Rights Issue

Hiscox PLC
10 September 2002



FOR IMMEDIATE RELEASE 10 September 2002


NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES,
CANADA, JAPAN, AUSTRALIA, SOUTH AFRICA OR THE REPUBLIC OF IRELAND


                                   Hiscox plc


                             Proposed Rights Issue

Highlights

  • Proposed 1 for 2 Rights Issue to raise £110.5m (net of expenses) to take
    full advantage of excellent trading conditions.
  • Up to 96,350,684 million New Ordinary Shares to be offered at a price of
    120 pence per share.

  • Proceeds will be used to capitalise on continuing strong underwriting
    conditions, to strengthen the Group balance sheet and to fund retail
    expansion.

  • The Rights Issue has been fully underwritten by ING Barings.

  • Interim results for the six months to 30 June 2002 announced separately.

Robert Hiscox, Chairman of Hiscox plc, commented:

'In my 38 years in the market I have never known conditions as good as this.
Hiscox has taken full advantage with every penny of its existing capital and
needs more as good profitable business is there for the taking.'

This summary should be read in conjunction with the detailed announcement which
follows.

A presentation for analysts will be held at 3pm at the offices of Hiscox, 1
Great St. Helen's, London EC3A 6HX.

For further information, please contact:
Hiscox plc                                                Tel: [phone]

Robert Hiscox/Bronek Masojada/Stuart Bridges
ING Barings                                               Tel: [phone]

Ben Money-Coutts/Simon Edwards
NM Rothschild                                             Tel: [phone]

Philip Swatman/Jonathan Eddis
The Maitland Consultancy                                  Tel: [phone]

Philip Gawith/Suzanne Bartch




Introduction

The Board of Hiscox plc ('Hiscox' or the 'Company') announces a proposed rights
issue of up to 96,350,684 New Ordinary Shares at 120 pence per share on the
basis of 1 New Ordinary Share for every 2 Existing Ordinary Shares to raise
approximately £110.5 million, net of expenses. The Rights Issue has been fully
underwritten by ING Barings and is conditional upon approval by shareholders of
Hiscox at an Extraordinary General Meeting, to be held on 26 September 2002.

Strategy

The Board's ambition is to build a successful Europe-based insurer known for its
specialist policies, customer focus and financial performance. The strategy is
to build the Group on the complementary foundations of Hiscox's business at
Lloyd's, conducted through Syndicate 33, and its retail insurance business
conducted outside Lloyd's, primarily through Hiscox Insurance Company Limited
('Hiscox Insurance Company' or 'HIC').

The Group endeavours to write business through the most appropriate underwriting
entity. Syndicate 33 underwrites mainly internationally traded business in the
London Market - generally large or complex business which needs to be shared
with other insurers or needs the international licences of Lloyd's. The Group's
participation in Syndicate 33's performance is achieved through direct
underwriting on its own account and through Hiscox Syndicates Limited ('HSL'),
which manages Syndicate 33 in consideration for an agency fee and profit
commission. This London Market business is balanced by Hiscox Insurance Company,
which focuses on two main areas - insurance of the personal property of affluent
individuals and insurance of service-based businesses and professional firms.

Syndicate 33 and Hiscox Insurance Company are supported by the Group's
international activities and Hiscox Connect. The international activities
comprise Hiscox Insurance Company (Guernsey) Limited ('HICG'), which conducts
offshore insurance, and various European offices which act as underwriting
agents for both Hiscox Insurance Company and Syndicate 33. Hiscox Connect, which
was launched in 2000, facilitates the direct purchase of insurance from Hiscox
Insurance Company through the internet.

As previously stated, it is the Board's intention to continue to increase the
Group's underwriting participation in Syndicate 33 whilst at the same time
growing Hiscox Insurance Company to balance the London Market business. However,
capital allocation between the Lloyd's and non-Lloyd's activities may be
adjusted to take advantage of varying market conditions from time to time.

Background to and reasons for the Rights Issue

In summary, the reasons for the Rights Issue are:

to take further advantage of continuing strong underwriting conditions in the
Lloyd's market through increasing both the size of Syndicate 33 and the Group's
percentage ownership;

to provide a stronger Group balance sheet in response to our experience of a
market-led demand for stronger-rated underwriting entities; and

to fund expansion of the retail insurance business.

Background

The Board reported at the time of the Company's fundraising in November 2001
that it believed that there was a world-wide shortage of insurance and
reinsurance capacity and that this, in conjunction with the low interest rates
and investment returns prevailing at the time, supported an increase in
insurance premium rates. Accordingly, £54.2 million (net) was raised to take
advantage of the opportunities.

Since that time, the insurance industry has experienced a further significant
hardening of insurance premium rates. In addition, the London Market is seeing
an increase in the amount of business being offered. Consequently, the Board
believes that currently there is an excellent opportunity to increase both
turnover and profitability by increasing both the capacity of Syndicate 33 and
the Group's participation in it.

The Lloyd's Business

After the tragic event at the World Trade Center in September 2001, market
conditions significantly improved on an already hardening insurance market. By
way of example, for the twelve months to 30 June 2002, Syndicate 33's rating
indices model showed that the relative aggregate risk exposure was only 58 per
cent. of its level for the twelve months to 30 June 1999, whilst the relative
aggregate premium received for these risks was 58 per cent. higher, representing
an effective net increase in premium of 172 per cent. per £1 of risk
underwritten. As a result of these improved markets, Syndicate 33 increased its
premium income capacity for the 2002 year of account to £504 million which,
through the use of quota share reinsurance arrangements, has been increased to
£655 million. On 6 September 2002, Lloyd's approved up to a further £50 million
increase for the 2002 year of account by way of quota share reinsurance, subject
to the approval of the Syndicate members, which Hiscox is confident it will
obtain. Additionally, Hiscox increased its share of Syndicate 33 for the 2002
year of account to 63 per cent. (2001 year of account: 60 per cent.)

In view of the current excellent trading conditions, Hiscox has obtained consent
from Lloyd's and capital providers to increase Syndicate 33's capacity in 2003
from £504 million in 2002 to £706 million. Through its 2002 quota share
reinsurance arrangements Hiscox already has business which, if renewed, would
utilise the majority of the additional premium income capacity. If Hiscox
maintains its share of syndicate ownership at 63 per cent., the additional
capital required by it to support this increased capacity would be £51 million,
assuming that the Lloyd's risk-based capital requirement for the Syndicate
remains at 40 per cent. The Syndicate currently intends to put in place similar
quota share reinsurance arrangements in 2003 which would increase its capacity
to approximately £850 million.

Depending on prices being at an acceptable level and availability, it is also
the Board's intention to acquire further Syndicate 33 capacity in the Lloyd's
auctions, which this year take place between 17 September and 10 December. While
it does not currently intend to make a general offer for the balance of the
Syndicate, it remains the Board's strategic goal to own 100 per cent. of the
Syndicate. For every additional £50 million of capacity acquired, Hiscox would
need to provide an additional £20 million of capital, assuming again a Lloyd's
risk-based capital requirement of 40 per cent. The Board expects that capacity
will become available, as it believes that some individual names will not put up
the extra capital to support the increase in the size of the Syndicate.

£16 million of the existing capital supporting Hiscox's own underwriting at
Lloyd's is provided by a number of reinsurers. The Rights Issue proceeds would
enable Hiscox to replace this third party funding.

Financial Strength

The Directors believe that Hiscox's stronger balance sheet following the Rights
Issue will benefit the Group in two ways. First, the Board believes that balance
sheet size and strength will play an increasingly important role in attracting
business. This belief is based on Hiscox's experience that there is both a trend
in the market towards brokers dealing with fewer underwriters and also an
increasing commercial importance of an insurer's financial strength and its
group ratings. Secondly, an improved balance sheet will support HIC's growth,
which depends in part on both the Group's and HIC's ratings.

Following the Rights Issue, Hiscox will have a pro forma net asset value per
share of 99.8p, compared with 92.4p as at 30 June 2002.

Retail Business

It is the Board's intention to grow the retail business both organically and,
should suitable opportunities become available, through acquisition. Throughout
2002, rates in the UK, France and Germany have continued to harden. By way of
example, for the twelve months to 30 June 2002, HIC's rating indices model
showed that the relative aggregate risk exposure was 60 per cent. higher than
that for the twelve months to 30 June 1999, whilst the relative aggregate
premium received for these risks was 125 per cent. higher, representing an
effective net increase in premium of 41 per cent. per £1 of risk underwritten.

The proceeds of the Rights Issue would provide regulatory capital, as necessary,
to support the increased underwriting and funds to pay for bolt-on acquisitions,
should the opportunities arise. Potential areas of expansion include books of
business, underwriting teams or retail distribution channels.

Syndicate 33 forecasts

Set out below are the 2000 and 2001 open year forecasts for Syndicate 33 which
were announced by Hiscox on 29 August 2002.

Syndicate 33 forecast results as a percentage of capacity
Year of Account        Current Estimate      Previous Estimate     Capacity
2000                   (5.0)% to (10.0)%     (2.5)% to (7.5)%     £360 million
2001                   (2.5)% to (7.5)%            N/A            £360 million

The 2000 year of account of Syndicate 33 has suffered some late deterioration.
The 2001 estimate, which has been significantly affected by the World Trade
Center loss, represents a significant underlying improvement and this trend in
underwriting conditions has continued strongly into the current year. The
Syndicate's capacity for the 2002 year of account was increased from £504million
to £655 million through the use of qualifying quota share (QQS) reinsurance and
is planned to increase further for 2003 to £706 million.

Current trading and prospects

The Company announced separately today its unaudited interim results for the six
months ended 30 June 2002. The Group's gross written premium income was up by
41.3 per cent. in this period from £313.1 million for the six months to 30 June
2001 to £442.3 million, while at the same time the combined ratio fell to 101.5
per cent. (2001: 102.2 per cent.) This led to an increase in operating profit to
£10.8 million (2001: £4.8 million).

The investment return on Group funds for the period of £6.7 million (2001: £6.2
million) was below the assumed long-term rate.

The pre-tax profit for the period was £3.9 million (2001: £1.4 million).

Syndicate 33's gross written premium for the first six months of 2002 was £549.4
million (2001: £380.0 million), an increase of 44.6 per cent. At the same time
its combined ratio fell to 103.5 per cent. (2001: 104.9 per cent.) This ratio
incorporates an incurred gross loss ratio of 1.41 per cent. on the 2002 year of
account, the lowest the Syndicate has experienced at this stage for many years.
Insurance rates continue to rise and Hiscox has obtained consent from Lloyd's
and other capital providers to increase Syndicate 33's capacity for the 2002
year of account by use of quota share reinsurance to allow it to write £151
million more premium than its original £504 million capacity. On 6 September
2002, Lloyd's approved up to a further £50 million increase by way of quota
share reinsurance subject to the approval of the Syndicate members, which Hiscox
is confident it will obtain. The Syndicate is continuing to experience
significant rate rises and a strong inflow of business.

Underwriting conditions are such that Hiscox has obtained permission to increase
Syndicate 33's capacity for the 2003 year of account to £706 million and the
Board expects to put in place similar quota share reinsurance to allow the
Syndicate to increase its capacity to approximately £850 million in 2003.

HIC is also enjoying growth in its specialist lines and a strong rating
environment. Growth has been especially strong in the UK regional offices, which
have increased their income by 37 per cent.

The Directors continue to believe that the insurance market is the strongest it
has been for many years and expect such conditions to continue through 2003 to
the benefit of the Group's overall trading performance.

The World Trade Center losses ('WTC Losses')

Although it is a year since the terrorist attack, there is still a large degree
of uncertainty with regard to the WTC Losses. In particular, the issue as to
whether or not the terrorist attack on the WTC constituted one or two
occurrences has yet to be resolved. This issue is presently the subject of
litigation in New York (between the owners of the WTC and their insurers, of
which Syndicate 33 is one) and a trial date for the hearing of this matter has
been set for 12 November 2002. The trial is expected to last a number of weeks.

At 30 August 2002, Syndicate 33 had received notifications of claims from its
insurance and reinsurance accounts totalling US$576 million. The current
estimated gross loss suffered by Syndicate 33, however, remains unchanged from
31 December 2001 at US$440 million, which equates to a net loss of approximately
£30 million to Hiscox after taking into account reinsurance recoveries and the
associated costs of reinstating reinsurance coverage. This loss is equivalent to
11p per Existing Ordinary Share after tax. It is possible that facts or
circumstances will come to light in the future which may significantly alter
that estimate. In the unlikely event that Syndicate 33's loss increases, for
example, by a further US$100 million, and assuming there are no further
reinsurance recoveries, the net cost to Hiscox plc would increase by
approximately £35 million.

97 per cent. of Syndicate 33's reinsurance is placed with counterparties which
are rated A grade or better (by international rating agencies) and 64 per cent.
with companies rated AA or AAA. 89 per cent. of the reinsurance is placed
outside Lloyd's. A general provision for bad debts of US$4.5 million has been
made by Syndicate 33 in relation to the WTC Losses and the Directors consider
this to be adequate.

This estimate of the financial effect of the terrorist attack on the WTC has
been reserved, according to Group accounting policies, in the financial
statements for the year ended 31 December 2001.

Dividend

The Board announced at the time of the preliminary results on 16 April 2002 that
with buoyant market conditions giving Hiscox the opportunity to use profitably
all available capital and having made a loss in 2001, it had decided not to pay
a dividend in respect of the year ended 31 December 2001 but expected to resume
payments this financial year.

Given the current strong trading conditions and the good prospects going
forward, the Board has today announced an interim dividend of 1.2p per Ordinary
Share in respect of the six months ended 30 June 2002, payable on 24 October
2002 to Shareholders on the register at the close of business on 27 September
2002.

The New Ordinary Shares will not be eligible for this interim dividend.

Principal terms and conditions of the Rights Issue

Up to 96,350,684 New Ordinary Shares will be issued under the Rights Issue to
raise approximately £110.5 million, after expenses. The issue price of 120 pence
per New Ordinary Share represents a 21.3 per cent. discount to the closing
middle market price of 152.5 pence per Ordinary Share on 9 September 2002, the
last practicable date before this announcement.

Qualifying Shareholders will be offered New Ordinary Shares at a price of 120
pence per New Ordinary Share on the following basis:

           1 New Ordinary Share for every 2 Existing Ordinary Shares

held at the close of business on 19 September 2002 and so in proportion for any
other number of Ordinary Shares then held. The rights to fractions of New
Ordinary Shares will be rounded down and will not be allotted to Qualifying
Shareholders.

The Rights Issue is conditional, inter alia, upon:


    (i) the passing of the Resolutions;

    (ii) the Underwriting Agreement having become unconditional in all respects
    (save for the condition relating to Admission) and not having been
    terminated in accordance with its terms; and

    (iii) Admission having occurred by not later than 8.00 a.m. on 27 September
    2002 (or such later time as ING Barings may agree).

The New Ordinary Shares, when issued and fully paid, will rank pari passu in all
respects with the Existing Ordinary Shares, save for the right to receive the
interim dividend of 1.2p announced today, including the right to receive all
other dividends or distributions made or paid thereafter.

ING Barings, as agent for the Company, has conditionally agreed to procure
subscribers or, failing which, itself to subscribe as principal, for the New
Ordinary Shares not taken up in the Rights Issue at the price of 120 pence per
share.

A prospectus providing further details of the Rights Issue, including the terms
and conditions on which it is being made, and convening an EGM will be published
and posted to Shareholders as soon as practicable. Copies of the Prospectus can
be obtained from ING Barings, 60 London Wall, EC2M 5TQ.

Based on the Existing Issued Share Capital, up to 96,350,684 New Ordinary Shares
will be offered pursuant to the Rights Issue and this number of New Ordinary
Shares has been underwritten by ING Barings. If, as at the Record Date, further
Ordinary Shares have been issued pursuant to the exercise of any options under
the Employee Share Schemes, the number of New Ordinary Shares offered pursuant
to the Rights Issue could rise to 97,141,391. These additional New Ordinary
Shares have not been underwritten.

Intentions of Directors and certain Shareholders

Certain Directors have undertaken to take up their entitlements in respect of
809,895 Existing Ordinary Shares. Certain other Directors and connected parties
have undertaken to take up in aggregate £600,000 worth of their rights in
respect of New Ordinary Shares, and certain Directors and connected parties have
undertaken in respect of 8,239,682 Existing Ordinary Shares to subscribe for
such number of New Ordinary Shares as can be funded by the net proceeds of sale
of the balance of their remaining entitlements.

All of the above persons have irrevocably undertaken to vote in favour of the
Resolutions in respect of 10,180,262 Existing Ordinary Shares, representing 5.3
per cent. of the Existing Issued Share Capital.

Chubb Investment Services Limited who, as at 9 September 2002, hold 54,529,566
Ordinary Shares (representing 28.3 per cent. of the Existing Issued Share
Capital) have not made an advance commitment in respect of their entitlement to
New Ordinary Shares.

Extraordinary General Meeting

An extraordinary general meeting of the Company will be held at the offices of
Hiscox at 1 Great St. Helen's, London EC3A 6HX at 11.00 a.m. on 26 September
2002, at which the resolutions necessary to enable the Rights Issue to proceed
will be put to Shareholders for approval.

Expected timetable of principal events                                                                          2002

Record Date for the Rights Issue                                                                        19 September

Latest time and date for receipt of proxy forms                                           11.00.a.m. on 24 September

Extraordinary General Meeting                                                             11.00.a.m. on 26 September

Despatch of Provisional Allotment Letters (to Qualifying non-CREST Shareholders                         26 September
only)

Dealings in New Ordinary Shares, nil paid, commence on the London Stock Exchange           8.00 a.m. on 27 September

Existing Ordinary Shares marked 'ex' by London Stock Exchange                              8.00 a.m. on 27 September

Nil Paid Rights and Fully Paid Rights enabled in CREST                                     8.00 a.m. on 27 September

Recommended latest time for requesting withdrawal of Nil Paid Rights or Fully Paid           4.30 p.m. on 14 October
Rights from CREST (i.e. if your Nil Paid Rights are in CREST and you wish to
convert them into certificated form)

Latest time for depositing renounced Provisional Allotment Letters, nil paid, into           3.00 p.m. on 16 October
CREST or for dematerialising Nil Paid Rights or Fully Paid Rights into a CREST
stock account

Latest time and date for splitting Provisional Allotment Letters, nil paid or                3.00 p.m. on 17 October
fully paid

Latest time and date for acceptance, payment in full and registration of                    10.30 a.m. on 21 October
renunciation

Dealings in New Ordinary Shares commence                                                  by 8.00 a.m. on 22 October

New Ordinary Shares credited to CREST stock accounts                                                      22 October

Expected despatch of definitive share certificates for New Ordinary Shares                                29 October

Notes

(i) The dates set out in the expected timetable of principal events above and
throughout this announcement may be adjusted by Hiscox, in which event details
of the new dates will be notified to the UK Listing Authority and to the London
Stock Exchange and, where appropriate, to Shareholders.

(ii) References in this announcement are to London time unless otherwise stated.

This announcement does not constitute or form part of, and should not be
construed as, an offer for sale or subscription of, or solicitation of an offer
to buy or subscribe for, any securities of Hiscox plc nor should it, or any part
of it, form the basis of, or be relied on in connection with any contract or
commitment whatsoever. Any decision in connection with the proposed Rights Issue
should be made solely on the basis of the information contained in the
Prospectus.

This announcement is not for publication or distribution or release, directly or
indirectly, in the United States, Canada, Japan, Australia, South Africa or the
Republic of Ireland. This announcement does not constitute or form any part of
any offer to sell, issue or to acquire any securities of the Company in the
United States, Canada, Japan, Australia, South Africa, the Republic of Ireland
or in any other jurisdiction. Neither the Company's New Ordinary Shares nor the
Provisional Allotment Letters are being registered under the US Securities Act
of 1933, as amended (the 'Securities Act') and may not be offered or sold in the
United States (as such term is defined in Regulation S under the Securities Act)
at any time except pursuant to the terms of an applicable exemption under the
Securities Act and applicable securities laws of the states of the United
States.

ING Barings and NM Rothschild are acting for the Company, and no one else, in
connection with the Rights Issue and will not be responsible to any other person
for providing the protections afforded to their respective clients or for
providing advice in relation to the proposed Rights Issue.

Certain statements made in this announcement are forward-looking statements.
Such statements are based on current expectations and, by their nature, are
subject to a number of risks and uncertainties that could cause actual results
and performance to differ materially from any expected future results or
performance, expressed or implied by the forward-looking statement. The
information and opinions contained in this announcement are subject to change
without notice and Hiscox assumes no responsibility or obligation to update
publicly or revise any of the forward-looking statements contained herein.

Terms in this announcement shall bear the same meaning, unless the context
otherwise requires, as defined in the Prospectus, published today in respect of
the Rights Issue.


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