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Chairman’s statement continued In brief, our catastrophe reinsurance underwriting in Bermuda and London was extremely profitable which enabled us to continue to invest in our US start-ups and our direct business. Our UK business demonstrated strong profitable growth, Europe had a tough first half but recovered well in the second, and Guernsey was outstanding as usual. We have made a major investment in the US and it was extremely gratifying to see the core errors and omissions account, which Ed Donnelly joined in 2005 to build, coming into profit. To return to the valuation of insurance companies, I can understand that the volatility of earnings from the catastrophe account makes a valuation based on earnings difficult. Conversely, our strategy of building more stable specialist accounts should be valued much more highly if they can demonstrate sustainable earnings which I believe some have and the others will. In the meantime, we will strive to continue to add to the net assets year-on-year which will inevitably drive the share price up over time. People First I must record our sadness at the recent death of our Senior Independent Non Executive Director, Sir Mervyn Pedelty. He was a huge asset to our business through his knowledge and business acumen, and his warm and humorous personality made him a real pleasure to work with. Life was more fun and interesting when Sir Mervyn was around. Our inestimable CEO, Bronek Masojada, leads an excellent team at the top, and the talent stretches throughout the Company. Over the years we have steadily been able to attract better talent, and the current frailty of the banks and the political attacks on them will help us by making more talent available. We are acutely aware that we are only as good as the people who work here, and it has been gratifying that our conscious efforts to be an employer of choice for the best people continues to be rewarded. We have great teams throughout the Group and I am deeply grateful to them not only for this great profit but for being so inspirational to work with. 4 Chairman’s statement Hiscox Ltd Report and Accounts 2009 Outlook As I have said, there is more discipline in our industry than at any time in my long career. It is of course not perfect, but the general insurance industry and Lloyd’s in particular have performed excellently through the financial chaos of the last few years. I just hope that the regulators and Government will appreciate the industry’s conservatism and value, and not wound it with some collateral damage from its current bank bashing. The Hiscox Group has a solid core of profitable businesses which, over the last few years, have enabled us to invest in creating exciting new ventures which will each become core profit earners and bring great value to shareholders. I admire the restless search for new methods of selling our specialist products. The world belongs to the discontented; we will never be satisfied; the profitable growth will continue. Robert Hiscox Chairman 1 March 2010
Chief Executive’s report In 2009 we made a pre-tax profit of £320.6 million – the best result in the Group’s history. Good underwriting and top-class investment management drove this result, helped by the absence of any major catastrophes. Our record profit has not come by sacrificing the future growth of the Group – in 2009 we continued to invest in building our brand in the UK and rapidly expanding our US operations. Strategic focus Total Group controlled income for 2009 100% = £1,713m 6% Large property Our strategy is to establish operations in Europe, the UK and the US that focus on our core specialty products to balance our more volatile business written in London and Bermuda. This strategy works: in 2005 when Hurricanes Katrina, Rita and Wilma drove some of our competitors deep into the red we made a healthy profit thanks to the contribution of our specialty businesses. The market outlook for 2010 is positive, though with lower expected investment returns and the easing of rates it will probably not be as good a vintage as 2009. We will seek to grow in those specialist areas where margin remains strong and we will maintain our commitment to reinsurance. 3% Global errors and omissions 5% Specialty – terrorism, specie, political risks, aerospace 9% Marine and energy 31% Reinsurance Tech and media errors and omissions 4% Local errors and omissions and commercial 9% Small property 7% Bronek Masojada Chief Executive Specialty – kidnap and ransom, contingency, bloodstock, personal accident 10% Art and private client 16% Chief Executive’s report Hiscox Ltd Report and Accounts 2009 5
Page 1 and 2: Hiscox Ltd Report and Accounts 2009
Page 3 and 4: Corporate highlights Group key perf
Page 5: Chairman’s statement It is an eno
Page 9 and 10: Hiscox London Market Hiscox London
Page 11 and 12: We have also worked hard to develop
Page 13 and 14: We have continued to invest in trai
Page 15 and 16: Hiscox London Market Hiscox London
Page 17 and 18: Group financial performance Group f
Page 19 and 20: The expense ratio deteriorated by 7
Page 21 and 22: High quality and well diversified p
Page 23 and 24: Risk management The risk management
Page 25 and 26: Credit Reinsurance counterparties T
Page 27 and 28: Boxplot and whisker diagram of Hisc
Page 29 and 30: in essence a non-bureaucratic organ
Page 31 and 32: Cougar Syndicate 6104 Cougar Syndic
Page 33 and 34: Hiscox Insurance Company (Bermuda)
Page 35 and 36: Independent Non Executive Directors
Page 37 and 38: ecent and relevant financial experi
Page 39 and 40: Directors’ remuneration report Th
Page 41 and 42: Executive Directors’ cash incenti
Page 43 and 44: Remuneration of Executive Directors
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Page 47 and 48: Directors’ report The Directors h
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Page 51 and 52: Consolidated balance sheet At 31 De
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3 Management of risk continued 3.1
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4 Operating segments continued (a)
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5 Net asset value per share 2009 20
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12 Auditors’ remuneration continu
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15 Intangible assets continued Othe
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19 Reinsurance assets 2009 2008 Not
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22 Derivative financial instruments
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23 Fair value measurements continue
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25 Share capital continued Share op
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27 Insurance liabilities and reinsu
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30 Deferred tax continued (b) Group
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31 Employee retirement benefit obli
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36 Contingencies and guarantees con
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38 Principal subsidiary companies o
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To request a copy of the 2009 Hisco
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