Hiscox Affirmed at ‘A-‘

October 28, 2002

A.M. Best Co. affirmed the financial strength rating of “A-” of Hiscox Insurance Company Limited (Hisco). The rating reflects the company’s excellent capitalization and prospective financial performance, excellent business profile with leadership in certain specialist lines and experienced management team. Offsetting factors include the company’s disappointing investment return and high expense ratio. The outlook is stable.

At the end of 2001, Hisco maintained excellent capitalization, and its financial flexibility is enhanced by the financial support from its parent, Hiscox plc, as indicated by a GBP 20 million ($29.2 million) capital injection in December 2001. To maintain the “A-” rating, additional capital must be made available to Hisco to support its expansion plans over the next two years.

A.M. Best expects Hisco’s pre-tax operating performance to continue to improve in 2002. The company has generated pre-tax operating profits consistently since 1998. Hisco’s combined ratio improved from 96.3 percent in 2000 to 95.8 percent in 2001, supported by the company’s very low underwriting loss ratio. Although progress has been made in reducing both the company’s own expenses and commissions paid to intermediaries, the expense ratio has remained persistently high at 43 percent in 2001.

Hisco is a market leader in high value household business and professional indemnity (PI) for service sector professions. The company is well positioned to benefit from improving household rates and average increases of approximately 30 percent on renewal business in the PI sector.

A.M. Best expects that Hisco’s parent will make additional financial resources available to Hisco by 2003 and that Hisco will continue to operate to a combined ratio of less than 100 percent.

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Insurance Journal Magazine October 28, 2002
October 28, 2002
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