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LONDONLloyd's of London insurer Hiscox P.L.C. plans to shift its domicile from the United Kingdom to Bermuda in an effort to boost business, the company said in a regulatory filing last week.
"A move of our domicile to Bermuda should increase the earnings and add to our international status," Robert Hiscox, chairman of Hiscox, said in a statement.
The domicile change is subject to regulatory approvals, but the company's board has already approved a corporate reorganization to create a new Bermuda-domiciled holding company, to be called Hiscox Ltd. If approved by regulators, shareholders would receive an equal number of shares in the new company to replace their existing shares in Hiscox P.L.C.
Hiscox Ltd. is to be listed on the London Stock Exchange in place of Hiscox P.L.C. and is expected to replace Hiscox P.L.C. as a member of the FTSE 250 Index, Hiscox noted in its statement that accompanied the company's first-half earnings report.
Hiscox posted profits of £63 million ($116.0 million) for the first half of 2006, down from £88.1 million ($156.0 million) in the prior-year period.
According to a spokeswoman for the company, Hiscox will benefit from Bermuda's "favorable tax regime" and less corporate regulation.
The proposed move to Bermuda follows a "strong start" to Hiscox's operations in Bermuda, which opened last year, and Hiscox USA, which opened in March. Hiscox Bermuda is on track to underwrite its target of $325 million this year and Hiscox USA has increased its forecast premium volume to $25 million from $15 million.
Overall, Hiscox reported a 43% increase in gross premiums to £625.1 million ($1.15 billion) in the first half of this year compared with the same period of 2005. The increase was due to growth in its Bermudian and U.S. operations as well as a surge in U.K. commercial and personal lines business following a recent U.K. advertising campaign. The volume of European business was static but profitable, Hiscox said.
Hiscox's first-half 2006 pretax profits were down 30% to £61.3 million ($112.9 million) while the combined ratio was almost 10 percentage points higher at 93.2%.
Commenting on market conditions, Mr. Hiscox said that rates were strong for any risks exposed to catastrophes but competition is growing fiercer for other risks. In the U.K. market he said: "We are reaching the stage in the cycle when chief executives state in public that their company will not reduce rates, while demanding more income from their troops."
Commenting on the redomestication, a spokesperson for Lloyd's of London said: "Hiscox has made it clear for some time that they are doing this for operational reasons, and that it in no way reduces their commitment to writing a significant element of their business through Lloyd's."