US wildfires cut Hiscox Re’s half-year pre-tax profit in half

Hiscox Re and ILS saw its half-year profit before tax drop by 46% year-on-year as a result of the 14 wildfires that occurred in Los Angeles, California in January 2025.

This figure was reported within the reinsurance business’ half-year financial results for the six months to 30 June 2025, which was published on 6 August 2025.

It confirmed profit before tax of $54m (£41m) for 2025’s first half, compared to $86.5m (£65.5m) for the same period last year.

The firm’s combined ratio also worsened over this reporting period, moving from 73.8% in 2024 to 95.1% this year.

Its undiscounted combined ratio, which excludes the impact of discounting future claims liabilities, followed a similar trajectory – worsening from 77.3% in H1 2024 to 99.5% by the end of June 2025.

The insurance service result for H1 2025 – a metric reflecting underwriting profit – was $8.5m (£6.4m), versus $43.5 (£33m) for 2024’s first half.

Joanne Musselle (pictured), group chief underwriting officer at Hiscox, told Global Reinsurance that the “really tragic events at the beginning of this year in California” were the culprits of this financial fall.

The half-year report additionally stated: “The first six months’ performance was impacted by losses from California wildfires in the first quarter. In line with our expectations, the group’s initial wildfire loss estimate of $170m (£128.8m) is developing favourably.”

Despite the financial ramifications of January’s wildfire activity, Musselle added that Hiscox Re and ILS had “delivered a resilient half-year performance”, recording a 7% uptick in insurance contract written premium (ICWP) over the period – this improved from $829.3m (£628m) in 2024 to $887.3m (£672m) this year.

Musselle continued: “We still believe that market to be well priced. It’s come off a bit from the decade high, but actually – from a price adequacy point of view – we still believe it’s priced to deliver good returns in a mean environment. We’ve grown that about 7% at the half-year.”

‘Moderated’ growth amid soft market

Across Hiscox’s portfolio of businesses – which includes Hiscox London Markets, Hiscox UK and Hiscox USA, for example – Musselle confirmed that the company’s reinsurance arm was the primary “part of our group where we see hardening and softening” market conditions having an impact.

She noted, for example, that reinsurance rates at Hiscox have declined 6% so far in 2025 when compared to prior years, which she attributed to cyclical market softening. However, she added that rates this year are still up 81% versus 2018 “across our really strong portfolio”.

Musselle continued: “There was a significant change in reinsurance pricing in 2023 and then flat in 2024. Rates have come down this year about 6% – but when you look back [at] cumulative rates in 2018, [this is still] an increase of about 81% across our really strong portfolio. We still believe this to be a well rated, adequate portfolio which will deliver good returns in a mean environment.

“We exercise discipline if we believe [rates will] come down beyond what we would call adequate. But, at the moment, reinsurance rates are in a still in a favourable part of the market.

“We’ve grown that portfolio slightly at the half-year, but not as much as we’ve grown it historically in 2023/24. As the market changes [and softens], you will see that growth moderated,” she added.