Beazley PLC

Earnings Release • Nov 5, 2021

National Storage Mechanism | Additional information

RNS Number : 4307R

Beazley PLC

05 November 2021

Beazley plc trading statement for the three months ended 30 September 2021

London, 5 November 2021

Overview

·      Gross premiums written increased by 29% to $3,271m (Q3 2020: $2,534m)

·      Premium rates on renewal business increased by 23%, ahead of our expectations

·      Q3 catastrophe loss estimates are $125m net of reinsurance, $85m in respect of Hurricane Ida and $40m for European floods

·      Underwriting action taken since October 2020 continues to have a positive impact on cyber ransomware trends

·      Investment return of $99m (Q3 2020: $124m)

·      Capital surplus remains within our preferred range

Adrian Cox, Chief Executive Officer, said: 

"I am delighted that the momentum from the first half has persisted into the second with rate rises and premium growth that have exceeded our expectations. We continue to be strongly capitalised and are well placed to take advantage of these favourable market conditions. I remain excited about the opportunity in the cyber market and with our disciplined and prudent risk selection, our market leading product offering and the ongoing investment in our cyber infrastructure, I believe we are in a great position to capitalise on this."

	30 September 2021	30 September 2020	% increase
Gross premiums written ($m)	3,271	2,534	29
Investments and cash ($m)	7,453	6,511	14
Year to date investment return	1.4%	2.0%
Rate increase	23%	14%

Premiums

Growth has been achieved in all of our divisions with gross premiums written for the nine months ended 30 September 2021 increasing by 29% year on year to $3,271m.  

Our performance to the end of September 2021 by business division is:

	Gross premiums written 30 September 2021	Gross premiums written 30 September 2020	% increase/ (decrease)	Year to date Rate change
	$m	$m	%	%
Cyber & Executive Risk	991	686	44%	48%
Marine	283	256	11%	9%
Market Facilities	145	96	51%	15%
Political, Accident & Contingency	231	205	13%	6%
Property	435	354	23%	10%
Reinsurance	207	192	8%	13%
Specialty Lines	979	745	31%	15%
OVERALL	3,271	2,534	29%	23%

Gross written premiums are higher than expected.  While we have seen rates increase across all divisions, the main drivers of the premium growth are Cyber & Executive Risk and our Specialty Lines divisions.

Rates within the Cyber & Executive Risk division are up 48%, driven predominantly by Cyber where the rates continue to exceed expectations.

In Specialty Lines, we have benefited from the continued hard market with particularly good rate increases within International Financial Lines.

The Marine, Property and Reinsurance divisions continue to perform broadly as expected with respect to both growth and pricing. 

The contingency market remains in a relative state of flux as a result of COVID-19 and growth is slightly below expectations within our PAC division.  We expect to see a more predictable environment by early 2022.

Business update

Bob Quane joined Beazley in October as Chief Underwriting Officer and a member of the executive committee. Bob was previously the Chief Underwriting Officer at Axis and brings more than three decades of industry experience.

In September, Rachel Turk was promoted from Head of Corporate Development, a role she has held since 2019, to the newly created position of Group Head of Strategy.  She has also joined the executive commitee.  Rachel has been with Beazley since 2009, initially as a D&O underwriter having previously held equity and finance analyst roles. 

We have received approval from Lloyd's of London to establish an ESG syndicate which will focus exclusively on offering additional capacity to businesses that perform well against ESG metrics. The syndicate is part of Beazley's ongoing commitment to embed responsible business across the entire organisation.

On August 1, Beazley plc sold Beazley Benefits to life insurer Globe Life Inc. Beazley Benefits was a part of Beazley plc US subsidiary, Beazley Insurance Company, Inc. The transaction will increase profit before tax by $55m in 2021.

Claims update

Beazley plc's initial estimate of catastrophe losses for the third quarter is $125m net of reinsurance. This includes an early estimate of losses in respect of Hurricane Ida of $85m and $40m for the European floods. 

The downward trajectory on the frequency of our ransomware claims has continued following the remediation action we have been taking since October 2020. Exposure growth within our cyber book during 2022 will be predicated on those trends continuing.

Total natural catastrophes this year have been in excess of the relevant catastrophe margins held within our reserves. The full year combined ratio is now expected to be mid 90's assuming claims experience is as expected for the remainder of 2021.

Investments

Our portfolio allocation was as follows:

	30 September 2021		30 September 2020
	Assets	Allocation	Assets	Allocation
	$m	%	$m	%
Cash and cash equivalents	444	6.0	306	4.7
Fixed and floating rate debt securities
-     Government, quasi-government and supranational	3,775	50.6	2,726	41.8
-     Corporate bonds
-     Investment grade	1,824	24.5	2,599	39.9
-     High yield	440	5.9	154	2.4
Syndicate loans	41	0.5	17	0.3
Derivative financial assets	7	0.1	18	0.3
Core portfolio	6,531	87.6	5,820	89.4
Equity funds	229	3.1	122	1.9
Hedge funds	455	6.1	364	5.6
Illiquid credit assets	238	3.2	205	3.1
Capital growth assets	922	12.4	691	10.6
Total	7,453	100.0	6,511	100.0

Our investments returned 0.2% in the third quarter and 1.4%, or $99m, in the first nine months of the year. Returns from our fixed income investments have been low, reflecting the low and rising yield environment, although our inflation-linked bond exposures have made a positive contribution. Our capital growth investments have performed much better, led by the strong equity market, while our hedge fund and illiquid credit portfolios also delivered good returns. Overall, the year to date return, though modest, is ahead of what might have been expected, given prevailing yield levels. At 30 September 2021 the yield of our fixed income portfolio was 0.6% and weighted average duration was 1.8 years.

Capital update

Beazley remains within our preferred capital range of 15-25% above the ECR.  We continue to manage capital actively and prudently during these times of continued strong growth and are confident that we have sufficient capital flexibility to take advantage of the favourable market conditions.

Conference call

We will be hosting a conference call at 8am this morning, dial in details are below, please join 5 minutes before the start:

Webcast URL: https://www.investis-live.com/beazley/6168143b835ae2120095bc73/lpfs

ENDS

For further information, please contact:

Beazley plc

Sarah Booth, Head of Investor Relations

+44 (0) 207 6747582

Note to editors:

Beazley plc (BEZ.L), is the parent company of specialist insurance businesses with operations in Europe, North America, Latin America and Asia. Beazley manages six Lloyd's syndicates and, in 2020, underwrote gross premiums worldwide of $3,563.8 million. All Lloyd's syndicates are rated A by A.M. Best. 

Beazley's underwriters in the United States focus on writing a range of specialist insurance products. In the admitted market, coverage is provided by Beazley Insurance Company, Inc., an A.M. Best A rated carrier licensed in all 50 states. In the surplus lines market, coverage is provided by the Beazley syndicates at Lloyd's.

Beazley's European insurance company, Beazley Insurance dac, is regulated by the Central Bank of Ireland and is A rated by A.M. Best and A+ by Fitch.

Beazley is a market leader in many of its chosen lines, which include professional indemnity, cyber liability, property, marine, reinsurance, accident and life, and political risks and contingency business.

For more information please go to: www.beazley.com

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