Lloyd’s insurer outperforms peers with underwriting discipline

Standard & Poor's (S&P) has upped its long-term counterparty credit and insurer financial strength ratings on Hiscox to A from A- because of its underwriting discipline and strong reserves unaffected by the credit crunch

"The upgrade is based on Hiscox' strong recent operating performance, and expectations for continued underwriting discipline and robust earnings going forward," said Standard & Poor's credit analyst Matthew Day.

S&P said Hiscox has differentiated itself from its peers and enhanced its competitive position through continued brand development and product innovation. The ratings also reflect the group's strong capitalization. "Offsetting these positive factors is the recent decline in the group's financial flexibility related to the challenging economic environment, which is expected to persist for the next 12-24 months," added Mr. Day.

S&P praised Hiscox' strong competitive position and “superior strategic flexibility afforded it by the diversity of the group's operating platforms”.

It said capital adequacy was forecast to be in the 'A' range, similar to the level at year-end 2007. “This demonstrates the resilience of the group's capital position to the extreme turbulence seen in global financial markets during 2008. The quality of capital is high, reserves are satisfactory, and reinsurance is prudently managed” S&P said.

But S& P warned: “The group's financial flexibility is considered to be a weakness for the rating at its current level. Hiscox does not hold as much excess capital as a number of its similarly rated peers. In our view, this makes it somewhat more exposed to the systemic decline seen in the level of access to capital markets over the past 15 months. This could place downward pressure on the ratings were Hiscox to experience a shock loss, on either side of the balance sheet, over the next 12-18 months.”

"We expect that Hiscox' enhanced competitive position will be maintained, particularly in respect of the high-net-worth segment of the retail portfolio," said Mr. Day.

‘S&P’s outlook fro Hiscox is stable.

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