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(Alliance News) - Hiscox Ltd on Wednesday declared no dividend for 2020 after Covid-19 related claims swung the insurer to an annual loss and it expressed "regret" over its dispute with some policy holders.
Hiscox shares sank 10% at 882.53 pence each in London on Wednesday.
The Bermuda-based insurer swung to a pretax loss in 2020 of USD268.5 million, from a USD53.1 million profit the year prior, as total expenses jumped to USD3.22 billion from USD2.82 billion while gross written premiums remained unchanged at USD4.03 billion.
In 2020, Hiscox's group combined ratio increased to 114.5% from 106.8%. The combined ratio decreased to 97.0% when excluding the effects of Covid-19, it said.
Chair Robert Childs said the company expects to pay USD475 million in Covid-related claims net of reinsurance, the majority for event cancellation and the remaining for business interruption and other claims.
"These are large sums and disappointingly means that we will make a pre-tax loss for the year," Childs said, adding that, without Covid-19, Hiscox would have posted a profit of USD207 million.
Back in January, the UK's highest court ruled "substantially" in favour of the Financial Conduct Authority and policyholders in a GBP1.2 billion legal battle over insurance claims for Covid-19-related business disruption.
The FCA last year brought a test case, which could affect around 370,000 businesses, over the wording of business interruption insurance policies, which some insurers - including Hiscox and RSA Insurance Group PLC - argued did not cover the Covid-19 pandemic.
"For Hiscox UK, Covid-19 brought about a dispute with a number of our customers over the wording in some commercial property policies," Chair Childs commented on Wednesday, acknowledging that its brand took a hit as result.
"Our commitment to putting things right for our customers has long been the cornerstone of the Hiscox brand. But for the first time, our reputation for paying claims quickly and without fuss came under intense scrutiny. We regret any dispute with a customer, but particularly where the policy wording was not as clear as it should have been. That is why we willingly agreed to be one of the group of insurers that assisted the FCA with the test case and we welcome the finality and certainty the Supreme Court Judgment has brought. We are now paying covered claims as quickly as possible."
Hiscox did not declare any dividend for 2020, and had cancelled 2019's final dividend, leaving 2019's total payout at 13.8 pence per share.
"In the face of unprecedented economic uncertainty, prudent capital management is critical to ensure we are able to continue to serve our customers, pay valid claims and grow where opportunity permits. We have taken a range of proactive actions, both before the onset of the pandemic and since, to further strengthen Hiscox's robust balance sheet and position us for growth," Childs said.
Going forward, he said: "The challenges of a global pandemic have not withered the green shoots of a hardening market. Rates are rising across all three of our business areas, and the market is turning. Together with our multi-year investments in technology and digital tools, we have the infrastructure, talent and financial firepower to realise the significant opportunities ahead.
"We can look forward with confidence as some normality returns globally in 2021 and we continue to focus on providing excellent service during these difficult times in all our markets."
Hiscox said it remains strongly capitalised and is able to withstand a combination of severe downside scenarios, including an active hurricane season.
By Greg Roxburgh; gregroxburgh@alliancenews.com
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