Bermuda-based specialty re/insurer Hiscox Ltd. saw its profits plunge by nearly a third in the first half of the year, on heavy catastrophe claims.

Hiscox, which is domiciled on the Island and also has a significant underwriting platform here, posted net earnings of £97.2 million ($151.4 million), compared to £141.4 million in the same period last year, the company announced yesterday.

Claims costs rose to £324.9 million from £231.1 million. Hiscox said its estimated net claims from the Chile earthquake and the European windstorm Xynthia, remained unchanged at £100 million, while losses from the sinking of the Deepwater Horizon oil rig and the subsequent spill were expected to bring losses of less than £10 million.

Gross written premiums for the group were flat at £904.3 million, compared to £906 million in 2009.

But the Bermuda platform showed strong growth in the amount of business written as gross premiums rose 21.3 percent. The company said this was down to Hiscox Bermuda using additional quota share capacity provided by third parties to take on more attractively priced business in January renewal season.

Other local specialist businesses also saw growth. Hiscox UK grew 11.6 percent, Hiscox Europe 12 percent and Hiscox USA 22.5 percent.

However, gross written premium income in the Lloyd's of London market unit, in which Hiscox is the second-biggest player, fell 15 percent, due to the deliberate shrinking of lines where rates came under the greatest pressure, particularly US property and catastrophe.

Hiscox reported a combined ratio — reflecting the number of premium dollars spent of claims and expenses — of 94.8 percent. Return on equity was 14.8 percent, while investment return was 3.5 percent on an annualised basis.

In the interim results statement, chairman Robert Hiscox said: "When the market turns, which it inevitably will, and interest rates rise, which they must one day, we will have another surge of growth. In the meantime, we will keep our tinder dry with disciplined, selective underwriting and cautious investing."

Despite the fall in profits, Hiscox announced an in 11 percent increase in its interim dividend payment to shareholders to 5p from 4.5p.

With the soft market cycle continuing in most lines, Mr. Hiscox expressed disappointment that some companies were apparently taking on inadequately priced risks.

"A year ago I wrote that the insurance cycle was alive and well, albeit split, with reinsurance more disciplined than insurance, and I hoped that CEOs would crack their whips to stop the decline in rates, especially when there are such slim investment pickings," Mr. Hiscox wrote. "Well it would appear that the record profits last year have caused a triumph of optimism over discipline.

"Despite the low investment returns and substantial losses of the first six months of this year, rates in many areas (particularly big ticket risks) have got steadily more competitive."

One exception was offshore energy insurance, in which Hiscox had seen a 20-plus percent rise in rates since the Deepwater Horizon disaster.

In his outlook comments, Mr. Hiscox said: "Capacity in the world insurance market remains plentiful despite insured disaster losses of $22 billion in the first six months of this year, and is likely to continue to remain so in the absence of any market-turning hurricanes over the coming months."