Analyst Presentation Transcript (Hiscox Preliminary Results 2024 27.02.2025)

Introduction

Aki Hussain

Group CEO, Hiscox

2024 results

High quality growth underpins second consecutive year of record profits

Good morning, everyone. It is nice to see you all, and thank you for joining us here. 2024 has been another strong year of delivery from Hiscox. We are achieving broad-based growth and positive earnings momentum across the Group.

We have increased our revenues by around $170 million in the year, of which about $150 million has come from our Retail business. The quality of this growth is reflected in the undiscounted combined ratio at 93.6% and Retail profits of around $300 million.

Our effective cycle management in big-ticket means we have been able to achieve an excellent undiscounted combined ratio of 81.6% in an active loss year.

With each of our segments delivering strong results, our Group for the second year in a row is reporting record profits at $685 million and an excellent retuon equity of 19.8%. With the strength of our business performance and in particular, the accelerating momentum and improved confidence in the Retail business, this creates the flexibility to pursue multiple growth opportunities and to step up our progressive dividend.

We are increasing our final dividend by 20%, which means a full year 15% increase to our EPS. We are also announcing a further substantial special retuof capital of $175 million through a share buyback, reflecting the strength of the capital generated in the year, the robustness of our balance sheet and the confidence we have in the quality of our underwriting.

Taking all of this together, our business performance is such that we can pursue an ambitious growth plan and retu10% of Hiscox's equity to our shareholders.

Now as usual, I will go through each of our business segments, beginning with Retail.

Hiscox Retail

Growth and earnings momentum continuing to build

We are achieving growth and earnings momentum across our Retail business, as the management actions we have deployed over recent years are now beginning to show up in the P&L. For example, our UK business is now growing at its fastest rate since 2018 as management actions on brand, technology and distribution are building momentum.

Our European business has once again delivered strong growth with a further pickup expected in 2025 as new distribution partnerships come online, including a new bancassurance relationship in Spain.

In US DPD, we have once again delivered strong double-digit growth in our direct-to- consumer business as our customer acquisition and cross-sell initiatives take effect.

In digital partnerships, we have delivered robust growth, albeit at a more moderate pace as due to one or two of our more established partners lowering their production. The vast

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majority of our partners are growing strongly with us, and we continue to broaden and diversify our partnership network.

In US broker, the business has contracted in 2024, albeit on an improving trend, and I expect the business will retuto growth in 2025.

I am going to focus just for a moment on some of the key management actions that are behind the improving momentum.

Retail growth

Actions driving momentum in all markets

In the UK, our brand campaign, which many of you will have experienced and seen, has now won 18 awards. But more importantly, it is delivering tangible results. We have seen a material increase in our brand awareness, an increase in our organic branded search and increased click-through rates to our UK Direct portal.

In UK and Europe, we are rolling out AI solutions to our broker channels to improve underwriter effectiveness and efficiency. You will hear in a moment from Jo, on how we are exploring the potential of AI and other technologies to improve underwriting productivity and access new markets.

In US DPD, we have deployed a range of marketing initiatives that have helped sustain that double-digit growth rate in direct-to-consumer and we have added 17 new partners to the digital platform.

In US broker, Mary and the team have deployed a range of initiatives to retuthe business to growth, including measures to streamline the underwriting process adding new product, adding new distribution capability. These are leading to an improvement in new business conversion and customer retention.

Across all of our businesses, we are expanding our distribution reach through multi-country specialty MGA opportunities, adding new broker deals and adding partners to our platforms. All of these initiatives will continue to build momentum over time.

Lots of great work done in 2024 with more to come.

Hiscox London Market

Proactive cycle management delivers excellent underwriting results

Now turning to our London market business. Our teams here have once again delivered a strong set of results. This is the fifth consecutive year our London market business has achieved an undiscounted combined ratio in the 80% range.

This strong performance is underpinned by a disciplined cycle management, which means we grow where we see attractive opportunities and we manage the cycle in other areas. For example, property has been an attractive segment and we have achieved growth in a number of portfolios.

Our market-leading crisis management teams have generated substantial growth against the backdrop of geopolitical uncertainty.

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In contrast, in our Casualty division, where market conditions have been less attractive, we have taken proactive action to manage the cycle there. Those actions have meant this division has remained profitable throughout the period.

In Marine, energy and specialty, our growth has been impacted by a decision to exit the space class of business where rates and terms have not evolved in line with underlying risk and the complexity. Once again demonstrating we will grow and shrink based on our view of risk and our assessment of the medium-term prospects of the market.

Hiscox Re & ILS

Growth and excellent underwriting result drive record fee income and profits

Turning to Re & ILS. Our teams here have delivered a fantastic result. We have increased net premiums by over 11% and delivered a undiscounted combined ratio of 69%.

In Re & ILS, we have more than doubled our net premium since 2020 as we have grown into the hard market. Since the end of the year, we have had a good January renewal season, where, again, we have deployed incremental capital and achieved solid net premium growth.

Now as you know, as part of our Re & ILS business, third-party capital management and our strategy to manage that has been an integral part of the business model for many years. During the course of the year, we attracted $460 million of new inflows into our ILS strategies, which have gone a long way to offset the planned capital return, and we continue to broaden and deepen our quota of share partnerships.

Not only is this strategy integral, it is a material contributor of earnings to our Re & ILS business. In the year, we recorded a record fee income of $128 million.

I want to spend a moment just to reflect on how our business has grown and evolved over the years.

Capturing the structural retail opportunity

Management action and powerful tailwinds driving momentum

As you can see here, we have grown our Retail business to $2.5 billion of premiums during the course of the year. We have grown faster than the market. Indeed, the growth momentum is now picking up again after a period of consolidation, a period during which we have added new leadership. We have reinvigorated the brand. We have replatformed much of our technology and we have added capability to our distribution.

And we are also benefiting from favourable external secular market trends, including strong new business formation, the emergence of new professions and increased digital adoption. All trends are set to continue over the long term.

This is an incredibly exciting time for us at Hiscox, where we have more certainty and greater confidence to capture that structural growth opportunity in the US, in the UK and in Europe.

Managing big-ticket through the cycle

Proactive actions to capture opportunities

In our big-ticket segment, we have captured the opportunity of the hard market in a disciplined way. In Re & ILS, we have increased our net premiums by 159% since 2020 as we have grown into the hard market.

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In our London market business, where business is much more diverse, we have been proactively managing the micro cycles to optimise returns. Again, for example, property has been an attractive segment over this period, and our major property premiums have increased by 45% since 2020.

In contrast, D&O and cyber is where we have seen multiple years of rate declines, we reduced our premiums by around 30% over the same period. It is this discipline, which underpins the profitability of the London Market over many years.

Earnings momentum, business mix and growth underpin progressive dividend step- up and $175m buyback

The Hiscox business model is unique, with that balance between our cyclical big-ticket businesses, where our entrepreneurial culture, our underwriting pedigree, combined with effective cycle management leads to periodic surges in growth and profitability.

Our Retail business, where, again, our entrepreneurial business-building culture combined with our specialty underwriting capability, our brand and our broker and digital platforms position us very well to capture the long-term structural growth opportunity and the benefit of compounding through the insurance cycle.

Over the years, our business has grown and evolved such that today, Retail profits make up 44% of the Group's total, compared to 34%, 10 years ago. This gives us the confidence to pursue multiple growth opportunities and to step up our final dividend by 20%.

Summary

In summary, it is another strong year of delivery from Hiscox, a year in which we have:

• Delivered high-quality growth;
• Record profits;
• Accelerating momentum in Retail;
• Substantial capital generation;
• A significant step-up in our progressive dividend; and
• A further substantial retuof capital to our shareholders
• and exciting times ahead for Hiscox.

On that note, thank you. I am going to hand over to Paul to provide an update on our financial performance followed by Jo to provide an underwriting perspective, and then I shall be back to wrap up.

Financial Performance

Paul Cooper

Group CFO, Hiscox

Group financial performance

Growth momentum building and strong profitability

Thanks, Aki, and good morning. It is great to be here with you today presenting another great set of results.

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The Group is delivering on its promise. We are achieving high quality growth with insurance contract written premium increasing by $169 million as growth momentum builds across our retail business.

Pleasingly, this was achieved with an excellent undiscounted combined ratio of 89.2% in an active loss year and an insurance service result of $554 million with strong results in each segment.

We continue to make good progress in improving our expense ratio. This has fallen by around 1 percentage point for the second consecutive year as we continue to manage our costs carefully.

Other operating expenses are up 19%, reflecting continued brand investment, which increased 25%, investments in efficiency savings and a one-off cost relating to the sale of DirectAsia Thailand.

The Group's profitability is supplemented by the investment retuof $384 million as cash and coupon income continues to grow. The growing underwriting profits and the strong investment result has delivered a profit before tax of $685 million, up 9.5% on last year's record profits. This has resulted in substantial capital generation, an excellent retuon equity of 19.8% and an estimated BSCR of 225%.

Our high quality growth and building of momentum in Retail supports the step-up of our progressive dividend with an increase in the final dividend of 19.6%. In addition, the substantial capital generation allows us to make a special capital retuof $175 million in the form of a buyback. Our strong financial position enables us to make this special capital retudespite the tragic events in California in Q1.

The Group estimates a net loss from the California wildfires of around $170 million at an industry loss of $40 billion. This will be booked in the first quarter of 2025 with $150 million expected to be recognised in Re & ILS and $10 million in each of London Market and Retail. The buyback, together with the total 2024 dividend, means that we plan to retuaround $320 million or 10% of 2024's opening equity, demonstrating our disciplined approach to capital management.

You can see the benefits of this in NAV per share, which has grown by 14% year-on-year, driven by a combination of strong earnings and the capital returns completed during 2024.

The Bermuda corporate income tax came into force on 1st January 2025. This will increase the Group's effective tax rate to between 15% and 20%. In relation to this, we have recognised a $155 million deferred tax asset. However, under new OECD guidance published in January, the future benefit of up to 80% of this asset is uncertain.

Following new BMA guidance, we have recognised 20% of the DTA in capital for 2024.

Delving into these results a little further, starting with our Retail segment.

Hiscox Retail

Broad-based growth momentum and strong profitability

Hiscox's Retail ICWP grew by 5.1% in constant currency to $2.5 billion, driven by continued good growth in Europe and the US DPD and improving momentum in the UK. US broker

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continued to act as a drag on the retail growth, shrinking 4% in the year, and we expect US broker to rotate back to growth in 2025.

The Retail insurance service result increased by 39% to $247 million as a result of an improvement in the undiscounted combined ratio of 2.8 percentage points to 93.6%. To achieve this level of profitability while continuing to invest in growth is a pleasing result and reflects the quality of growth being achieved.

In 2024, we concluded the sale of DirectAsia Thailand. The remaining DirectAsia business is held for sale and would not be reported within the Retail results going forward.

Hiscox London Market

Excellent underwriting results continue

Moving on to London Market. ICWP declined by 2%, reflecting our proactive cycle management within casualty and our exit from space as the Group remains focused on risk- adjusted returns.

This is evidenced by an undiscounted combined ratio of 88.6%, marking the fifth consecutive year in the 80s range despite an active loss environment with several US hurricanes making landfall and a number of man-made losses.

Hiscox Re & ILS

Strong performance in an active loss year

Turning to Re & ILS. Net ICWP is up 11.1% as the business has continued to deploy additional capital into attractive market conditions. The strength of the portfolio we have built is demonstrated by an insurance service result of $166 million and an undiscounted combined ratio below 70% for the second consecutive year. An excellent performance in an active loss year.

This is recognised by our third-party capital providers with new ILS inflows of $460 million and growth in outwards quota share capacity. These alongside higher profit commissions following the fantastic underwriting results in both 2024 and 2023 have resulted in record fee income of $128 million.

Investment performance

Coupon income and cash returns led to strong result

Looking at investments. Returns from coupons and cash have continued to grow as high yields have earned through delivering an investment retuof $384 million or 4.8%. The reinvestment yield has fallen slightly to 4.6%, while the quality of the fixed income portfolio remains high with an average credit rating of A.

Through the course of the year, we have extended the duration of our assets to 1.8 years to more broadly match that of our claims liabilities. These strong investment returns should continue to provide a tailwind for the Group.

Claims discounting impact on profit and COR

Net impact on profit is $16 million

Moving on to discounting. The net discounting impact from IFRS 17 was a positive $16 million in 2024. The IFIE unwind of $154 million is in the middle of the guidance range of

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$135 million to $165 million. For 2025, we expect the unwind to be between $125 million and $155 million.

We have updated the interest rate change sensitivity to reflect market conditions and the balance sheet as at 31st December.

Reserves

Balance sheet remains strong

Looking at reserves. Our conservative reserving philosophy remains unchanged with a risk adjustment of $267 million and a confidence level of 83% within our 75% to 85% range. In addition, our LPTs cover over 37% of gross casualty reserves for 2019 and prior and provide protection from inflation and other pressures.

Reserve releases

$146m positive reserve development with releases across all prior accident years

Turning to reserve releases. The Group has continued its long history of favourable reserve development with a release of $146 million or 3.7% of opening reserves for 2024. The Group's prudent reserving has delivered sustained releases with all recent accident years below the initial estimate and continuing to run off favourably.

Finally, an update on capital.

Very strong capital generation

Balance sheet strength supporting growth and increased returns

The Group has generated significant capital in the year, reflecting excellent profits, the recognition of 20% of the Bermuda DTA, as well as the benefit of some technical optimisation. The Group remains strongly capitalised even after the impact of a significant loss scenario.

Strongly capitalised post returns

Post-scenario comfortably within S&P 'A' rating

As you can see, this strong BSCR position means we are again able to announce a special capital retuof $175 million via share buyback after taking into account our ambitious growth plans and capital required to maintain a strong balance sheet.

Even after the impact of the new buyback, the step-up in the ordinary dividend and the expected loss from the California wildfire, the Group's pro forma BSCR remains strong at 198%. The step-up of our dividend reflects our high quality growth and building momentum in Retail.

Going forward, we expect to retuto a more steady period-on-period increase in DPS growth.

I will now hand over to Jo, who will provide you with an update on underwriting.

Underwriting

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Jo Musselle

Group Chief Underwriting Officer, Hiscox

Introduction

Thank you, Paul, and good morning all. So you have heard how we have grown and delivered an excellent underwriting profit as we continue to benefit from a portfolio of quality, balance and choice. Our effective cycle management and our underwriting strategy of cyclical growth in our big-ticket business and structural growth in our Retail business gives us the opportunity to expand profitably through the cycle.

Power of an actively managed portfolio

Continuing to benefit from strategy of balance

Looking at our business in more detail. Retail growth momentum is building. Commercial is up 5% in constant currency with improving US DPD growth. In UK, we have achieved pleasing double-digit growth in general liability and commercial property, and in Europe, in emerging PI and General Liability.

Our accelerated growth in Art and Private Client continues, and we have grown that 8% with UK high value household, a standout at 18% growth, as we benefit from our expertise and an AI solution rolled out to help our underwriters.

In reinsurance, the market remains favourable. We have incrementally deployed our capital. We have grown 4% gross and 10% net, leaning into things like international and proportional where we have been underweight.

London Market, attractive but more nuanced by line as we manage the cycle in some portfolios and react to market trends in others. As an example, in Specialty, we have exited the space market. We did not believe that there was a route to profit because we believe the risk had fundamentally changed.

In product recall, it is challenged and we have exercised discipline. Outside of these, Specialty has grown 6% and London Market terror 16% as we see attractive market opportunities. In Marine and Energy, Hull and renewable operations have grown well. Liability and renewable construction have been affected by market trends, the latter because there were just less construction projects in the market in 2024.

In Casualty, D&O continues to soften, and we have shrunk 13%. General Liability was still taking rate and it is growing. But overall, I am really pleased with how our London Market team continued to manage the various micro cycles in their portfolio, delivering another undiscounted combined operating ratio within the 80s.

Attractive rate environment sustained

Majority of portfolio with substantial rate adequacy

Moving on to rate and market. The graph on the left-hand side will be familiar to you. This is our rate index back to 2018 for our various segments.

The attractive rate environment sustained in 2024, London Market rates up 2%, the reinsurance rates holding. Retail up 2% are most generally less cyclical with regard to rates, taking rate has been necessary in our Retail portfolio over the last few years as we have dealt

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with a higher inflationary environment, where we continue to see a positive delta between claim inflation and the assumptions that we took.

As you know, 01/01 is a key renewal date for us, and we typically write about 45% of our reinsurance business and about 20% of our London Market business in January. For the first year in about seven, we saw some rate decline at 01/01 renewals. Rates were down about 3% in London Market and about 8% in our reinsurance property cat.

Now what we have shown on the right-hand side is a view for you of our view of rate adequacy within the portfolio. You can see the vast majority of our portfolio is priced to deliver attractive returns in a mean loss environment.

Whilst we are a net beneficiary of reinsurance rates, we are also a significant buyer of reinsurance and our Outwards team did a great job at 01/01, placing our own programme at substantial savings.

Active 2024 claims environment

Delivering resilience through active portfolio management

Moving on to claims and the very busy first half continued with a very active second half. Managing and paying claims is exactly what we are here for and how we eaour reputation. Like others, we look at our claims through the lens of attritional, large and cats.

From an attritional point of view, frequency was slightly up, returning to more normal levels. From an underwriting point of view, it is all about anticipating current and emerging trends. It is all about understanding inflation and then ensuring both of those are taken into account and reflected in our rates and our terms.

We were also notified of many large risk losses in 2024, well over 200 losses notified to us have claims in excess of $1 million. That is about an 8% increase year-on-year.

From an underwriting point of view, it is all about spread, it is all about balance and diversification and then managing our exposure through both line size and risk sharing with our partner reinsurers.

Then catastrophe, 2024 was a very active nat cat year with over $145 billion of insured industry losses. Again, from an underwriting point of view, it is all about us being focused on understanding that changing nature of peril, utilising our own view of risk and marrying that to the external science and models on a forward-looking basis. Also, we are a utiliser of third-party capital and reinsurance for both relevance and also to protect our peak volatility.

In summary, 2024 was a very active year from a claims point of view, but we served our customers well and our portfolio has demonstrated resilience.

2025 Californian wildfires

Loss estimate, post event evaluation and market impact

Whilst not in our numbers, California had a devastating start to 2025 with the Los Angeles wildfires. Of course, our thoughts are with all of those who were affected by this event.

Our number one priority is to support our customers and cedents, and we have already paid over 70% of losses presented to us. We understand our loss and our exposure through both

1. top-downmarket share analysis and also a bottom-up analysis working with our customers and cedents. As you have heard, we have estimated our loss for this event to be $170

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