |
8,397 |
14,794 |
|
Results of operating activities |
164,402 |
41,683 |
41,701 |
12,417 |
260,203 |
|
|
|
|
Year ended 31 December 2009
|
||
|
|
London Market £000 |
UK and Europe £000 |
International £000 |
Corporate Centre |
Total |
|
Gross premiums written |
914,072 |
440,064 |
359,297 |
- |
1,713,433 |
|
Net premiums written |
666,692 |
408,037 |
287,589 |
- |
1,362,318 |
|
Net premiums earned |
624,755 |
382,417 |
287,524 |
- |
1,294,696 |
|
|
|
|
|
|
|
|
Investment result |
109,803 |
38,395 |
59,214 |
8,872 |
216,284 |
|
Other revenues |
- |
2,716 |
677 |
2 |
3,395 |
|
Claims and claim adjustment expenses, net of reinsurance |
(242,422) |
(204,330) |
(94,873) |
- |
(541,625) |
|
Expenses for the acquisition of insurance contracts |
(139,923) |
(92,562) |
(69,185) |
- |
(301,670) |
|
Operational expenses |
(61,054) |
(97,948) |
(62,040) |
(19,067) |
(240,109) |
|
Foreign exchange (losses)/gains |
(48,912) |
(6,951) |
6,678 |
10,322 |
(38,863) |
|
Results of operating activities |
242,247 |
21,737 |
127,995 |
129 |
392,108 |
Segment results at the 100% level presented above differ from those presented at the Group's share at note 4(a) solely as a result of the Group not owning 100% of the capacity of Syndicate 33 at Lloyd's.
|
100 % Ratio analysis |
|
Year ended 31 December 2010 |
||||
|
|
London Market
|
UK and Europe
|
International
|
Corporate Centre
|
Total
|
|
|
Claims ratio (%) |
48.3 |
50.2 |
53.2 |
- |
50.1 |
|
|
Expense ratio (%) |
33.5 |
44.6 |
43.2 |
- |
39.7 |
|
|
Combined ratio excluding foreign exchange impact (%) |
81.8 |
94.8 |
96.4 |
- |
89.8 |
|
|
Foreign exchange impact (%) |
(2.1) |
0.5 |
0.9 |
- |
(0.5) |
|
|
Combined ratio (%) |
79.7 |
95.3 |
97.3 |
- |
89.3 |
|
|
Combined ratio excluding non monetary foreign exchange impact (%) |
79.7 |
95.3 |
97.3 |
- |
89.3 |
|
|
|
|
Year ended 31 December 2009 |
|||
|
|
London Market
|
UK and Europe
|
International |
Corporate Centre |
Total |
|
Claims ratio (%) |
38.8 |
53.4 |
33.0 |
- |
41.8 |
|
Expense ratio (%) |
32.2 |
49.9 |
45.6 |
- |
40.4 |
|
Combined ratio excluding foreign exchange impact (%) |
71.0 |
103.3 |
78.6 |
- |
82.2 |
|
Foreign exchange impact (%) |
7.8 |
1.8 |
(2.3) |
- |
3.8 |
|
Combined ratio (%) |
78.8 |
105.1 |
76.3 |
- |
86.0 |
|
Combined ratio excluding non monetary foreign exchange impact (%) |
71.5 |
103.9 |
76.3 |
- |
81.7 |
The impacts on profit before tax of a 1% change in each component of the segmental combined ratios are:
|
|
Year to 31 December 2010
|
Year ended 31 December 2009
|
||||||
|
|
London Market £000 |
UK and Europe £000 |
International £000 |
Corporate Centre £000 |
London Market £000 |
UK and Europe £000 |
International £000 |
Corporate Centre £000 |
|
At 100% level |
|
|
|
|
|
|
|
|
|
1% change in claims or expense ratio |
5,459 |
4,388 |
3,223 |
- |
6,248 |
3,824 |
2,875 |
- |
|
At Group level |
|
|
|
|
|
|
|
|
|
1% change in claims or expense ratio |
3,961 |
4,222 |
3,129 |
- |
4,533 |
3,673 |
2,775 |
- |
5. Net asset value per share
|
|
|
2010 |
|
|
2009 |
|
|
Net asset value |
NAV per |
|
Net asset value |
NAV per |
|
|
(total equity) |
share |
|
(total equity) |
share |
|
|
£000 |
p |
|
£000 |
p |
|
|
|
|
|
|
|
|
Net asset value |
1,266,114 |
332.7 |
|
1,121,286 |
299.2 |
|
Net tangible asset value |
1,202,006 |
315.8 |
|
1,070,873 |
285.7 |
The net asset value per share is based on 380,613,336 shares (2009: 374,819,025), being the adjusted number of shares in issue at 31 December. Net tangible assets comprise total equity excluding intangible assets.
6. Return on equity
|
|
|
|
|
|
2010 |
2009 |
|
|
|
|
|
|
£000 |
£000 |
|
|
|
|
|
|
|
|
|
Profit for the year (all attributable to owners of the Company) |
|
|
|
|
178,800 |
280,497 |
|
Opening shareholders' equity |
|
|
|
|
1,121,286 |
951,026 |
|
Adjusted for the time weighted impact of capital distribution and issuance of shares |
|
|
(34,820) |
(20,429) |
||
|
Adjusted opening shareholders' equity |
|
|
|
|
1,086,466 |
930,597 |
|
Annualised return on equity (%) |
|
|
|
|
16.5 |
30.1 |
|
|
|
|
|
|
|
|
7. Investment result
The total result for the Group before taxation comprises :
|
|
|
2010 £000 |
|
2009 £000 |
|
Investment income including interest receivable |
|
61,606 |
|
75,740 |
|
Net realised gains on financial investment at fair value through profit or loss |
|
12,971 |
|
19,733 |
|
Net fair value gains/(losses) on financial investment at fair value through profit or loss |
|
24,272 |
|
87,296 |
|
Investment result - financial assets |
|
98,849 |
|
182,769 |
|
Fair value gains/(losses) on derivative instruments and borrowings (note 14) |
|
1,400 |
|
396 |
|
Total result |
|
100,249 |
|
183,165 |
Investment expenses are presented within other expenses (note 9).
8. Analysis of return on financial investments
(i) The weighted average return on financial investments for the year by currency, based on monthly asset values, was:
|
|
|
2010 % |
|
2009 % |
|
Sterling |
|
3.6 |
|
4.2 |
|
US Dollar |
|
3.8 |
|
8.5 |
|
Other |
|
2.3 |
|
6.5 |
(ii) Investment return
|
Year ended 31 December 2010
|
||||||||||
|
|
London Market |
UK and Europe |
International |
Corporate Centre |
Total |
|||||
|
|
£000 |
% |
£000 |
% |
£000 |
% |
£000 |
% |
£000 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt and fixed income securities |
39,464 |
4.2 |
9,586 |
2.6 |
22,078 |
3.6 |
11,106 |
4.7 |
82,234 |
3.7 |
|
Equities and shares in unit trusts |
- |
- |
6,079 |
11.6 |
4,468 |
9.0 |
5,025 |
13.4 |
15,572 |
11.1 |
|
Deposits with credit institutions/cash and cash equivalents |
138 |
0.3 |
500 |
0.8 |
218 |
0.1 |
187 |
0.4 |
1,043 |
0.3 |
|
|
39,602 |
4.0 |
16,165 |
3.3 |
26,764 |
3.2 |
16,318 |
5.0 |
98,849 |
3.6 |
|
Year ended 31 December 2009
|
||||||||||
|
|
London Market |
UK and Europe |
International |
Corporate Centre |
Total |
|||||
|
|
£000 |
% |
£000 |
% |
£000 |
% |
£000 |
% |
£000 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt and fixed income securities |
80,616 |
8.0 |
19,212 |
5.9 |
48,887 |
9.2 |
4,239 |
3.8 |
152,954 |
7.7 |
|
Equities and shares in unit trusts |
- |
- |
14,769 |
28.5 |
7,668 |
17.5 |
3,923 |
12.3 |
26,360 |
20.7 |
|
Deposits with credit institutions/cash and cash equivalents |
285 |
0.7 |
954 |
1.4 |
1,210 |
0.4 |
1,006 |
3.3 |
3,455 |
0.8 |
|
|
80,901 |
7.7 |
34,935 |
7.8 |
57,765 |
6.8 |
9,168 |
5.2 |
182,769 |
7.2 |
9. Other revenues and operational expenses
|
|
|
|
2010 £000 |
2009 £000 |
|
Agency related income |
|
|
6,816 |
6,651 |
|
Profit commission |
|
|
10,616 |
12,248 |
|
Other underwriting income - catastrophe bonds |
|
|
1,280 |
410 |
|
Other income |
|
|
3,367 |
189 |
|
Other revenues |
|
|
22,079 |
19,498 |
|
|
|
|
|
|
|
Wages and salaries |
|
|
80,359 |
86,701 |
|
Social security cost |
|
|
13,689 |
12,391 |
|
Pension cost - defined contribution |
|
|
5,209 |
5,167 |
|
Pension cost - defined benefit |
|
|
1,700 |
13,300 |
|
Share based payments |
|
|
8,047 |
5,260 |
|
Other expenses |
|
|
74,668 |
86,150 |
|
Marketing expenses |
|
|
11,863 |
11,422 |
|
Investment expenses |
|
|
3,803 |
3,129 |
|
Depreciation and amortisation |
|
|
7,065 |
6,046 |
|
|
|
|
|
|
|
Operational expenses |
|
|
206,403 |
229,566 |
10. Net foreign exchange gains/(losses)
The net foreign exchange gains/(losses) for the year include the following amounts:
|
|
|
2010 £000 |
|
2009 £000 |
|
Exchange gains/ (losses) recognised in the consolidated income statement |
|
15,484 |
|
(25,554) |
|
Exchange gains/ (losses) classified as a separate component of equity |
|
11,729 |
|
(69,589) |
|
Overall impact of foreign exchange related items on net assets |
|
27,213 |
|
(95,143) |
The above excludes profits or losses on foreign exchange derivative contracts which are included within the investment result and are outlined in note 14.
Net unearned premiums and deferred acquisition costs are treated as non monetary items in accordance with IFRS. As a result, a foreign exchange mismatch arises caused by these items being earned at historical rates of exchange prevailing at the original transaction date whereby resulting claims are retranslated at the end of each period. The impact of this mismatch on the income statement is shown below.
|
|
|
2010 £000 |
|
2009 £000 |
|
Opening balance sheet impact of non retranslation of non monetary items |
|
(3,207) |
|
50,525 |
|
Gain/(loss) included within profit representing the non retranslation of non monetary items |
|
1,956 |
|
(53,732) |
|
Closing balance sheet impact of non retranslation of non monetary items |
|
(1,251) |
|
(3,207) |
11. Reinsurance assets
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Reinsurers' share of insurance liabilities |
|
463,724 |
|
425,572 |
|
Provision for non-recovery and impairment |
|
(959) |
|
(5,446) |
|
Reinsurance assets (note 17) |
|
462,765 |
|
420,126 |
Amounts due from reinsurers in respect of outstanding premiums and claims already paid by the Group are included in loans and receivables (note 13). The Group recognised a gain during the year of £4,487,000 (2009: gain of £2,085,000) in respect of impaired balances.
12. Financial assets and liabilities
Financial assets are measured at their bid price values, with all changes from one accounting period to the next being recorded through the income statement.
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Debt and fixed income securities |
|
2,284,513 |
|
2,255,737 |
|
Equities and shares in unit trusts |
|
154,862 |
|
133,841 |
|
Deposits with credit institutions |
|
4,280 |
|
11,394 |
|
Total investments |
|
2,443,655 |
|
2,400,972 |
|
Catastrophe bonds |
|
15,452 |
|
11,310 |
|
Derivative financial instruments (note 14) |
|
- |
|
1,018 |
|
Total financial assets carried at fair value |
|
2,459,107 |
|
2,413,300 |
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Borrowings from credit institutions carried at amortised cost* |
|
20,000 |
|
138,000 |
|
Derivative financial instruments |
|
457 |
|
539 |
|
Total financial liabilities |
|
20,457 |
|
138,539 |
*The fair value of borrowings from credit institutions is not considered to be significantly different from the amortised cost value.
Investments at 31 December are denominated in the following currencies at their fair value:
|
|
2010 % |
2009 % |
|
|
|
|
|
Sterling |
24.5 |
24.2 |
|
US Dollars |
67.1 |
67.1 |
|
Euro and other currencies |
8.4 |
8.7 |
13. Loans and receivables including insurance receivables
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Gross receivables arising from insurance and reinsurance contracts |
|
412,524 |
|
413,449 |
|
Provision for impairment |
|
(1,041) |
|
(955) |
|
Net receivables arising from insurance and reinsurance contracts |
|
411,483 |
|
412,494 |
|
|
|
|
|
|
|
Due from contract holders, brokers, agents and intermediaries |
|
298,214 |
|
270,593 |
|
Due from reinsurance operations |
|
113,269 |
|
141,901 |
|
Prepayments and accrued income |
|
411,483 7,656 |
|
412,494 10,020 |
|
Other loans and receivables: |
|
|
|
|
|
Net profit commission receivable |
|
15,276 |
|
17,758 |
|
Accrued interest |
|
11,888 |
|
12,227 |
|
Share of Syndicate's other debtors balances |
|
23,230 |
|
20,273 |
|
Other debtors including related party amounts |
|
15,881 |
|
16,010 |
|
Total loans and receivables including insurance receivables |
|
485,414 |
|
488,782 |
There is no significant concentration of credit risk with respect to loans and receivables, as the Group has a large number of internationally dispersed debtors. The Group has recognised a loss of £86,000 (2009: loss of £395,000) for the impairment of receivables during the year ended 31 December 2010.
14. Derivative financial instruments
The Group entered into both exchange-traded and over the counter derivative contracts for a number of purposes during 2010. The Group had the right and intention to settle each contract on a net basis. The assets and liabilities of these contracts at 31 December 2010 all mature within one year of the balance sheet date and are detailed below:
31 December 2010
|
|
|
Gross contract notional amount |
|
Fair value of assets |
|
Fair value of liabilities |
|
Net balance sheet position |
|
|
Derivative financial instrument liabilities included on balance sheet |
|
£000 |
|
£000 |
|
£000 |
|
£000 |
|
|
Foreign exchange forward contracts |
|
20,223 |
|
10,070 |
|
10,500 |
|
430 |
|
|
Interest rate futures contracts |
|
64,407 |
|
16,557 |
|
16,582 |
|
25 |
|
|
Credit default swaps |
|
25,398 |
|
- |
|
2 |
|
2 |
|
|
Total |
|
110,028 |
|
26,627 |
|
27,084 |
|
457 |
|
31 December 2009
|
|
|
Gross contract notional amount |
|
Fair value of assets |
|
Fair value of liabilities |
|
Net balance sheet position |
|
|
Derivative financial instrument assets included on balance sheet |
|
£000 |
|
£000 |
|
£000 |
|
£000 |
|
|
Foreign exchange forward contracts |
|
50,105 |
|
180 |
|
7 |
|
173 |
|
|
Interest rate futures contracts |
|
21,288 |
|
906 |
|
61 |
|
845 |
|
|
Total |
|
71,393 |
|
1,086 |
|
68 |
|
1,018 |
|
|
|
|
Gross contract notional amount |
|
Fair value of assets |
|
Fair value of liabilities |
|
Net balance sheet position |
|
|
Derivative financial instrument liabilities included on balance sheet |
|
US$000 |
|
£000 |
|
£000 |
|
£000 |
|
|
Event linked future contracts |
|
2,400 |
|
18 |
|
557 |
|
539 |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
During the current and prior year the Group entered into a series of conventional over the counter forward contracts in order to secure translation gains made on Euro, US Dollar and other non Pound Sterling denominated monetary assets. The contracts require the Group to forward sell a fixed amount of the relevant currency for Pound Sterling at pre-agreed future exchange rates. The Group made a gain on these forward contracts of £1,522,000 (2009: £769,000) as included in note 7. The opposite exchange loss is included within financial investments.
There was no initial purchase cost associated with these instruments.
Interest rate future contracts
During the year the Group continued short selling a number of government bond futures and sovereign futures denominated in a range of currencies to informally hedge substantially all of the interest rate risk on specific long portfolios of the matching currencies denominated corporate bonds. All contracts are exchange traded and the Group made a loss on these futures contracts of £117,000 (2009: £78,000) as included in note 7.
Event linked future contracts
In June 2008, the Group commenced trading event linked future contracts which are transacted on the Chicago Climate Futures Exchange. The contracts have fixed maturity dates and are structured such that cash inflows are binary in nature and are triggered by the occurrence of specific natural events in specific geographical zones which cause pre-determined losses to the insurance industry in excess of a specified amount. The Group itself does not have to suffer losses to receive a payment once the industry loss strike amount on each contract has been reached. Consequently the contracts are not accounted for as insurance contracts in accordance with IFRS 4. The Group ceased trading in these instruments during the year realising a loss on settlement of £5,000 (2009: £609,000).
15. Fair value measurements
In accordance with the Amendments to IFRS 7 Financial Instruments: Disclosures 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 provided below.
|
As at 31 December 2010 |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Debt and fixed income securities |
|
516,528 |
1,767,985 |
- |
2,284,513 |
|
Equities and share in unit trusts |
|
70 |
147,866 |
6,926 |
154,862 |
|
Deposits with credit institutions |
|
4,280 |
- |
- |
4,280 |
|
Catastrophe bonds |
|
- |
15,452 |
- |
15,452
|
|
Total |
|
520,878 |
1,931,303 |
6,926 |
2,459,107 |
Financial liabilities
|
Derivative financial instruments |
|
- |
457 |
- |
457 |
|
As at 31 December 2009 |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Financial assets |
|
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Debt and fixed income securities |
|
627,702 |
1,628,035 |
- |
2,255,737 |
|
Equities and share in unit trusts |
|
162 |
129,419 |
4,260 |
133,841 |
|
Deposits with credit institutions |
|
11,394 |
- |
- |
11,394 |
|
Catastrophe bonds |
|
- |
11,310 |
- |
11,310 |
|
Derivative financial instruments |
|
- |
1,018 |
- |
1,018 |
|
Total |
|
639,258 |
1,769,782 |
4,260 |
2,413,300 |
Financial liabilities
|
Derivative financial instruments |
|
- |
539 |
- |
539 |
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 observable market data,
Level 3 - fair values measured using valuation techniques for which significant inputs are not based on market observable data.
The fair value 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 manager 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.
The fair values of the Group's investments in catastrophe bonds are based on quoted market prices or where such prices are not available, by reference to broker or underwriter bid indications.
Investments in mutual funds 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 as reported by independent pricing sources or the fund manager.
Included within Level 1 of the hierarchy are Government bonds, Treasury bills and exchange traded equities which are measured based on quoted prices.
Level 2 of the hierarchy contains U.S Government Agencies, Corporate Securities, Asset Backed Securities, Mortgage Backed Securities and Catastrophe bonds. The fair value of these assets are based on 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 of 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 which have limited observable inputs on which to measure fair value. Unquoted equities are carried at cost which is deemed to be comparable to fair value. The effect of changing one or more inputs used in the measurement of fair value of these instruments to another reasonably possible assumption would not be significant and no further analysis has been performed.
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 year, there were no transfers made between Level 1 and Level 2 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:
|
|
|
Equities and shares in unit trusts |
Deposits with credit institutions |
Derivative financial instruments |
Total |
|
31 December 2010 |
|
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Balance at 1 January |
|
4,260 |
- |
- |
4,260 |
|
Total gains or losses through profit or loss* |
|
842 |
- |
- |
842 |
|
Purchases |
|
1,824 |
- |
- |
1,824 |
|
Issues |
|
- |
- |
- |
- |
|
Settlements |
|
- |
- |
- |
- |
|
Transfers into Level 2 |
|
- |
- |
- |
- |
|
Closing balance |
|
6,926 |
- |
- |
6,926 |
|
|
|
Equities and shares in unit trusts |
Deposits with credit institutions |
Derivative financial instruments |
Total |
|
31 December 2009 |
|
£000 |
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Balance at 1 January |
|
539 |
5,877 |
40 |
6,456 |
|
Total gains or losses through profit or loss* |
|
245 |
- |
- |
245 |
|
Purchases |
|
3,353 |
- |
- |
3,353 |
|
Issues |
|
123 |
- |
- |
123 |
|
Settlements |
|
- |
(5,877) |
- |
(5,877) |
|
Transfers into Level 2 |
|
- |
- |
(40) |
(40) |
|
Closing balance |
|
4,260 |
- |
- |
4,260 |
*Total gains/(losses) are included within the investment result in the income statement
16. Cash and cash equivalents
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Cash at bank and in hand |
|
260,710 |
|
166,780 |
|
Short-term bank deposits |
|
75,307 |
|
92,867 |
|
|
|
336,017 |
|
259,647 |
The Group holds its cash deposits with a well diversified range of banks and financial institutions.
17. Insurance liabilities and reinsurance assets
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Gross |
|
|
|
|
|
Claims reported and loss adjustment expenses |
|
802,254 |
|
800,307 |
|
Claims incurred but not reported |
|
904,150 |
|
749,016 |
|
Unearned premiums |
|
573,463 |
|
573,028 |
|
Total insurance liabilities, gross |
|
2,279,867 |
|
2,122,351 |
|
|
|
|
|
|
|
Recoverable from reinsurers |
|
|
|
|
|
Claims reported and loss adjustment expenses |
|
131,697 |
|
173,987 |
|
Claims incurred but not reported |
|
242,496 |
|
154,903 |
|
Unearned premiums |
|
88,572 |
|
91,236 |
|
Total reinsurers' share of insurance liabilities |
|
462,765 |
|
420,126 |
|
|
|
|
|
|
|
Net |
|
|
|
|
|
Claims reported and loss adjustment expenses |
|
670,557 |
|
626,320 |
|
Claims incurred but not reported |
|
661,654 |
|
594,113 |
|
Unearned premiums |
|
484,891 |
|
481,792 |
|
Total insurance liabilities, net |
|
1,817,102 |
|
1,702,225 |
The gross claims reported, the loss adjustment expenses liabilities and the liability for claims incurred but not reported are net of expected recoveries from salvage and subrogation. The amounts for salvage and subrogation at the end of 2010 and 2009 are not material.
Claims development tables
The development of insurance liabilities provides a measure of the Group's ability to estimate the ultimate value of claims. The Group analyses actual claims development compared with previous estimates on an accident year basis. This exercise is performed to include the liabilities of Syndicate 33 at the 100% level regardless of the Group's actual level of ownership, which has increased significantly over the last eight years. Analysis at the 100% level is required in order to avoid distortions arising from reinsurance to close arrangements which subsequently increase the Group's share of ultimate claims for each accident year three years after the end of that accident year.
The top half of each table illustrates how estimates of ultimate claim costs for each accident year have changed at successive year ends. The bottom half reconciles cumulative claim costs to the amounts still recognised as liabilities. A reconciliation of the liability at the 100% level to the Group's share, as included in the balance sheet, is also shown.
Insurance claims and claims expenses reserves - gross at 100% level
|
Accident year |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Estimate of ultimate claims costs as adjusted for foreign exchange*: |
|
|
|
|
|
|
|
|
|
|
|
|
at end of accident year |
701,387 |
410,797 |
463,733 |
698,820 |
1,170,170 |
604,706 |
809,548 |
1,127,349 |
860,395 |
1,033,809 |
7,880,714 |
|
one year later |
680,601 |
435,108 |
476,153 |
774,979 |
1,294,900 |
577,680 |
726,072 |
959,350 |
719,421 |
- |
6,644,264 |
|
two years later |
755,321 |
443,259 |
447,650 |
739,639 |
1,297,603 |
556,641 |
689,800 |
937,465 |
- |
- |
5,867,378 |
|
three years later |
779,918 |
427,233 |
460,941 |
699,397 |
1,279,163 |
525,823 |
702,980 |
- |
- |
- |
4,875,455 |
|
four years later |
823,545 |
423,050 |
456,291 |
702,505 |
1,273,288 |
536,077 |
- |
- |
- |
- |
4,214,756 |
|
five years later |
819,846 |
398,472 |
445,561 |
684,260 |
1,274,625 |
- |
- |
- |
- |
- |
3,622,764 |
|
six years later |
817,655 |
394,252 |
440,956 |
688,004 |
- |
- |
- |
- |
- |
- |
2,340,867 |
|
seven years later |
814,774 |
395,833 |
430,687 |
- |
- |
- |
- |
- |
- |
- |
1,641,294 |
|
eight years later |
823,678 |
382,319 |
- |
- |
- |
- |
- |
- |
- |
- |
1,205,997 |
|
nine years later |
808,695 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
808,695 |
|
Current estimate of cumulative claims |
808,695 |
382,319 |
430,687 |
688,004 |
1,274,625 |
536,077 |
702,980 |
937,465 |
719,421 |
1,033,809 |
7,514,082 |
|
Cumulative payments to date |
(751,596) |
(347,926) |
(394,853) |
(604,658) |
(1,151,238) |
(462,855) |
(542,307) |
(639,622) |
(386,599) |
(182,971) |
(5,464,625) |
|
Liability recognised at 100% level |
57,099 |
34,393 |
35,834 |
83,346 |
123,387 |
73,222 |
160,673 |
297,843 |
332,822 |
850,838 |
2,049,457 |
|
Liability recognised in respect of prior accident years at 100% level |
|
|
|
|
|
|
|
|
|
|
84,784 |
|
Total gross liability to external parties at 100% level |
|
2,134,241 |
|||||||||
*The foreign exchange adjustment arises from the retranslation of the estimates at each date using the exchange rate ruling at 31 December 2010.
Reconciliation of 100% disclosures above to Group's share - gross
|
Accident year |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Current estimate of cumulative claims |
808,695 |
382,319 |
430,687 |
688,004 |
1,274,625 |
536,077 |
702,980 |
937,465 |
719,421 |
1,033,809 |
7,514,082 |
|
Less:Attributable to external Names |
(200,059) |
(77,565) |
(96,451) |
(159,837) |
(319,643) |
(112,599) |
(136,453) |
(181,382) |
(119,007) |
(172,924) |
(1,575,920) |
|
Group's share of current ultimate claims estimate |
608,636 |
304,754 |
334,236 |
528,167 |
954,982 |
423,478 |
566,527 |
756,083 |
600,414 |
860,885 |
5,938,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative payments to date |
(751,596) |
(347,926) |
(394,853) |
(604,658) |
(1,151,238) |
(462,855) |
(542,307) |
(639,622) |
(386,599) |
(182,971) |
(5,464,625) |
|
Less:Attributable to external Names |
184,573 |
68,737 |
87,421 |
141,261 |
291,641 |
96,380 |
101,589 |
114,995 |
59,151 |
20,732 |
1,166,480 |
|
Group's share of cumulative payments |
(567,023) |
(279,189) |
(307,432) |
(463,397) |
(859,597) |
(366,475) |
(440,718) |
(524,627) |
(327,448) |
(162,239) |
(4,298,145) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for 2001 to 2010 accident years recognised on Group's balance sheet |
41,613 |
25,565 |
26,804 |
64,770 |
95,385 |
57,003 |
125,809 |
231,456 |
272,966 |
698,646 |
1,640,017 |
|
Liability for accident years before 2001 recognised on Group's balance sheet |
|
|
|
|
|
|
|
|
|
|
66,387 |
|
Total Group liability to external parties included in balance sheet - gross** |
|
1,706,404 |
|||||||||
** This represents the claims element of the Group's insurance liabilities.
Insurance claims and claims expenses reserves - net at 100% level
|
Accident year |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
Total |
|
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Estimate of ultimate claims costs as adjusted for foreign exchange*: |
|
|
|
|
|
|
|
|
|
|
|
|
|
at end of accident year |
337,866 |
277,174 |
366,197 |
584,744 |
689,688 |
537,157 |
700,937 |
782,336 |
695,595 |
819,110 |
5,790,804 |
|
|
one year later |
380,010 |
302,447 |
386,549 |
638,962 |
792,534 |
528,737 |
637,695 |
698,849 |
585,504 |
- |
4,951,287 |
|
|
two years later |
453,049 |
312,897 |
351,754 |
613,606 |
782,878 |
511,509 |
617,910 |
695,742 |
- |
- |
4,339,345 |
|
|
three years later |
492,745 |
288,586 |
362,671 |
575,449 |
757,545 |
468,059 |
585,996 |
- |
- |
- |
3,531,051 |
|
|
four years later |
481,424 |
282,392 |
353,744 |
576,344 |
747,108 |
485,738 |
- |
- |
- |
- |
2,926,750 |
|
|
five years later |
466,500 |
267,860 |
348,549 |
561,005 |
747,855 |
- |
- |
- |
- |
- |
2,391,769 |
|
|
six years later |
459,225 |
261,703 |
344,902 |
561,577 |
- |
- |
- |
- |
- |
- |
1,627,407 |
|
|
seven years later |
461,672 |
267,290 |
333,610 |
- |
- |
- |
- |
- |
- |
- |
1,062,572 |
|
|
eight years later |
461,216 |
255,949 |
- |
- |
- |
- |
- |
- |
- |
- |
717,165 |
|
|
nine years later |
446,087 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
446,087 |
|
|
Current estimate of cumulative claims |
446,087 |
255,949 |
333,610 |
561,577 |
747,855 |
485,738 |
585,996 |
695,742 |
585,504 |
819,110 |
5,517,168 |
|
|
Cumulative payments to date |
(391,358) |
(229,514) |
(300,776) |
(488,664) |
(639,323) |
(421,595) |
(451,859) |
(484,840) |
(321,162) |
(173,650) |
(3,902,741) |
|
|
Liability recognised at 100% level |
54,729 |
26,435 |
32,834 |
72,913 |
108,532 |
64,143 |
134,137 |
210,902 |
264,342 |
645,460 |
1,614,427 |
|
|
Liability recognised in respect of prior accident years at 100% level |
|
|
|
|
|
|
|
|
|
|
37,001 |
|
|
Total net liability to external parties at 100% level |
1,651,428 |
|
||||||||||
*The foreign exchange adjustment arises from the retranslation of the estimates at each date using the exchange rate ruling at 31 December 2010.
Reconciliation of 100% disclosures above to Group's share - net
|
Accident year |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Current estimate of cumulative claims |
446,087 |
255,949 |
333,610 |
561,577 |
747,855 |
485,738 |
585,996 |
695,742 |
585,504 |
819,110 |
5,517,168 |
|
Less:Attributable to external Names |
(104,209) |
(50,055) |
(73,299) |
(131,460) |
(179,351) |
(103,318) |
(118,752) |
(130,649) |
(91,326) |
(123,011) |
(1,105,430) |
|
Group's share of current ultimate claims estimate |
341,878 |
205,894 |
260,311 |
430,117 |
568,504 |
382,420 |
467,244 |
565,093 |
494,178 |
696,099 |
4,411,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative payments to date |
(391,358) |
(229,514) |
(300,776) |
(488,664) |
(639,323) |
(421,595) |
(451,859) |
(484,840) |
(321,162) |
(173,650) |
(3,902,741) |
|
Less:Attributable to external Names |
89,314 |
43,108 |
64,811 |
114,344 |
154,111 |
88,645 |
87,112 |
81,953 |
48,897 |
22,793 |
795,088 |
|
Group's share of cumulative payments |
(302,044) |
(186,406) |
(235,965) |
(374,320) |
(485,212) |
(332,950) |
(364,747) |
(402,887) |
(272,265) |
(150,857) |
(3,107,653) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability for 2001 to 2010 accident years recognised on Group's balance sheet |
39,834 |
19,488 |
24,346 |
55,797 |
83,292 |
49,470 |
102,497 |
162,206 |
221,913 |
545,242 |
1,304,085 |
|
Liability for accident years before 2001 recognised on Group's balance sheet |
|
|
|
|
|
|
|
|
|
|
28,126 |
|
Total Group liability to external parties included in balance sheet - net** |
1,332,211 |
||||||||||
** This represents the claims element of the Group's insurance liabilities and reinsurance assets.
Movement in insurance claims liabilities and reinsurance claims assets
|
|
|
|
2010 |
|
|
|
2009 |
|
|
Gross |
Reinsurance |
Net |
|
Gross |
Reinsurance |
Net |
|
Year ended 31 December |
£000 |
£000 |
£000 |
|
£000 |
£000 |
£000 |
|
Total at beginning of year |
(1,549,323) |
328,890 |
(1,220,433) |
|
(1,767,728) |
426,303 |
(1,341,425) |
|
Claims and loss adjustment expenses for the year |
(733,074) |
162,077 |
(570,997) |
|
(508,238) |
45,020 |
(463,218) |
|
Cash paid for claims settled in the year |
598,179 |
(120,088) |
478,091 |
|
571,689 |
(110,924) |
460,765 |
|
Exchange differences and other movements |
(22,186) |
3,314 |
(18,872) |
|
154,954 |
(31,509) |
123,445 |
|
Total at end of year |
(1,706,404) |
374,193 |
(1,332,211) |
|
(1,549,323) |
328,890 |
(1,220,433) |
|
|
|
|
|
|
|
|
|
|
Claims reported and loss adjustment expenses |
(802,254) |
131,697 |
(670,557) |
|
(800,307) |
173,987 |
(626,320) |
|
Claims incurred but not reported |
(904,150) |
242,496 |
(661,654) |
|
(749,016) |
154,903 |
(594,113) |
|
Total at end of year |
(1,706,404) |
374,193 |
(1,332,211) |
|
(1,549,323) |
328,890 |
(1,220,433) |
The insurance claims expense reported in the consolidated income statement is comprised as follows:
|
|
|
|
2010 |
|
|
|
2009 |
|
|
Gross |
Reinsurance |
Net |
|
Gross |
Reinsurance |
Net |
|
Year ended 31 December |
£000 |
£000 |
£000 |
|
£000 |
£000 |
£000 |
|
Current year claims and loss adjustment expenses |
(864,128) |
160,277 |
(703,851) |
|
(725,132) |
122,538 |
(602,594) |
|
(Under)/over provision in respect of prior year claims and loss adjustment expenses |
131,054 |
1,800 |
132,854 |
|
216,894 |
(77,518) |
139,376 |
|
Total claims and claims handling expense |
(733,074) |
162,077 |
(570,997) |
|
(508,238) |
45,020 |
(463,218) |
18. Trade and other payables
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Creditors arising out of direct insurance operations |
|
52,368 |
|
45,476 |
|
Creditors arising out of reinsurance operations |
|
181,159 |
|
157,514 |
|
|
|
233,527 |
|
202,990 |
|
|
|
|
|
|
|
Obligations under finance leases |
|
45 |
|
393 |
|
Share of Syndicate's other creditors' balances |
|
4,887 |
|
316 |
|
Social security and other taxes payable |
|
14,563 |
|
15,424 |
|
Other creditors |
|
13,995 |
|
20,448 |
|
|
|
33,490 |
|
36,581 |
|
Reinsurers' share of deferred acquisition costs |
|
17,048 |
|
17,584 |
|
Accruals and deferred income |
|
64,933 |
|
82,328 |
|
Total |
|
348,998 |
|
339,483 |
19. 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 consolidated income statement comprise the following:
|
|
2010 |
2009 |
|
|
£000 |
£000 |
|
Current tax expense |
57,166 |
53,375 |
|
Deferred tax credit |
(24,600) |
(13,254) |
|
|
|
|
|
Total tax expense |
32,566 |
40,121 |
20. 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 shares in issue during the year, excluding ordinary shares purchased by the Group and held in treasury as own shares.
|
|
|
2010 |
|
2009
|
|
Profit attributable to the Company's equity holders (£000) |
|
178,800 |
|
280,497 |
|
Weighted average number of ordinary shares (thousands) |
|
379,064 |
|
372,848 |
|
Basic earnings per share (pence per share) |
|
47.2p |
|
75.2p |
Diluted
Diluted earnings per share is calculated adjusting for the assumed conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares, share options. 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.
|
|
|
2010
|
|
2009 |
|
Profit attributable to Company's equity holders (£000) |
|
178,800 |
|
280,497 |
|
|
|
|
|
|
|
Weighted average number of ordinary shares in issue (thousands) |
|
379,064 |
|
372,848 |
|
Adjustments for share options (thousands) |
|
14,662 |
|
14,966 |
|
Weighted average number of ordinary shares for diluted earnings per share (thousands) |
|
393,726 |
|
387,814 |
|
Diluted earnings per share (pence per share) |
|
45.4p |
|
72.3p |
Diluted earnings per share has been calculated after taking account of 13,996,961 (2009: 14,345,744) options and awards under employee share option and performance plan schemes and 665,060 (2009: 619,870) options under SAYE schemes.
21. Dividends paid to owners of the Company
|
|
|
2010 |
|
2009 |
|
|
|
£000 |
|
£000 |
|
Interim dividend for the year ended : |
|
|
|
|
|
- 31 December 2010 of 5.0p (net) per share |
|
19,018 |
|
- |
|
- 31 December 2009 of 4.5p (net) per share |
|
- |
|
16,834 |
|
Final dividend for the year ended : |
|
|
|
|
|
- 31 December 2009 of 10.5p (net) per share |
|
39,442 |
|
- |
|
- 31 December 2008 of 8.5p (net) per share |
|
- |
|
31,779 |
|
|
|
58,460 |
|
48,613 |
Subject to shareholder approval at the forthcoming Annual General Meeting on 8 June 2011, a scrip dividend alternative to the cash dividend is to be offered to the Owners of the Company. These financial statements do not reflect this dividend as a distribution or liability in accordance with IAS 10 Events after the reporting period.
22. Foreign currency items on economic hedges and intragroup borrowings
The Group have loan arrangements, denominated in US Dollars, in place between certain group companies. In most cases, as one party to each arrangement has a functional currency other than the US Dollar, foreign exchange losses arise which are not eliminated through the income statement on consolidation. Implicit offsetting gains are reflected instead on retranslation of the counterparty company's closing balance sheet through other comprehensive income and into the Group's currency translation reserve within equity.
Impact as at 31 December 2010
|
|
Consolidated income statement 2010 £000 |
Consolidated other comprehensive income 2010 £000 |
Total economic impact 2010 £000 |
|
Unrealised translation gains /(losses) on intragroup borrowings |
1,846 |
(1,846) |
- |
|
|
|
|
|
|
Total gains recognised |
1,846 |
(1,846) |
- |
Impact as at 31 December 2009
|
|
Consolidated income statement 2009 £000 |
Consolidated other comprehensive income 2009 £000 |
Total economic impact 2009 £000 |
|
Realised gains on foreign currency derivative contracts used to manage retranslation risk associated with the net investment in Bermuda and Guernsey insurance operations |
314 |
- |
314 |
|
Retranslation loss on managed net investment in Bermuda and Guernsey insurance operations |
- |
(5,207) |
(5,207) |
|
Unrealised translation (losses) / gains on intragroup borrowings |
(4,362) |
4,362 |
- |
|
|
|
|
|
|
Total losses recognised |
(4,048) |
(845) |
(4,893) |
The Group did not enter into any economic hedging derivative contracts during the current year.
23. Subsequent events
Significant flooding in Queensland, Australia dominated the end of 2010 and beginning of 2011. The Group has provided for £10 million in relation to net losses which it believes were incurred pre 31 December 2010. The start of 2011 also saw a severe tropical cyclone, Yasi, make landfall in northern Queensland. On 22 February 2011, an earthquake measuring 6.3 on the Richter scale struck approximately 10 kilometres south-east of Christchurch, New Zealand's second most populous city. The earthquake caused extensive damage in the Christchurch area and although it is too early to assess, the Group expect to report losses of a similar or greater magnitude to those recorded for the September 2010 New Zealand earthquake. Losses relating to these events in 2011 are not included within the results for 2010.
Note:
The Annual Report and Accounts for 2010 will be available to shareholders no later than 20 March 2011. Copies of the Report may be obtained by writing to the Company Secretary, Hiscox Ltd, Wessex House, 45 Reid Street, Hamilton HM12, Bermuda. A copy of this and other announcements can be found at www.hiscox.com.
This information is provided by RNS