Hiscox Ltd

Okay, good morning everyone and welcome to the Hiscox Q3 trading update. I'm Paul Cooper, the Hiscox Group CFO, and I'll be walking you through the usual topics that we cover at Q3, namely growth, claims experience and the investment result. After this, I will hand over to the call moderator who will open the floor for Q&A. So let's begin with growth. The group delivered ICWP of 3.9 billion as we added 113 million of premiums, with 99 million contributed by retail. This has been underpinned by steady growth in our retail business, as well as disciplined capital deployment in RE and ILS. Our diversified portfolio is allowing us to deliver sustained growth in areas with attractive market opportunities. such as big ticket property and London market crisis management, while managing the cycle in other areas of big ticket. We continue to make progress in executing the group strategy to deliver sustainable and less volatile returns while growing the business. Let's dive further into this and examine our growth by segment, starting with retails. As we told you at the half year, retail growth is not linear and ICWP grew by 4.4% in constant currency, driven by continued strong momentum in Europe and the UK, offsetting slower growth in the US. In the UK, good performance across all areas of our business delivered growth of 4.5% in constant currency, an increase from 4.3% at half year. We expect the UK momentum to continue to build in the fourth quarter as we benefit from new distribution deals, a new AI solution in art and private client and our award winning brand campaign. Our European business has delivered growth of 6.7% in constant currency with growth broad based across markets and lines. Growth was lower in the third quarter due to a strong prior year comparator. Nonetheless, the underlying momentum is strong. You will have read in today's update that we have launched a new European partnership with a leading digital MGA. This exciting partnership, along with other innovations, will help build further momentum in 2025. In the US, Our digital business, USBPD, has delivered growth of 7.6%. Our digital direct business continues to deliver double-digit growth fueled by strong retention and a good rate of customer acquisition. In digital partnerships, we continue to grow, albeit at a lower rate, as the slower production momentum from some established partners, highlighted in the second quarter, has continued through the third quarter and is likely to continue for the rest of the year. The majority of partners continue to grow their premium placement with Hiscox, and the partner additions are continuing at a steady rate, with 55 partners added over the last 21 months. U.S. broker premiums have reduced by 3.9% over the first nine months, the business is rotating back to growth following our deliberate repositioning of the book that was completed in 2022. This required us to rebase relationships with brokers on our redefined risk appetite. Pleasingly, growth trends are emerging in an increasing number of lines across U.S. broker. Now moving on to London market. ICWP, has decreased by 2.9%, broadly in line with the trend at half year. This continues to reflect our proactive management of the cycle, growing where we see attractive opportunities, including property and crisis management, while also reducing our position in DNO and cyber, which took 2.3 percentage points off London market growth, continuing the adverse trend since 2023. In addition, Growth has been tempered by our decision to non-renew certain large binder deals earlier in the year and to stop writing space business. Looking at the underlying momentum, our crisis management division delivered the strongest growth in the quarter, up 18%, driven by strong momentum in both K&R and terrorism. Property classes continue to enjoy attractive market conditions and we are taking advantage of this by writing new business. Like retail, London Market continues to innovate. In August, we launched the first AI lead underwriting solution in the Lloyds Market for our terrorism business. You will have also seen we've launched a new Personal Security Plus product to complement our existing suite of K&R products. This has been well received by our clients. Moving on to RE&ILS. Hiscox Re and ILS achieved net ICWP growth of 12% as the business deployed additional capital into attractive underwriting conditions. ICWP grew by 4.3%. The net growth has been ahead of top line growth as we have taken more risks onto our own balance sheet. The reinsurance market has remained disciplined throughout the year with rates flat on average across our book and detachment points and T&Cs broadly holding firm. The active natural catastrophe environment, including Helene and Milton, looks likely to arrest or slow the reduction of rates forecast for 1-1. Hiscox ILSAUM was £1.5 billion at 30 September 2024, and we see a robust pipeline of potential investors ahead of the 2025 renewals. Now looking at our claims experience. The third quarter of 2024 has seen a number of US hurricanes make landfall, including Beryl, Debbie, Francine and Helene. There was also flooding in Europe and both wildfires and storms in Canada. We have been focusing on supporting our customers who were affected by these tragic events. For the first nine months of 2024, our natural catastrophe claims and overall claims experience is within expectations. Earlier in the fourth quarter, Hurricane Milton made landfall in Florida. The group expects to reserve a net loss of 75 million based on an industry insured loss of $40 billion. The vast majority of our exposure is in our big ticket businesses with the net loss split broadly equally between London Market and RIA and ILS. We remain within our full year catastrophe loss expectations. Let's move briefly on to our investment result. For the first nine months of 2024, the net investment result is 346.6 million, representing a return of 4.3% year to date. This has been driven by a combination of strong interest income, and favourable mark-to-market movements on our bond portfolio. The reinvestment yield on the bond portfolio reduced from 5.2% at the end of June 2024 to 4.4% at the 30th of September, with the duration at 1.9 years. In summary, our diversified business is demonstrating its strength as we continue to make progress in delivering sustainable and less volatile returns while growing the business. Retail growth is expected to improve in the fourth quarter, as the momentum from a range of distribution initiatives continues to build. Attractive market conditions continue to persist within our big ticket businesses, and we will continue to deploy capital where there is opportunity for profitable growth. Any surplus capital will be returned to shareholders following the board's decision at year end. This concludes my opening remarks, so I'll now hand over to the operator to open the floor for Q&A. Operator, over to you.

Thank you, Paul. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure that your device is unmuted locally. Our first question is from Will DeHart-Castle from UBS. Will, please go ahead.

Thanks for taking the questions. There's two. The first one is thanks for the update on the growth that's come through. I guess just a little bit of a high-level view where you're most excited about or where you see most pressure likely for 25 would be helpful across retail, London market, and RIA and ILS. It's a big picture question, I guess, for next year. And secondly, just coming back to the USDPD status update on the partnerships, are we right in thinking that because the drag essentially started in Q2 this year, this could actually mean that the drag continues from these large partners until the beginning of next year? Is that right? So Q1 2025 might still be a bit of a drag. Thank you.