Lloyd’s insurer expects to pay £16m for UK flood claims

Lloyd’s insurer Hiscox’s UK division made a profit of £45.4m in 2013, almost unchanged from 2012’s £45.2m.

The division’s combined operating ratio (COR) improved by 1.4 percentage points to 90.7% (2012: 92.1%). UK gross written premium increased by 9.9% to £412.4m (2012: £375.2m).

The COR improvement came despite Hiscox incurring an estimated £11m of claims for the UK flooding in December 2013. The insurer expects to pay a further £5m for the continued flood and storm claims from January and February this year.

‘Excellent’ year

Hiscox chief executive Bronek Masojada said: “Hiscox UK had another excellent year.

“The business benefited from our continued investment in marketing and a focus on solid underwriting. It had a charmed first 11 months, as the weather had been benign until mid-December while the few major weather events, such as the St Jude’s day storm in October had little impact. The heavy rain and consequent flooding in December changed this.”

Masojada said despite being tested by the floods, Hiscox’s UK high net worth business had performed well and had its best new business premium for 10 years.

The company’s UK professions and specialty commercial books had made “good progress” and that the company had launched a new technology insurance portfolio product.

‘Testing’ DUAL relationship

However, the year had some challenges for the UK arm. Masojada said its relationship with Hyperion-owned underwriting agency DUAL “had a testing year”.

He added: “We have agreed changes to underwriting appetite which should see better performance in the future.”

Direct investment

Hiscox chairman Rob Childs said that the company is “investing heavily” in its direct-to-consumer distribution channel. To take advantage of the growing trend for buying insurance directly from insurers online or over the phone.

Childs said: “In 2013, 50% of our customers in the UK and USA (160,000 householders and businesses) chose to buy cover directly from us. In 2013, the Group spent £30 million on marketing, and plan for the same this year. Under the leadership of Steve Langan our investment in marketing has built a recognised and respected consumer brand in the UK and we are making good headway in other markets.”

Group result

Group-wide, Hiscox had a good 2013. Profit after tax rose 14.3% to £237.8m (2012: £208m). The COR improved by 2.3 points to 83% (2012: 85.5%). GWP rose 8.5% to £1.7bn (2012: £1.6bn.

Masojada said: “2013 was a very good year for Hiscox. Our long term strategy of building local retail businesses in Europe, the UK, Guernsey and the US to balance internationally traded business in London and Bermuda continues to deliver.

“We are excited about the opportunities we see in many retail markets where we have room to grow profitably. In our big ticket areas, discipline and opportunism will guide us.”