Hiscox raises fresh capital to secure balance sheet as virus battles loom

Hiscox has raised £375m from placing 57.6 million new shares, almost 20% of its existing share capital, as the firm comes under pressure to pay coronavirus claims. The company has also withdrawn financial guidance for 2020 in light of uncertainty.

Although its share price tumbled amid Covid-19 claims controversy last month, Hiscox said the capital raising attracted strong support from both existing shareholders and new investors. It said a number of directors took up subscription shares.

Hiscox said the additional capital will back growth opportunities to capitalise on rate hikes in the US wholesale and reinsurance markets. It added that its capital position is “robust”, with an estimated group solvency ratio of 195%.

But Hiscox faces potential legal action in the UK over its stance that Covid-19-related business interruption (BI) claims, following the government’s lockdown, are “not a covered loss” for its 33,000 commercial policyholders.

CEO Bronek Masojada said the group has limited exposure to Covid-19 BI claims in Europe, and its US retail business has negligible exposure. However, Hiscox said exposure to London market and reinsurance losses is “uncertain”, in particular major property risks written by Hiscox London Market. Hiscox said it has no material exposure to trade credit losses linked to the pandemic.

Mr Masojada said Hiscox is paying claims for event cancellation and abandonment, media and entertainment, and travel linked to the Covid-19 pandemic. Claims are projected to total $150m based on lockdowns and travel restrictions lasting six months to September. The insurer projects a further $25m loss should restrictions on travel and mass gatherings last longer.

In a trading statement for Q1, Hiscox reported higher rates in London market operations, up 12% across the portfolio and in 15 out of 16 business lines. It reported rate increases of 85% in US D&O, 26% in US general liability, 23% in cargo and household, and commercial property was up 11%. It said the market is expected to harden further as capital contracts in the current uncertainty over Covid-19.

Across the group, gross written premiums were up 2% to $1.18bn during the first quarter. Hiscox said reinsurance pricing is below expectations and up 8% in Q1. But it said rate increases are starting to accelerate.

Hiscox’s investment losses totalled $79m during the first three months of 2020. The group said it has withdrawn financial guidance for 2020, given the current uncertainty.