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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