AM Best has affirmed the credit ratings of Bermudian-based Hiscox Ltd and its subsidiaries.

The agency affirmed the financial strength rating of A (Excellent) and the long-term issuer credit ratings of “a+” (Excellent) of Hiscox Insurance Company (Bermuda) Limited, UK-based Hiscox Insurance Company Limited, Hiscox Insurance Company (Guernsey) Limited, and Chicago-headquartered Hiscox Insurance Company Inc.

AM Best also affirmed the long-term ICR of “bbb+” (Good) of Hiscox Ltd, the ultimate non-operating holding company of the Hiscox group of companies.

The outlook of these credit ratings is stable.

The ratings of Hiscox reflect the group’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

The agency said the ratings of HIB, HICL, HIG and HICI reflect their strategic importance to Hiscox, as well as their integration within the group.

AM Best said the Hiscox group is an international insurer and reinsurer with good brand strength and a diversified book of business.

It added that the group has a strong presence in the Lloyd’s market, primarily through Lloyd’s Syndicate 33, which is one of the largest Lloyd’s syndicates based on 2022 gross written premium.

The Hiscox group’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s capital adequacy ratio.

AM Best said the balance sheet strength assessment also considers the group’s good financial flexibility and strong liquidity profile.

The group has a prudent reserving strategy, demonstrated by a history of positive overall reserve development.

Despite underwriting losses in 2019 and 2020, driven by Covid-19-related losses and reserve strengthening on certain lines of business, the group has a strong track record of earnings evidenced by a 10-year (2013-2022) weighted average combined ratio of 96 per cent and a return-on-equity ratio of seven per cent.

AM Best said the group produced a combined ratio of 92 per cent in 2022; however, unrealised investment losses led to a decline in profit after tax to $41.7 million from $189.5 million in 2021.

The agency said investment losses in 2022 were driven mainly by a rise in interest rates and largely reversed during the first six months of 2023 with a portion of the group’s investment portfolio reaching maturity.

Strong underwriting performance and a rebound in investment performance resulted in the group reporting a robust profit after tax of $250 million for the first six months of 2023.

AM Best said it expects the group’s underlying performance to remain strong over the short-to-medium term, supported by portfolio rebalancing and hardening rates in key lines in Hiscox’s London Market and reinsurance portfolios.