HIIG combined ratio improved by 3 pts to 96.3% in Q3

HIIG improved its combined ratio by 3 points to 96.3 percent in a third quarter when it also cut its top line as part of underwriting actions taken by its new management team led by Andrew Robinson that included exits from monoline workers comp and lawyers and insurance agents liability.

The financial highlights were disclosed by HIIG backer Westaim in its earnings for the period and also included details of strong price increases in excess of 10 percent across HIIG’s book.

Canadian investment firm Westaim said the fair value of HIIG increased by $3.3mn in the quarter compared to $2.7mn.

Underwriting actions taken by the new management team contributed to gross written premium shrinking by 17.8 percent to $191.4mn.

The reduction came as HIIG – which is set to rebrand next week – re-underwrote some existing businesses, and exited underperforming businesses.

The exits included monoline workers compensation and lawyers and insurance agents professional liability, while the US specialty insurer also accelerated growth in other segments of the business.

Westaim said HIIG’s growth strategy is focused on the remaining businesses and new opportunities where it has specialty expertise and/or key relationships with its target customer base.

Despite the improved third quarter underwriting results, HIIG’s reported combined ratio for the first nine months of the year deteriorated from 99.0 percent to 111.1 percent, excluding the impact of the cost of its loss portfolio transfer (LPT) with R&Q earlier this year and recoveries under the transaction.

However, factoring in the impact of development recoverable under the LPT, the combined ratio narrowed to 101.5 percent. Excluding development that was not recoverable it dropped further to 97.5 percent.

The LPT provides reinsurance protection of around $127.4mn above the net ceded claim reserves. In the first nine months of the year there was adverse development on reserves covered by the LPT of around $40mn before tax, of which around $28.2mn was recoverable from the LPT reinsurer.

Laser focus

Commenting on the performance at its insurance operations, Westaim president and CEO Cameron MacDonald said: “Andrew Robinson’s laser focus on execution and achieving first quartile performance is starting to be reflected in our underwriting results.”

He added that industry conditions for HIIG remain “quite favorable for profitable growth” with US composite insurance pricing up in excess of 10 percent.

“Any business lines that do not achieve an acceptable return on invested capital will be corrected or culled. Importantly, Andrew continues to attract high quality professionals and pursue opportunities that collectively will contribute to our growth and results.

“We are excited about the trajectory of HIIG as we move into 2021,” said MacDonald.

As previously reported, HIIG’s A- financial rating was taken off negative outlook in August this year after the specialty insurer took various balance sheet actions.

As well as the LPT with R&Q, Westaim purchased $44.0mn of HIIG convertible preferred shares in a $100mn rights issue to maintain its 44.0 percent ownership of HIIG.