★ Excellent performance from Lloyd’s Syndicate 33. Gross written premium applicable to Hiscox plc up 35% to £461.8 million
Syndicate 33 with a new source of catastrophe reinsurance protection for earthquake events in the USA, enabling us to underwrite profitable new business in this area.
HISCOX SYNDICATE 33 AT LLOYD’S The result this year is dominated by the excellent performance of Syndicate 33 in 2002. The performance and results for 1998-2000 were below the standards we set
We continue to concentrate on organic growth with small add-on acquisitions of books of business that fit into our two core areas.
Our internet business grows rapidly and I believe that it will be a major earner in the future as people get used to buying insurance online.
We continue to earn our reputation as the leading insurer of fine art –
Setting out our stall – Hiscox’s performance in the UK and international retail insurance markets continues to be fruitful shows how this business has had another good year with operating profit growing to £11.7 million (2001: £7.6m). Gross written premium has increased to £147.6 million (2001: £143.6m), despite the non-renewal of the £8.2 million property owners business. The combined ratio has remained at a market leading level of 96% (2001: 95.4%). At this level of performance our goal is to grow the business without compromising our underwriting standards. We currently serve less than 5% of our target markets, so we believe that our growth opportunities are huge. Last year we launched a Professional Insurances Portfolio that enables us to insure the full package of insurance required by small and medium sized service based businesses. This focus on specialty commercial business is in keeping with the overall strategy of the Hiscox Group. Looking forward to 2003, we expect to update our affluent personal line products – again broadening our product range. Both of these developments will allow us to serve better the two market segments on which we focus.
Hiscox Guernsey has made another excellent profit. Our team there continues to underwrite more policies and has maintained its income despite a reduction in the size of risk they are willing to underwrite. This has brought the added advantage of better balance to the portfolio.
INVESTMENT MANAGEMENT Our investment management business has two roles within the Group. First and foremost, it supervises the external managers who have day-to-day responsibility for the investment of our assets. Second, it manages a small range of funds – such as the Hiscox Insurance Portfolio –
Derek Nigel Donald Netherton (Aged 58) Derek Netherton was previously a Director of J. Henry Schroder & Co. Limited and is currently Chairman of Greggs plc and a non-executive Director of Next plc, Plantation & General Investments plc and St James’s Place Capital plc. He is a member of the Supervisory Board of the Schroder Exempt Property Unit Trust . He joined the Group on 6 August 1999.
Robert Ralph Scrymgeour Hiscox Chairman (Aged 60) Robert Hiscox joined the Group in 1965. He was Deputy Chairman of Lloyd’s between 1993 and 1995.
Robert Simon Childs Director of Underwriting (Aged 51) Chairman of the Lloyd’s Market Association Robert Childs has been Underwriter of Syndicate 33 since 1993. He joined the Group in 1986.
THE BOARD OF DIRECTORS The Board comprises four executive directors and four independent non-executive directors, including a senior independent director. Brief biographical details for each member of the Board are provided on page 23.
A designated Hiscox representative at tends meet ings organised by the
Anticipated reinsurance recoveries, and estimates of salvage and subrogation recoveries, are disclosed separately as assets.
3(n) Pension costs Pension contributions in respect of defined benefit schemes are charged against profits, with pension surpluses and deficits allocated over the remaining service periods of current employees. Differences between the amounts charged to the profit and loss account and payments made to the pension schemes are treated as assets or liabilities in the balance sheet.
The reinsurance program continued to respond to the increase in the property claims described in (b) and (c) above. Due to the sequence of actual payments, net recoveries remain similar to last year. Syndicate 33’s net loss has increased to approximately US$125 million (2001: US$90 million). In arriving at this estimate it has been assumed that the terrorist attack in New York City on 11 September 2001 was one occurrence and also that the aircraft impacts on the WTC are one occurrence in respect of the property losses. In the unlikely event that Syndicate 33’s loss increases by, for example, a further US$100 million, and assuming there are no further reinsurance recoveries, the net cost to Hiscox plc would increase by approximately £35 million.
Operating profit/(loss) is stated after charging: Loan interest payable 1,432 1,099 Amortisation of goodwill and Lloyd’s capacity costs 1,412 1,410 Finance lease charges 32 121 Operating lease charges (net of recharges to the managed syndicate) 1,750 1,793 Depreciation (net of recharges to the managed syndicate) on tangible fixed assets: – Owned assets 1,223 1,151 – Leased assets 138 190 Exchange losses/(gains) (814) 385 Increase in provisions for bad and doubtful debts (including share of syndicate) 3,850 1,100 11 AUDITORS’ REMUNERATION
Adjustments in respect of previous periods UK corporation tax 1,275 350 Foreign tax (1) –
Exercise of share options 8 156 – – – – 164 143 Shares issued as part of Rights Issue 4,818 105,817 – – – – 110,635 54,228 Exchange differences taken to reserves – – – – – (50) (50) (35) Retained profit/(loss) for the year – – – – – 4,762 4,762 (23,107)
Total Total Issued Share Capital Profit Share- ShareShare Premium Merger Redemption Capital and Loss holders’ holders’
c) Total directors’ remuneration of which £727,000 was recharged to the managed syndicate (2001: £981,000) was: Salaries, benefits and bonuses 1,872 1,094 Fees to non-executive directors 123 119
The value of services provided to the syndicate in the year was as follows: Services provided by Hiscox Syndicates Limited to the undertakings below: Balances due to the Hiscox Group at the balance sheet dates were as follows: Due from respective related parties as at 31 December: Notes to the Accounts (continued)