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Notes to the consolidated financial statements continued 4 Operating segments continued All amounts reported below represent transactions with external parties only, with all inter-segment amounts eliminated which is consistent with the information used by the chief operating decision maker when evaluating the results of the Group. Performance is measured based on each reportable segment’s profit before tax. (a) Profit before tax by segment 72 Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2009 Year to 31 December 2008 Year to 31 December 2009 Restated London UK and Corporate London UK and Corporate Market Europe International Centre Total Market Europe International Centre Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Gross premiums written 663,034 420,982 351,385 – 1,435,401 545,930 357,095 244,339 – 1,147,364 Net premiums written 483,611 391,461 281,951 – 1,157,023 363,112 329,117 206,165 – 898,394 Net premiums earned Investment result – 453,281 367,326 277,495 – 1,098,102 427,770 303,363 196,962 – 928,095 financial assets* 80,901 34,935 57,765 9,168 182,769 (5,463) (11,928) (8,443) (1,798) (27,632) Investment result – derivatives (1,192) 1,967 (83) (296) 396 – (10,483) – (42,495) (52,978) Other revenues 12,841 3,955 2,700 2 19,498 15,606 2,929 1,323 – 19,858 Revenue Claims and claim adjustment 545,831 408,183 337,877 8,874 1,300,765 437,913 283,881 189,842 (44,293) 867,343 expenses, net of reinsurance Expenses for the acquisition (175,823) (195,967) (91,428) – (463,218) (261,875) (130,723) (86,782) – (479,380) of insurance contracts (101,518) (87,393) (67,723) – (256,634) (108,346) (74,582) (45,015) – (227,943) Administration expenses (25,794) (56,057) (29,531) (1,245) (112,627) (19,622) (46,250) (17,326) – (83,198) Other expenses Foreign exchange (26,384) (41,136) (31,597) (17,822) (116,939) (19,149) (33,042) (14,112) (10,196) (76,499) (losses)/gains (35,800) (7,065) 6,989 10,322 (25,554) 108,345 32,507 (22,100) (8,997) 109,755 Total expenses (365,319) (387,618) (213,290) (8,745) (974,972) (300,647) (252,090) (185,335) (19,193) (757,265) Results of operating activities 180,512 20,565 124,587 129 325,793 137,266 31,791 4,507 (63,486) 110,078 Finance costs Share of profit of (616) (20) (407) (4,250) (5,293) (273) (35) (186) (4,664) (5,158) associates after tax – – – 118 118 – – – 260 260 Profit before tax 179,896 20,545 124,180 (4,003) 320,618 136,993 31,756 4,321 (67,890) 105,180 *Interest revenues included total £74,584,000 (2008: £89,608,000). The following charges are included within the consolidated income statement: Year to 31 December 2009 Year to 31 December 2008 London UK and Corporate London UK and Corporate Market Europe International Centre Total Market Europe International Centre Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Depreciation 650 3,230 1,187 60 5,127 1,348 3,007 921 47 5,323 Amortisation of intangible assets 635 135 149 – 919 – 135 123 1 259 The Group’s wholly owned subsidiary, Hiscox Syndicates Limited, oversees the operation of Syndicate 33 at Lloyd’s. The Group’s percentage participation in Syndicate 33 can fluctuate from year to year and consequently, presentation of the results at the 100% level removes any distortions arising therefrom. Year to 31 December 2008 Year to 31 December 2009 Restated London UK and Corporate London UK and Corporate 100% ratio analysis Market Europe International Centre Total Market Europe International Centre Total Claims ratio (%) 38.8 53.4 33.0 – 41.8 61.2 42.2 44.6 – 52.7 Expense ratio (%) Combined ratio excluding 32.2 49.9 45.6 – 40.4 33.3 50.1 37.9 – 38.9 foreign exchange impact (%) 71.0 103.3 78.6 – 82.2 94.5 92.3 82.5 – 91.6 Foreign exchange impact (%) 7.8 1.8 (2.3) – 3.8 (28.7) (10.7) 10.6 – (16.3) Combined ratio (%) 78.8 105.1 76.3 – 86.0 65.8 81.6 93.1 – 75.3 Combined ratio excluding non monetary foreign exchange impact (%) 71.5 103.9 76.3 – 81.7 73.2 82.4 93.1 – 80.0
4 Operating segments continued (a) Profit before tax by segment continued The claims ratio is calculated as claims and claim adjustment expenses, net of reinsurance, as a proportion of net premiums earned. The expense ratio is calculated as the total of expenses for the acquisition of insurance contracts, administration expenses and other expenses as a proportion of net premiums earned. The foreign exchange impact ratio is calculated as the foreign exchange gains or losses as a proportion of net premiums earned. The combined ratio is the total of the claims, expense and foreign exchange impact ratios. The combined ratio excluding non monetary foreign exchange impact is calculated by adjusting the net premiums earned and the expenses for the acquisition of insurance contracts by the movement arising from retranslating net unearned premiums and net deferred acquisition costs at year end rates of exchange. All ratios are calculated using the 100% results. Costs allocated to the Corporate Centre are non-underwriting related costs and are not included within the combined ratio. The impact on profit before tax of a 1% change in each component of the segmental combined ratios is: Year to 31 December 2008 Year to 31 December 2009 Restated London UK and Corporate London UK and Corporate Market Europe International Centre Market Europe International Centre £000 £000 £000 £000 £000 £000 £000 £000 At 100% level (note 4b) 1% change in claims or expense ratio At Group level 6,248 3,824 2,875 – 5,894 3,179 2,076 – 1% change in claims or expense ratio 4,533 3,673 2,775 – 4,278 3,034 1,970 – (b) 100% operating result by segment Year to 31 December 2008 Year to 31 December 2009 Restated London UK and Corporate London UK and Corporate Market Europe International Centre Total Market Europe International Centre Total £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Gross premiums written 914,072 440,064 359,297 – 1,713,433 752,593 374,254 262,893 – 1,389,740 Net premiums written 666,692 408,037 287,589 – 1,362,318 500,585 344,342 219,560 – 1,064,487 Net premiums earned Investment result – 624,755 382,417 287,524 – 1,294,696 589,446 317,868 207,552 – 1,114,866 financial assets 111,446 36,428 59,297 9,168 216,339 (7,525) (11,960) (8,567) (1,798) (29,850) Investment result – derivatives (1,643) 1,967 (83) (296) (55) – (10,483) – (42,495) (52,978) Other revenues Claims and claim adjustment – 2,716 677 2 3,395 23 2,929 35 – 2,987 expenses, net of reinsurance (242,422) (204,330) Expenses for the acquisition (94,873) – (541,625) (360,919) (133,983) (92,600) – (587,502) of insurance contracts (139,923) (92,562) (69,185) – (301,670) (149,755) (79,357) (46,599) – (275,711) Administration expenses (34,196) (56,812) (30,427) (1,245) (122,680) (26,905) (46,964) (18,391) – (92,260) Other expenses Foreign exchange (26,858) (41,136) (31,613) (17,822) (117,429) (19,531) (33,042) (13,589) (10,196) (76,358) (losses)/gains Results of operating (48,912) (6,951) 6,678 10,322 (38,863) 169,393 34,152 (21,971) (8,997) 172,577 activities 242,247 21,737 127,995 129 392,108 194,227 39,160 5,870 (63,486) 175,771 Segment results at the 100% level presented above differ from those presented at the Group’s share at note 4(a) solely as a result of the Group not owning 100% of the capacity of Syndicate 33 at Lloyd’s. (c) Segmental analysis of assets and liabilities The segment assets and liabilities at 31 December and the capital expenditure for the year then ended are as follows: 31 December 2009 London UK and Corporate Intragroup items Market Europe International Centre and eliminations Total £000 £000 £000 £000 £000 £000 Intangible assets 32,647 2,715 8,522 6,529 – 50,413 Deferred acquisition costs 59,741 44,735 36,453 – 576 141,505 Financial assets 1,161,612 365,268 604,927 75,118 213,693 2,420,618 Reinsurance assets 472,998 146,435 103,630 – (302,937) 420,126 Other assets 369,751 235,075 294,113 925,940 (1,040,129) 784,750 Total assets 2,096,749 794,228 1,047,645 1,007,587 (1,128,797) 3,817,412 Insurance liabilities 1,326,719 482,577 384,186 – (71,131) 2,122,351 Other liabilities 657,956 185,355 173,219 168,193 (610,948) 573,775 Total liabilities 1,984,675 667,932 557,405 168,193 (682,079) 2,696,126 Capital expenditure 1,539 2,245 6,962 275 11,021 Notes to the consolidated financial statements Hiscox Ltd Report and Accounts 2009 73
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Hiscox Ltd Report and Accounts 2009
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Corporate highlights Group key perf
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Chairman’s statement It is an eno
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Chief Executive’s report In 2009
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Hiscox London Market Hiscox London
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We have also worked hard to develop
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We have continued to invest in trai
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Hiscox London Market Hiscox London
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Group financial performance Group f
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The expense ratio deteriorated by 7
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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
Page 45 and 46: Share options Number of Number of M
Page 47 and 48: Directors’ report The Directors h
Page 49 and 50: Report of the independent registere
Page 51 and 52: Consolidated balance sheet At 31 De
Page 53 and 54: Consolidated statement of cash flow
Page 55 and 56: 2 Significant accounting policies c
Page 63 and 64: 3 Management of risk continued 3.1
Page 73: 3 Management of risk continued 3.3
Page 77 and 78: 5 Net asset value per share 2009 20
Page 79 and 80: 12 Auditors’ remuneration continu
Page 81 and 82: 15 Intangible assets continued Othe
Page 83 and 84: 19 Reinsurance assets 2009 2008 Not
Page 85 and 86: 22 Derivative financial instruments
Page 87 and 88: 23 Fair value measurements continue
Page 89 and 90: 25 Share capital continued Share op
Page 91 and 92: 27 Insurance liabilities and reinsu
Page 93 and 94: 27 Insurance liabilities and reinsu
Page 95 and 96: 30 Deferred tax continued (b) Group
Page 97 and 98: 31 Employee retirement benefit obli
Page 99 and 100: 36 Contingencies and guarantees con
Page 101 and 102: 38 Principal subsidiary companies o
Page 103 and 104: To request a copy of the 2009 Hisco
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