Best Affirms Hiscox and Operating Companies ‘A’ Ratings; Outlook Stable

November 28, 2011

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit rating (ICR) of “a” of Hiscox Insurance Company (Bermuda) Limited, UK-Based Hiscox Insurance Company Limited and Hiscox Insurance Company (Guernsey) Limited.

Best also affirmed the FSR of ‘A’ (Excellent) and ICR of “a +” of Lloyd’s Syndicate 33, which is managed by Hiscox Syndicates Ltd (HSL) and the ICR of “bbb+” of Hiscox Ltd (Bermuda), the ultimate parent holding company of the Hiscox group of companies.

The outlook for all of the ratings remains stable.

The ratings of the Hiscox operating companies continue to “benefit from the strong consolidated risk-adjusted capitalization and good financial flexibility of the Hiscox group,” said Best. “Financial leverage is low and liquidity is enhanced by the availability of a $750 million credit facility, which can be issued in the form of a letter of credit against which the group can underwrite at Lloyd’s.”

Best also noted that the Hiscox group’s “good performance record,” is “demonstrated by an average five year combined ratio below 90 percent. For 2011, performance will be affected by exposure to the year’s large catastrophes, with losses from the Japan and New Zealand earthquakes, Australian flooding and US tornadoes reserved at £210 million [$326 million] at half year 2011.

“Earnings from the more stable portfolios written by Hiscox and Hiscox Guernsey as well as positive prior year reserve development are expected to partly offset catastrophe losses.”

Best said it “expects a combined ratio only slightly above 100 percent. Investment income for 2011 is expected to be modest, reflecting the low interest rate environment. The group reported unrealized losses in the third quarter of 2011 due to equity market movements and widening credit spreads.”

In addition Best pointed out that Hiscox “benefits from a strong business profile in its core markets and writes a well-diversified portfolio of London market business, including property reinsurance and global errors and omissions, balanced by specialist lines such as fine art, kidnap and ransom and high net worth home insurance. Business is written through a number of insurance subsidiaries and managed Lloyd’s syndicates.

“Hiscox Bermuda writes third party property reinsurance business and operates as an internal reinsurer within the Hiscox group. There remains strong correlation between the main reinsurance business written by the company and that written by syndicate 33.

“Hiscox Guernsey has a strong business profile as a specialist insurer of kidnap and ransom and fine art insurance and benefits from significant reinsurance support from Hiscox Bermuda.

“Hiscox has a good business profile in the UK and continental Europe as an underwriter of high net worth household and certain specialist liability and commercial lines of business.”

Best described Syndicate 33 as having an “an excellent profile in the London market as a specialist underwriter of a diverse range of business classes. In addition to the support of Hiscox, the ratings of syndicate 33 reflect the underlying strength of the Lloyd’s market. Hiscox’s corporate member, Hiscox Dedicated Corporate Member (HDCM) provides 72.5 percent of the syndicate’s capacity, while the remaining capacity is provided by Lloyd’s names.”

Source: A.M. Best

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