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

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 (Hisco) and Hiscox Insurance Company (Guernsey) Limited, the principal operating companies of Hiscox Ltd., which is based in Bermuda. The outlook for all of the ratings remains stable.

The ratings of the Hiscox operating companies “continue to reflect the strong consolidated risk-adjusted capitalization of the group’s holding company, Hiscox Ltd.,” said Best. In 2010, an increase in consolidated shareholders’ funds is anticipated (2009: £1.121 billion [$1.8 billion]), in spite of total net losses of approximately £110 million [$176.3 million] expected from the Chilean earthquake, Windstorm Xynthia and the Deepwater Horizon event.

“In addition, each rated operating entity benefits from excellent stand-alone risk-adjusted capitalization and an excellent business profile, supported by membership of the Hiscox group.”

Best explained that the ratings of Hiscox Bermuda factor in its expectation of “continued strong correlation between the main reinsurance business written by the company and that written by Lloyd’s Syndicate 33 (managed by Hiscox Syndicates Ltd). In a separate announcment Best also affirmed its ratings on Syndicate 33.

In addition, best said the “company’s technical performance benefits from internal reinsurance cessions of profitable and well-established business from Hisco and Hiscox Guernsey. A good combined ratio is expected in 2010, albeit higher than the excellent 66 percent achieved in 2009.”

The ratings of Hiscox Guernsey continue to “reflect significant reinsurance support from Hiscox Bermuda,” Best’s report continued. “The company also benefits from a strong business profile for its specialist lines of business, including kidnap and ransom and fine art.

“Hisco is expected to return to underwriting profitability in 2010, supported by improved rating conditions for its main UK personal property business (2009: technical loss of £3.3 million [$5.287 million). Despite the impact of Windstorm Xynthia, results are likely to benefit from a reduction in net claims incurred from European business, which experienced a number of large uncorrelated losses in 2009. Hisco’s ratings also factor reinsurance support from Hiscox Bermuda.”

Source: A.M. Best Europe