Group-wide profits also fell by 31% – impacted by a £51m foreign exchange swing from 2013
Changes in foreign exchange rates and the winter storms caused Hiscox UK and Europe’s pre-tax profits to plunge by 40.8% to £26.3m in the first half of 2014 (2013: £44.4m).
The insurer’s combined ratio also went up by 5.7 percentage points to 92.9% from 87.9%. Its gross written premiums increased by 4.8% to £309.4m from £295.1m last year.
In figures released today, Hiscox said: “Overall, the UK experienced a return to normality in claims frequency after a quiet 2013, with the storms and floods in January and February hitting profits.
“Our brand is built on our claims promise, so we are happy to prove our worth when our clients need us.”
In 2013 the group introduced a single management structure for UK and Europe, bringing all its business under one umbrella and combined its London, Paris and Bermudan reinsurance businesses into one unit
The newly created UK and Europe division provides personal lines cover, from high value household, fine art and collectibles to luxury motor and commercial insurance for SMEs.
Separately, UK and Ireland premium income grew by 3.4% to £212.6m (2013: £205.5m).
Group wide, the insurer saw its pre-tax profits fall by 31% to £124.6m in H1 2014 (2013: £180.7m), while GWP fell by 3.8% to £978.9m (2013: 1bn)
The net combined ratio also shot up by 9.8 percentage points to 82% (2013: 74.7%).
The group results were affected by foreign exchange losses of £16.4m – in 2013 it reported gains of £34.9m. There was also a 21.6% reduction in reinsurance income.
And despite the early impact of the UK floods and storms, Hiscox said the group benefited from a benign global catastrophe claims environment.
Chief executive Bronek Masojada, said: “It has been a great start – at constant exchange rates the group made a similar profit to last year.
“Falling rates and deteriorating terms and conditions are putting pressure on the market. We’ve seen this before, but our discipline and strategy of balance is designed to absorb these conditions.”
The insurer expects the current soft market to deteriorate further, particularly for larger insurance lines and catastrophe reinsurance.
But insurer said it would continue to take advantage of opportunities by building balance and diversity in the specialist insurance market.