Interim Statement 2022

CEO's statement

I am pleased with the Group's performance during the first half of the year as rate strengthening and disciplined growth drove much-improved underwriting profitability.

"Rates have continued to strengthen ahead of our expectations across all three business units."

The Group delivered a solid underwriting result in the first six months of the year, with a focus on disciplined underwriting and building balanced portfolios. Gross premiums written increased by 9.2% to $2,649.8 million (H1 2021: $2,426.2 million), despite FX headwinds from a strengthening US Dollar, and underpinned by strong rate momentum across all business segments.

We are seeing improving growth momentum across our Retail businesses, our 'go-forward' portfolio growth has accelerated to 8.5% in constant currency, up from 6.4% in the prior period led by Europe and a recovery in the UK. In the USA, work to refocus the broker channel business is complete. US DPD technology re-platforming is continuing at pace, with all direct customers across 50 states now live on the new platform, and partner migration will commence in the third quarter. To maintain the

high standards of service to our customers and reduce complexity of technology transition, we have temporarily switched off some new business opportunities, and paused the onboarding of new partners. As a result, our expectation of US DPD growth in 2022 is now in the middle of the 5% to 15% range, however, we expect the business to retuto growth levels in excess of 15% in 2023 as we reap the benefits of the new technology. The business is also making strong progress on profitability, as reflected in the improved combined ratio now at 95.5%, and the business is on track to achieve our target range of 90% to 95% in 2023.

Our big-ticket businesses, Hiscox London Market and Hiscox Re & ILS, continue to deliver good selective growth, price adequacy and balance in their portfolios. We are seeing multiple years of rate improvement and portfolio adjustment turning into sustained profitability as both divisions report combined ratios in the 80s, after absorbing significant losses from the events in Ukraine and Russia. The external environment is somewhat uncertain due to global macroeconomic and geopolitical outlook. However, it is an environment where demand for (re)insurance remains strong and disciplined underwriting

combined with a strong balance sheet positions us well to grow profitably, as our results demonstrate.

In these uncertain times we have seen a significant increase in interest rates, which has had a material impact on our pre-tax profits mostly due to mark-to-market falls in our bond portfolio; these are largely non-economic

in nature, and the impact on capital is broadly offset by a discounting benefit on reserves. Moreover, the rise in reinvestment yields is indicative of a significant uplift in future expectations of investment income.

Rates

Rates have continued to strengthen ahead of our expectations across all three business units. Hiscox London Market achieved an 8% rate increase in the first half, which equates to a 72% cumulative rate rise since 2017. Cyber continues to experience a hard market with rates up 60% this year. Marine liability rates are up over 20% driven by significant rate increases on the renewal of International Group of Protection & Indemnity Clubs' reinsurance programme, which covers around 90% of the world's ocean-going tonnage. Property binders and commercial property continue to experience strong rate growth, assisted by further capacity being withdrawn from the market. Competition remains challenging in lines that have historically performed strongly, such as K&R and terrorism, although the first signs of re-rating appeared in the second quarter in response to the conflict in Ukraine. D&O rates have continued to soften, although remaining well priced - having seen rate increases approaching 250% over the past five years.

Hiscox Re & ILS achieved a 13% rate increase in the first half, driven by capacity constraints in retrocession, North American catastrophe and cyber, and increase in demand from clients who are starting to buy more limit in an inflationary environment. This equates to a cumulative rate increase of 52% since 2017. With respect to property catastrophe, Japanese renewals in April experienced a modest rate improvement, building on material re-rating

in 2020 following significant loss activity in 2018 and 2019. June renewals, which are largely dominated by Florida, experienced a severe capacity contraction and in some cases risks simply could not be fully covered. Hiscox Re & ILS has a focused portfolio of high-quality clients in the state and achieved rate increases in excess of 30%. US nationwide policies benefitted from 18% rate increases, as conditions continue to harden.

In Hiscox Retail, rates are strengthening across all regions: 6% on average in Hiscox UK, driven by double-digit increase in cyber, technology, professional indemnity and commercial property; 8% in Hiscox Europe, driven by cyber and commercial property; and 6% in Hiscox USA, driven by cyber and allied health.

Claims

The conflict in Ukraine has changed the geopolitical dimensions we all face, our primary role has been to provide support to our clients and to consider the risk landscape in these uncertain times. The impact of the conflict is being felt directly and indirectly by many across the world, and our thoughts are with those affected.

The Group's net direct exposure to the ongoing conflict in Ukraine is within a small number of lines, predominantly in our London Market division and to a smaller extent in Hiscox Re & ILS. The main impact is through the political violence, war and terror (PVWT) book, which provides physical damage and ensuing business interruption coverage to multinational companies that have fixed physical assets in Ukraine, such as office buildings or manufacturing plants. Since the outset of the crisis we have been actively reducing our war on land exposure in Ukraine and expect it to reduce by two-thirds by the end of the year. The rest of the impact is mainly in the marine portfolios, however, there have been no reported losses to date.

While the conflict in Ukraine is a live event with a range of potential outcomes, Hiscox has a good early view of our direct exposures. Hiscox London Market exited the

aviation hull insurance business in 2018 and political risk/trade credit business in 2017. We estimate that our ultimate loss from all risks in Ukraine and Russia, including aviation (in Hiscox Re & ILS), is $48 million net of reinsurance*, with $34 million attributable to Hiscox London Market, currently the majority of reserve comprises IBNR.

The second quarter has been relatively benign for natural catastrophe events, such that the net natural catastrophe losses in the first half are within our expectation and budget. Excluding the impact of the conflict in Ukraine, all Hiscox business divisions continued to enjoy favourable claims experience.

Premium growth as a result of rate and indexation is offsetting or is in excess of inflation expectations across our markets. It is important to differentiate between Consumer Price Index rates and our loss inflation assumptions as these are not always directly comparable. Not all items in the CPI basket directly impact our claims experience: for example inflation in food, beverages, clothing and footwear prices has limited relevance to our insurance products unlike housing repair, build costs and wage inflation. We have a diverse book of portfolios and for each of these our claims inflation expectations are based on a combination of internal and external data points: the monitoring of professional services, legal services, and medical care price incidences, among others.

We continue to invest in our underwriting, pricing, claims and reserving capabilities to understand and monitor claims inflation to ensure we maintain profitability. We have a range of tools available to mitigate impact both on our reserves covering the policies we have already issued and on the new business we are currently writing. Starting with the former, the average duration of our liabilities is

1.9 years, so exposure to inflation is relatively short lived.

*Including impact of reinstatement premiums.

Hiscox Retail

*96.7% excluding Covid-19 net claims and LPT costs.

"Hiscox Retail delivered a combined ratio of 95.5%, showing good progress towards the 90% to 95% range - the target we set ourselves to achieve in 2023."

We have a conservative reserving approach and are slow to release good news in our longer-tailed casualty lines. We have various elements of inflation loaded in our

loss ratio picks already, our case reserves are set

and reviewed in light of the current inflationary outlook, and we have added a further $55 million precautionary net inflationary load to our best estimate in the first half. At a Group level we hold an 11.0% margin above an already conservative best estimate, and we have completed four LPTs in the last two years which protect 20% of 2019 and prior year gross reserves from inflationary pressures.

From a new business perspective, we mitigate inflationary pressures through a combination of exposure indexation, driving increased premium and continued rate increases. Our current pricing and reserving assumptions incorporate expected inflation which is a multiple of experience in recent times; this is also significantly above our actual claims experience. Therefore, the increased premium we are getting across the Group is keeping pace with

or in excess of our current claim inflation assumptions.

Hiscox Retail

Hiscox Retail comprises our retail businesses around the world: Hiscox UK, Hiscox Europe, Hiscox USA and Hiscox Asia. In this segment, our specialist knowledge, technical capabilities, and retail products differentiate us, and our ongoing investment in the brand, distribution and technology is helping to reinforce our strong market position in an increasingly digital world.

Retail gross premiums written increased by 1.5% to $1,235.2 million (H1 2021: $1,216.4 million), or 5.9% in constant currency. We have now completed our portfolio repositioning in the US broker channel, which has continued to have a moderating impact on Retail growth in the first half. Excluding this, the go-forward Retail business accelerated to 8.5% in constant currency,

up from 6.4% in the prior period.

4Hiscox Ltd Interim Statement 2022

Hiscox Retail delivered a combined ratio of 95.5%, showing good progress towards the 90% to 95% range

• the target we set ourselves to achieve in 2023. Since 2019, when this target was set, we have exited portfolios of business which do not meet our profitability hurdles; meanwhile we have grown in attractive areas, driving rate and improving terms and conditions, standardising policy wordings and implementing cost efficiency in claims processing.

Hiscox USA

Hiscox USA focuses on underwriting small commercial risks with distribution through brokers, partners and direct-to-consumer using a wide range of trading models

• traditional, service centre, portals and application programming interfaces (APIs). Our aspiration is to build America's leading small business insurer.

Hiscox USA's gross premiums written grew 1.2% to $464.9 million (H1 2021: $459.3 million), as double-digit growth in the DPD division offset the impact of the final phase of the planned reductions in Retail broker lines to reshape this business towards the profitable small business segment. Adjusting for the latter, the US go-forward business grew 7.8% year-on-year.

The US broker channel re-underwriting programme completed in the first half of the year. In total, since 2019, we have exited around $160 million of business, including the non-renewal of business with customers whose revenues exceed $100 million and through portfolio remediations in D&O and media. Throughout this period we have also been driving substantial rate increases through the broker book, achieving cumulative rate growth of over 34% since 2019.

The business is now starting to see the benefits from the measures undertaken in earlier years to improve cost efficiency and operational effectiveness of the US claims function. Improving in-house capability is resulting in a significant efficiency, as the average claim handling

costs for outside services have decreased by 40% year-on-year. Overall, we are now better equipped to support a growing high-volume business and our focus has turned to resetting the US broker sales team into growth mode again.

Against a backdrop of strong demand for our product, our US DPD business grew gross premiums written by 10.1% to $242.0 million. As previously indicated, to maintain the high standards of service to our customers and reduce complexity of technology transition, we have temporarily switched off some new business opportunities, and paused the onboarding of new partners, this is having

a temporary moderating impact on growth for 2022.

Technology re-platforming is a significant undertaking involving migration of over 150 distribution partners and over 500,000 customers. In June we reached a significant milestone, as our new direct-to-consumer online portal went live in all of 50 states. In the third quarter we will start the migration of partner portals and then APIs, with this process planned to be materially complete by the end

of the year.

Once fully live, the new platform will be able to support improved revenue growth trajectory from 2023 onwards through an enhanced customer experience and significantly reduced time to quote. We have a healthy pipeline of partners who are keen to onboard on the new platform once live to take full advantage of the improved connectivity and functionality. Operational savings will be driven through automation of previously manual tasks.

As a result of switching off some new business opportunities and pausing the onboarding of new partners, we now expect US DPD gross premiums written to grow at the midpoint of our stated 5% to 15% Retail range at full year 2022. The majority of the impact from partner migration will be in the third quarter, with a pick-up in growth in the fourth quarter. We expect the DPD business to retuto growth rates in excess of 15% in 2023.

The opportunity for our US DPD business remains strong, the market is large, fragmented and continues to grow with new business formation remaining significantly above the pre-Covid-19 levels† . We anticipate that the commercial digitalisation of small business insurance will only continue to gain momentum. In the build-up

to completing the re-platforming, targeted marketing campaigns will resume in the third quarter to deliver the higher growth rate into 2023.

In June, Steve Prymas joined our very experienced US team as Chief Underwriting Officer of Hiscox USA. With over 25 years of specialty insurance experience, Steve brings exceptional breadth and depth of knowledge across financial and professional insurance lines,

as well as an inherent understanding of the small business and middle market and the insuretech landscape.

Hiscox UK

Hiscox UK provides commercial insurance for small- and medium-sized businesses as well as personal lines cover, including high-value household, fine art and luxury motor.

Hiscox UK premiums grew 4.6% on a constant currency basis, however, reduced by 1.2% in US Dollars to $406.2 million (H1 2021: $411.2 million). Commercial lines business continued to see strong growth, delivering 9.0% on a constant currency basis, supported by rate tailwinds, excellent retention rates of above 85%. This was partially offset by our decision not to renew some higher commission business in our art and private client portfolio as returns were expected to fall below an acceptable threshold.

Hiscox UK benefitted from good growth in contingency lines, having recovered well from the pandemic, as well as strong rate increases in technology, commercial property and professional indemnity business classes.

† Source: US Census Bureau, updated 16 June 2022.

Hiscox London Market

"In Hiscox London Market, strategic focus continues to be on selective growth and building balanced portfolios at attractive returns."

Overall the UK non-natural catastrophe loss experience has remained relatively benign in the first half, with weather-related losses in line with expectations.

We continue to drive a number of strategic initiatives to improve our core capabilities in the UK, including a broker service improvement programme, investment in e-trading, customer self-service functionality, together with further automation in operations and distribution. In the DPD channel, we launched our new integrated health and well-being product which combines professional, treatment and public liability insurance, thus covering against the key risks these professionals face.

Following a period of reduced marketing spend during the pandemic, we increased our investment in brand in the UK, extending our outdoor and targeted advertising. Fiona Mayo joined Hiscox UK in June as the new Marketing Director, driving the business's marketing and brand strategy, building affinity with new audiences and accelerating the continued growth of the digital acquisition channel.

Hiscox Europe

Hiscox Europe provides personal lines cover, including high-value household, fine art and classic car, as well as commercial insurance for small- and medium-sized businesses.

Hiscox Europe delivered another strong top-line performance in the first half, growing gross premiums written by 14.3% on a constant currency basis, or 4.8% in US Dollars to $338.3 million (H1 2021: $322.8 million) as all markets in the region are in growth mode. The business has grown well with particularly strong momentum in the core lines of technology, where we have a market-leading reputation, and in the high-net-worth segment, where rates are strengthening and competition retreating.

Overall loss experience has been in line or slightly better than expected across the portfolios.

Non-natural catastrophe loss performance in Europe has been benign in terms of both frequency and severity.

The roll-out of new core technology in Germany and France is progressing as planned, with preparation work in Benelux due to start later this year. Hiscox Europe has also commenced its front-end digital programme with an ambition to revamp all digital customer interactions across our European geographies, starting with France broker where work is already underway and planned to be delivered in the first half of 2023.

Hiscox Asia

DirectAsia grew gross premiums written by 11.3% to $25.7 million (H1 2021: $23.1 million). Singapore performed particularly well, underpinned by excellent new business growth and strong renewals, as the economy emerged from the pandemic and international travel resumed. The sustained focus on profitability has continued to deliver an improving combined ratio.

Hiscox London Market

Hiscox London Market uses the global licences, distribution network and credit rating of Lloyd's to insure clients throughout the world.

In Hiscox London Market, strategic focus continues to be on selective growth and building balanced portfolios at attractive returns. Excluding the impact of the conflict in Ukraine, the non-natural catastrophe loss performance was favourable and ahead of our expectations. Hiscox London Market delivered a combined ratio of 86.1% absorbing around 10 percentage points due to the Ukraine net loss. Adjusting for this,

our London Market business has achieved around

5.3 percentage points improvement in combined ratio on the prior-year period.

Our focus on profitability means we grew selectively, mainly in casualty lines that benefitted from significant cumulative rate increases over the recent periods.

The business benefitted from exposure growth in public D&O while cyber also grew well driven by rate. Overall though, Hiscox London Market's gross premiums written reduced by 3.0% to $591.9 million

(H1 2021: $609.9 million), mainly as a result of planned action to further reduce under-priced natural catastrophe exposure in our property binder book, which has taken

5.3 percentage points from the division's top-line growth in the first half. Since 2018, we have reduced gross premiums written with natural catastrophe exposure by over $160 million. While property binder rate strengthened 9% this year, the increased frequency and severity of events and losses means this asset class, although profitable, is not delivering adequate returns on capital. Thus, we are likely to continue with re-underwriting actions focused on further rate increases and managing aggregate exposures to mitigate inflation, litigation and climate impacts.

FloodPlus continues to drive growth, although we are seeing increased competition from the US government alternative, the National Flood Insurance Program (NFIP), as they look to offer more attractive rates. However, our scope and breadth of coverage remains a differentiator, given the significant opportunity we see in the US private flood market, we continue to invest in our offering and capability. In the first half we launched a new suite of flood products, including a selection of primary options and an excess policy which sits above a primary NFIP policy. Our new business pipeline remains positive and the quote levels for residential properties are running at 50,000 per week.

Competition in crisis management lines remains strong and while rates have started to improve in terrorism

- the line most impacted by the conflict in Ukraine - the market remains competitive. We have enhanced our malicious attack offering which is now available digitally and includes resilience training to minimise the trigger events. The risk outlook is evolving, so we are focused on maximising profit from the portfolio by right

sizing this to factors including rate and expected loss, and against the backdrop of geopolitical friction and supply chain challenges.

The impact of Russian sanctions on London Market gross premiums written is not material, estimated at around $10 million for full year, with around two-thirds reflected in the first half result. It is mainly contained to upstream energy where we removed exposure to Russian oil majors, and space, where all policies with Russian interests have been cancelled. The outlook for space is positive, and we expect (re)insurance markets may harden into 2023 as reinsurance capacity absorbs potential confiscated aircraft claims on combined aviation/space treaties.

Hiscox Re & ILS

The Hiscox Re & ILS segment comprises the Group's reinsurance businesses in London and Bermuda and insurance-linked security (ILS) activity written through Hiscox ILS.

Hiscox Re & ILS delivered an excellent result in the first half, with gross premiums written up 37.1% to $822.7 million (H1 2021: $599.9 million) due to a particularly strong performance in property catastrophe and retrocession lines. This was helped by the continued pressure on supply of capacity in both the traditional and ILS space. We were able to capitalise on this through improved pricing and our capabilities to carve out placements on our terms. Good relationships with our ILS investors and strong relative performance of our funds have led to AUM net inflows of $561 million, as of 1 July 2022. This has allowed us to step up to the opportunity in the distressed market and grow participation on carefully selected cedants while also moving up on programme layers. The vast majority of the ex-rate growth across the retrocession and natural catastrophe books is supported by third-party capital. Excluding reinstatement premiums, gross premiums written enjoyed even stronger growth of 41.1%.