Best Affirms Hiscox ‘A-‘ Rating

October 27, 2003

A.M. Best Co. announced that it has affirmed the financial strength rating of A- (Excellent) of the U.K.’s Hiscox Insurance Company Limited, with a stable outlook.

“The rating reflects the company’s excellent financial performance, capitalisation and its excellent business position as a specialist insurer,” said Best. “An offsetting factor is the persistently high operating expenses.”

Best said it “expects solid profits in 2003 and 2004 mainly due to the reduction and withdrawal from some unprofitable lines, as well as the benefits from the existing rating environment.” The bulletin also noted that “the half year 2003 combined ratio improved by 8.5 percentage points to 91.8% largely due to the absence of any significant losses and a 25% increase in net premium written. The operating expense ratio is likely to improve in 2004 to just below 40% (compared to 42.9% in 2002) as the company continues to reduce its own expenses and commissions paid to intermediaries.”

The rating agency characterized the “company’s current and prospective risk-adjusted capitalisation as excellent and likely to support Hiscox’s business growth in the near term.” It also noted that Hiscox enjoys an excellent business position” with a “strong brand name and market leadership in specialist classes.” The company specializes in “high value household (HVH), professional indemnity (PI) and affinity schemes,” said the bulletin, noting that these are mainly “markets where Hiscox has a limited number of direct competitors.”

Best said that it “believes Hiscox is well positioned to expand its business organically through its network of UK and European regional offices.” It also expects that the company “will continue to return consistent operating profits in 2003 and 2004, subject to normal loss experience.”

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