Beazley PLC

Earnings Release • Nov 10, 2016

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RNS Number : 8001O

Beazley PLC

10 November 2016

Press

Release

Beazley plc trading statement for the nine months ended 30 September 2016

London, 10 November 2016

Overview

·      Premiums grew by 2% to $1,666m (2015: $1,638m)

·      Premium rates on renewal business decreased by 2%

·      Year to date investment return of 2.0%

Andrew Horton, Chief Executive Officer, said: 

"We have maintained our momentum in the third quarter, driven principally by the strong performance of our specialty lines division, where premiums grew by 10% compared to the equivalent period last year.  We continue to attract talented underwriters to Beazley in London, the US and continental Europe."

	30 September 2016	30 September 2015	% increase
Gross premiums written ($m)	1,666	1,638	2%
Investments and cash ($m)	4,506	4,425	2%
Year to date investment return	2.0%	1.1%
Rate increase	(2%)	(2%)

Premiums

Gross premiums written for the nine months ended 30 September 2016 grew by 2% to $1,666m when compared to the equivalent period in 2015.

We have sustained growth despite the continued competitive market environment, which has persisted throughout 2016. Gross premiums written in specialty lines increased significantly compared to the equivalent period in the prior year, driven by the continued strong performance of our US business.  This growth in specialty lines has helped offset the more competitive market conditions experienced across our other underwriting divisions. 

Our performance to the end of September 2016 by business division is:

	Gross premiums written 30 September 2016	Gross premiums written 30 September 2015	% increase / (decrease)	Q3 2016 Rate change
	$m	$m	%	%
Life, accident & health	106	103	3	(1)
Marine	184	216	(15)	(7)
Political risk & contingency	91	94	(3)	(6)
Property	263	282	(7)	(5)
Reinsurance	198	195	2	(4)
Specialty lines	824	748	10	1
OVERALL	1,666	1,638	2	(2)

Rates on renewal business decreased by 2% across the portfolio as a whole. We continue to experience a highly competitive market environment particularly in respect of large risk, catastrophe exposed classes of business. In response, we aim to rebalance our portfolio in favour of smaller risks where we believe we can achieve more sustainable margins.  Specialty lines, our largest division, achieved rate increases of 1% on average in the nine months to 30 September 2016.

Business update

We have moved to new larger offices in both Atlanta and Paris.

We continue to attract underwriting talent and thus far in the second half of the year have hired senior underwriters across multiple underwriting teams in our Paris, Atlanta, Farmington and Chicago offices.

In November 2016, we filed an application with the Central Bank of Ireland to obtain approval for Beazley Re dac to become a European insurance company which will enable us to broaden our underwriting platforms to European based clients.

Claims update

During 2016, claims notifications have been in line with our expectations.  In October 2016, Hurricane Matthew made landfall along the south-eastern coast of the United States but at this stage is not expected to be a very substantial insured loss.

Barring any unexpected developments in the last few weeks of 2016, Beazley expects to achieve a combined ratio in line with its long term average.

Investments

As at the end of September our portfolio allocation was as follows:

	30 September 2016		30 September 2015
	Assets	Allocation	Assets	Allocation
	$m	%	$m	%
Cash and cash equivalents	502	11.1	451	10.2
Sovereign, quasi-sovereign and supranational	1,098	24.3	1,972	44.6
Corporate debt -     Investment grade -     High yield Senior secured loans Asset backed securities Derivative financial instruments	2,107 182 88 - (5)	46.7 4.0 2.0 - -	1,194 70 121 60 3	27.0 1.5 2.7 1.4 0.1
Core portfolio	3,972	88.1	3,871	87.5
Equity linked funds	115	2.6	137	3.1
Hedge funds	290	6.4	332	7.5
Illiquid credit assets	129	2.9	85	1.9
Overall portfolio	4,506	100.0	4,425	100.0

Investment income for the nine months to 30 September 2016 was $89m, or 2.6% annualised (2015 full year investment return: $57.6m, 1.3%). The combination of falling yields, declining credit spreads and recovering equities has helped to achieve an overall return year to date above our expectations.

The weighted average duration of our fixed income portfolio was 1.9 years at 30 September 2016 (30 June 2016: 1.8 years).

Capital management and debt financing

On 16 September 2016, we gave formal notice of redemption to the holders of the £76.5m of outstanding notes of the £150m fixed/floating rate subordinated notes due 17 October 2026 issued on 17 October 2006 and these were redeemed on 17 October 2016.

As communicated previously, we see debt leverage as an important component of our active capital management strategy, particularly as our speciality lines business continues to grow strongly.  On 4 November 2016, Beazley Re dac issued $250m of subordinated tier 2 debt redeemable in November 2026 paying a coupon of 5.875% semi-annually.

ENDS

For further information, please contact:

Beazley plc                                                                Finsbury

Martin Bride                                                              Guy Lamming/Sarah Roberts

Tel: +44 (0) 207 674 7291                                      Tel: +44 (0) 207 251 3801

Note to editors:

Beazley plc (BEZ), is the parent company of specialist insurance businesses with operations in Europe, the US, Latin America, Asia, the Middle East and Australia.  Beazley manages six Lloyd's syndicates and, in 2015, underwrote gross premiums worldwide of $2,080.9 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 is a market leader in many of its chosen lines, which include professional indemnity, property, marine, reinsurance, accident and life, and political risks and contingency business. 

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

This information is provided by RNS

The company news service from the London Stock Exchange

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