Hiscox Ltd Report and Accounts 2018 Hiscox is a diversified international insurance group with a powerful brand, strong balance sheet and plenty of room to grow. We are listed on the London Stock Exchange, headquartered in Bermuda and currently have over 3,300 staff across 14 countries and 34 offices. We can trace our roots back to 1901 and have grown organically over time from our beginnings in the Lloyd’s market. Our ambition is to be a respected specialist insurer in key geographies and product lines, valued by our customers, business partners and shareholders. Our values define our business, with a focus on quality, courage, excellence in execution and our people. A specialist approach See page 29. 1 Strategic report 41 Governance 67 Remuneration 97 Financial summary 2 Financial highlights 42 Risk management 68 Letter from Chairman 98 Independent auditor’s 3 Why invest in Hiscox? 52 Responsibility of the Remuneration report 8 Chairman’s statement 58 Board of Directors Committee 104 Consolidated income 10 Chief Executive’s report 60 Chairman’s letter 70 Remuneration summary statement 18 Building a balanced to shareholders 72 Annual report on 104 Consolidated statement business 61 Corporate governance remuneration 2018 of comprehensive 20 Actively managed 65 Audit Committee report 84 Remuneration policy income business mix 94 Directors’ report 105 Consolidated balance 21 Actively managed key 96 Directors’ responsibilities sheet underwriting exposures statement 106 Consolidated statement 22 Capital of changes in equity 24 Group financial 107 Consolidated statement performance of cash flows 26 Group investments 108 Notes to the consolidated 28 Additional performance financial statements measures 160 Five-year summary 29 A specialist approach Strategic report Hiscox Ltd Report and Accounts 2018 1 1 Strategic report 41 Governance 67 Remuneration 97 Financial summary Financial highlights $3,778.3m $ 15 1.1m 41. 9 ¢ Gross premiums written increased Profit before tax excluding foreign Total ordinary dividend per share by 15%. exchange up by 25%. up by 5.2%. Gross premiums written ($m) Profit before tax excluding FX ($m) Ordinary dividend (¢ per share) 3,778.3 39.8 41.9 3,286.0 151.1 120.6 2017 2018 2017 2018 2017 2018 Group key performance indicators* 2018 2017 Gross premiums written ($m) 3,778.3 3,286.0 Net premiums earned ($m) 2,573.6 2,416.2 Profit before tax ($m) 137.4 39.7 Profit before tax excluding foreign exchange ($m) 151.1 120.6 Profit after tax ($m) 128.0 33.9 Earnings per share (¢) 45.1 12.0 Total ordinary dividend per share for year (¢) 41.9 39.8 Net asset value per share (¢) 819.1 835.1 Combined ratio (%) 94.9 99.9 Combined ratio excluding foreign exchange (%) 94.4 98.8 Return on equity (%) 5.6 1.5 Investment return (%) 0.7 2.0 Reserve releases ($m) 326.5 324.2 *Additional performance measures are discussed on page 28. 2 Hiscox Ltd Report and Accounts 2018 1 Strategic report 41 Governance 67 Remuneration 97 Financial summary Why invest in Hiscox? Hiscox is a diversified international insurance group with a consistent, long-held strategy that provides opportunities throughout the insurance cycle. We are a uniquely-balanced insurer with a powerful brand, strong balance sheet and plenty of room to grow. Our strategy Building balance – a symbiotic relationship Total Group controlled income for 2018 (%) Our success is due to our long-held strategy: Big-ticket business Retail business A to use our underwriting expertise A Larger premium, globally traded, A Smaller premium, locally traded, in Bermuda and London to write catastrophe-exposed business relatively less volatile business larger premium, volatile or written mainly through Hiscox written mainly through Hiscox Retail. complex risks; London Market and Hiscox Re & ILS. A Growth between 5-15% per annum. A to build distribution in the UK, A Shrinks and expands according A Pays dividends. Europe, USA and Asia for our to pricing environment. A Specialist knowledge differentiates specialist retail products; A Excess profits allow further us and investment in brand builds A to protect and nurture our investment in retail development. strong market position. distinctive culture by recruiting A Profits act as additional capital. the best people, and by focusing on organic growth. This strategy provides opportunities throughout the insurance cycle, allowing us to deliver in the short, medium and long term. Long-term shareholder value Hiscox has always had a focus on creating long-term shareholder value with a progressive dividend policy. Over the last five years ROE averaged 13%, above the FTSE All-Share average 44% 56% of 11%. This performance has enabled the Company to distribute $1,123 million to shareholders since 2014, and deliver a total shareholder return of 67% – well above the FTSE All-Share of 20%. Hiscox Ltd Report and Accounts 2018 3 1 Strategic report 41 Governance 67 Remuneration 97 Financial summary Why invest in Hiscox? The Hiscox Group employs more than 3,300 people across 14 countries and 34 offices. Our products and services reach every continent and we are not overly reliant on any one of our divisions for the Group’s overall profits. Operational highlights A track record of profitable growth Hiscox Retail Brexit Over the last five years the Hiscox The single biggest segment in the Group Our business is ready for Brexit; our new Group has: wrote over $2 billion of income, served one European subsidiary Hiscox SA is fully million customers, and its profits cover the operational and we are already utilising dividend for the third year in a row. the Lloyd’s Brussels subsidiary. increased gross premiums written by 31% to $3.78bn Hiscox London Market Claims achieved compound dividend growth Returned to good health after several We paid out £1.2 billion in claims in in constant currency of years of taking tough action, and 2018 – getting our customers back on successfully replaced $400 million their feet when the worst happened. of challenged business with more 9.9% attractive risks by the end of 2018. returned capital to shareholders of $ 1,12 3 m Hiscox Re & ILS Marketing delivered an average combined ratio of Demand for our ILS offering has Our commitment to building a been sustained, with assets under differentiated brand continued in management now exceeding $1.5bn 2018, with award-winning campaigns 89.6% after last year‘s losses. such as CyberLive in the UK driving double-digit premium growth in our small business offering. reported average return on equity of $1.5bn 12 .6% 4 Hiscox Ltd Report and Accounts 2018 1 Strategic report 41 Governance 67 Remuneration 97 Financial summary Why invest in Hiscox? We have invested significantly in creating a unique culture that reflects our values and customer-focused ethos, and a powerful, differentiated brand which our target clients can identify with. A unique culture The excellence of our people has been a crucial factor in our continuing success. Their expertise, courage and dedication continue to drive our reputation for quality and professionalism. In return, we strive to provide them with a work environment in which they can flourish. In our annual global employee engagement survey we looked at how connected employees feel to Hiscox, their managers, teams and roles. Hiscox enjoys very high employee engagement, which averages in the top quartile of over 200 companies worldwide. In 2018, 86% of our employees said they are proud to work for us, 94% said they believe in our corporate values and 80% said they would recommend Hiscox as a great place to work. Pleasingly, Hiscox also ranked seventh in Glassdoor’s annual Employees’ Choice Awards for the UK’s Best Places to Work, up from eighth place last year. This accolade is especially important to us as the listing is based on the feedback that employees have shared about us on Glassdoor over the past year. Hiscox Ltd Report and Accounts 2018 5 1 Strategic report 41 Governance 67 Remuneration 97 Financial summary Why invest in Hiscox? We have specialist knowledge and great relationships, and we care about our customers and each other. We have always believed that doing the right thing, however hard, will lead to success. In 2018 this approach resulted in us receiving a number of new accolades. Awards Hiscox Group Big-ticket business Retail business A Hiscox ranked seventh in Glassdoor’s A Hiscox Security Incident Response A Hiscox USA picked up six awards annual Employees’ Choice Awards product won the Innovation Award at the Financial Communications for the UK’s Best Places to Work – at Business Insurance magazine’s Society’s 24th Annual Portfolio up from eighth place last year. Innovation Awards 2018. Awards for its ‘I’mpossible’ and A Hiscox received Insurance Company A Hiscox London Market received ‘Has America Lost its Courage?’ of the Year 2018 at UK newspaper Underwriting Team of the Year advertising campaigns. City A.M.’s annual awards. for our FloodPlus product, and A Hiscox UK was recognised with a A Bronek Masojada received Rising Star of the Year for product Marketing New Thinking Award for Outstanding Contributor of the recall and terrorism underwriter its CyberLive advertising campaign, Year – Risk at the Insurance Insider Amie Townsend at the Insurance thanks to its use of data creativity in Honours Awards 2018. Day London Market Awards 2018. brand-building, and a Media Week Award in the Media Idea (Budget Under £250,000) category. 6 Hiscox Ltd Report and Accounts 2018 1 Strategic report 41 Governance 67 Remuneration 97 Financial summary Why invest in Hiscox? Our values guide our business: to have courage and integrity, to provide quality products, to excel in the service we provide and, above all, to be human.