Q&A: Hiscox CFO Paul Cooper on Strategic Growth and Financial Discipline
In today’s fluctuating market, strategic and measured growth is essential for global businesses. Marina Mouka spoke with Paul Cooper, CFO of Hiscox, to understand how the company balances expansion with financial discipline. Cooper discusses the company’s approach to navigating market cycles, assessing risk, and utilizing technology to drive growth.
What are the key components of Hiscox’s growth strategy, and how does the financial function enable these goals?
Hiscox operates a diversified model: the London Market business (insuring complex global risks), Re & ILS (reinsurance), and Retail (direct-to-consumer insurance, mainly for small businesses). Cooper emphasizes the cyclical nature of the London Market and Re & ILS businesses, with returns varying across the insurance cycle. The Retail sector offers more consistent profits, presenting a significant growth opportunity because of still modest market share in each market.
Cooper states, “We’re strict about our capital allocation and evaluate the risks and opportunities within each segment. This means that we can grow the business through the cycle, but also that we can seize opportunities as they present themselves. For example, we recently launched a new London Market Financial Institutions offering because we see a significant opportunity in this area at this point in the cycle, and conversely, we’ve allocated capital away from Cyber where rates have been falling.”
How does Hiscox balance growth in mature markets, like the UK and Europe, with its expansion in high-potential areas like the US?
Hiscox has an international growth strategy, noting considerable potential to expand Retail market share in all of its chosen markets. Europe, particularly, has seen double-digit growth in the last five years. Further, the US market shows significant promise, due to its size and less-developed digital market. In the UK, Hiscox leverages existing foundations by investing in its brand and new partnerships to make this move.
Cooper explains, “We have a deep understanding of our customers, and because SME behavior is broadly consistent, we can leverage our technical expertise and deploy it in similarly attractive markets that have stable and favorable regulatory and legal regimes.”
In a competitive insurance market, what challenges do you face in driving profitable growth, and how do you overcome them?
Cooper highlights the importance of understanding underwriting cycles. The company assesses rates and profitability to allocate capital effectively, expanding when the cycle is favorable. Cooper explains, “From an investment perspective, we analyze our investment priorities and decide which initiatives we take forward, examining each business case and ensuring these are appropriately prioritized and executed.”
How does Hiscox approach investment decisions to support innovation and scalability?
With a history of innovation, Hiscox is increasing its technology focus for growth. They announced a collaboration with Google Cloud in 2023 to apply generative AI to refine underwriting processes. These investments use their enterprise portfolio management framework to evaluate both short- and long-term viability.
Cooper remarks, “And as a regulated financial services company, we also balance investing for growth with meeting the costs of regulatory compliance.”
What role does technology and data analytics play in Hiscox’s growth strategy, and how do you, as CFO, evaluate its ROI?
Due to the nature of insurance, data is critical for underwriting performance. Hiscox sees leveraging data as crucial to maintaining a competitive edge.
Cooper says, “If you look at our Retail business, the average premium for our digital small business insurance is around £/$/€1,000, and with 98% of that business digitally distributed, the cost element of that technology is important. So yes, we’re continually looking at how technology can drive productivity, and if I take our UK Retail business last year, Generative AI drove an increase in productivity by c.40%, which shows the material gains to be made.”
How do you foster an entrepreneurial mindset within the financial team to support growth initiatives?
Hiscox cultivates an entrepreneurial spirit and a unique culture, with a relatively flat structure that fosters collaboration. Cooper shares his “four c’s” of a high-performing finance function: commerciality, cost management, captaincy (financial leadership), and maintaining controls.
Cooper notes, “When combined, you get a business functioning extremely well and we’ve seen that for ourselves – for instance we’ve reduced our reporting timeframe by two weeks, using automation around reconciliations and financial report production, which is significant.”
What emerging trends or risks do you see shaping Hiscox’s growth in the next 5-10 years, and how are you preparing the organization for them?
Cooper identifies geopolitical trends, climate trends, and technological changes as crucial factors. Hiscox has been adept at adjusting to these changes to create customer-focused products. Technology, particularly AI, is becoming more important in underwriting and claims. Cooper emphasizes the need to recruit individuals with the ability to adapt to changes.
Cooper responds, “But the environment we operate in is constantly evolving, which is why when we recruit, we look for people with an appetite for change or change capabilities, as that’s important not only for Hiscox but also as it relates to the customer base we serve.”
How does Hiscox ensure its growth strategy remains adaptable in an industry known for economic and regulatory volatility?
Navigating volatility is part of Hiscox’s DNA, with a strong record of performance in uncertain times. The company focuses on predicting and responding to customer needs. Hiscox has a working group – the grey swan group – which studies emerging risks and how to turn those risks into growth opportunities.
In your view, how can the financial function at Hiscox continue to add value as the company evolves?
Cooper emphasizes that automation is vital, especially in leveraging data for insights that reduce costs. They support Hiscox’s growth and performance through cost management and capital allocation, emphasizing the importance of strong internal relationships. Additionally, they seek to attract people with the right competencies.
Cooper concludes, “We are non-hierarchical, and it is an empowering place to work, where people are encouraged to get on and help build the business.”
