Hiscox Ltd

Hello everyone and thank you for joining the Hiscox Q1 Trading Update. My name is Lucy and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2 on your telephone keypad. I will now hand over to your host, Paul Cooper, Group CFO to begin. Please go ahead.

Thanks. Good morning everyone and welcome to the Hiscox Q1 2025 Trading Update. I'm Paul Tooth at the Hiscox Group CFO and I'll be walking you through the usual topics that we cover at Q1, namely growth, claims and investments. After this I will hand over to the call operator who will open the floor for Q&A. So let's begin with growth. The group delivered ITWP of almost 1.6 billion, up 2.4% year on year. The improving multi-year growth trajectory in retail continues, driven by good momentum in Europe and improving growth in the US. London market has returned to growth as previously guided and RIA and ILS have found attractive opportunities to grow net premiums at January renewals. Let's dive further into this and examine our growth by segment, starting with the retail. Retail ICWP grew by 6.1% in constant currency as the retail distribution engine continues to build momentum and add customers and policies well in excess of rate increases, which remain positive at 2%, although moderating. Pleasingly, every market is achieving growth and the business remains on track to deliver constant currency growth in excess of 6% for 2025. Amidst the backdrop of economic and geopolitical uncertainty, Hiscox retails benefits from its broad geographic footprint, with exceptional opportunities in the US where our digital direct business continues to grow at a double-digit rate, and in Europe where growth momentum is building. In the UK, the business continues to benefit from management actions. including new distribution deals going live, with a good performance across all areas of the business to deliver growth of 4.4% in constant currency. Our European business has delivered growth of 8.8% in constant currency, with growth broad-based across markets, channel, and in both commercial and personal lines. In the US, ITWC grew by 4.6% as a US broker returned to growth, increasing by 1.5%, and momentum at USBPD continued. Our US Digital Direct business continues to deliver double-digit growth, with the launch of a new brand campaign expected to provide an additional powering going forward. In US Digital Partnerships, we continue to grow, albeit at a more moderate rate. The team continues to work closely with partners on a number of growth-enhancing initiatives. Now, moving on to London Markets, If God's London market grew by 4% in the first quarter, the business captured attractive opportunities in property and marine, energy and specialty. In property, we are benefiting from new commercial deals and improving rates in flood. In marine, energy and specialty, investments in our underwriting capabilities have supported growth in energy construction, as the business won a number of new deals. While rates have fell by 3% in the quarter, though it remained up 69% cumulatively since 2018. Moving on to RE and ILS. Hiscox RE and ILS achieved net ICWP growth of 9.1% as the business deployed additional capital into attractive opportunities at the January renewals. ICWP decreased by 1%, reflecting ILS flows over recent periods. Despite rates reducing 7% in the first quarter, the business remains well-rated, with cumulative rate increases of 80% since 2018. Terms and conditions and attachment points have broadly held. Turning to claims. The largest event during the first quarter of 2025 was the California wildfires. The group's previously disclosed $117 million estimate remains prudent, and unchanged with £150 million in Hiscot 3 and ILS, and £10 million in each of London Market and Retail. This estimate does not take account of any potential subrogation. In addition, whilst volume fees remain robust, the World Fire Losses will likely act as a drag on Hiscot 3 and ILS's performance fee income at both half-year and full-year. Outside of the wildfires, the group's loss experience was within expectations. Let's move on to our investment result. For the first quarter of 2025, the investment result is $114.1 million, representing a return of 1.4% year-to-date. This has been driven by interest on cash and strong coupon income on fixed income assets. and, to a lesser extent, favorable mark-to-market movements on our bond portfolio. The reinvestment yield on the bond portfolio was 4.5% at the end of March 2025, duration short at 1.8 years, and quality is high at an average A rating. In the wake of U.S. tariff announcements during April 2025, market volatility has increased, Hiscox's investment portfolio has remained resilient through this period, as movements in yields have helped to offset a widening of credit spreads, while the impact from equity markets has been limited given the Group's relatively low exposure. While continued volatility is anticipated, the Group's short-duration and high-quality fixed income portfolio positions Hiscox well. Our diversified business is capturing high-quality growth across all businesses. Momentum continues to build in retail with growth in line with guidance. Hipscott's London market has returned to growth and continues to see attractive opportunities in certain lines against the backdrop of increased rate softening across the portfolio. We continue to be disciplined underwriters in these micro-cycles. RIA and ILS have captured attractive opportunities with strong net growth in the first quarter, turning to mid-year renewals. Conditions are expected to be slightly more favourable than in January, following the nap-cap losses in the market over the past 12 months. Given our substantial net growth in recent years, including the January 2025 renewals, at mid-year we expect to maintain the level of capital deployed and take rates on loss-affected business. I look forward to seeing you at our Capital Markets Day on May 22nd. This concludes my opening remarks, so I will now hand over to the operator to open the floor for Q&A. Operator, over to you.

Thank you. To ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question is from Will Hardcastle of UBS. Will, your line is now open. Please go ahead.