TIDMBEZ
RNS Number : 4471E
Beazley PLC
06 November 2020
Press
Release
Beazley plc trading statement for the nine months ended 30
September 2020
London, 6 November 2020
Overview
-- Gross premiums written increased by 16% to $2,534m (Q3 2019:
$2,192m), ahead of our expectations
-- Premium rates on renewal business increased by 14%
-- Covid-19 first party loss estimate remain unchanged at $340m net of reinsurance
-- Q3 catastrophe estimate of approximately $80m net of reinsurance
-- Investment return of $124m as at 30 September 2020 (Q3 2019: $215m)
Andrew Horton, Chief Executive Officer, said:
"We have seen strong, double-digit premium growth across our
business as a whole so far this year, driven primarily by rate
rises across all divisions. I am extremely proud of all Beazley
employees who have shown commitment and resilience throughout this
time whilst continuing to support our customers and deliver the
excellent claims service we pride ourselves on.
Pricing conditions are positive and we have the expertise and
the capital in place to take advantage of these market conditions.
We have great confidence in our ability to deliver mid-teens growth
next year and strong shareholder returns in 2021 and beyond."
30 September 30 September % increase
2020 2019
Gross premiums written
($m) 2,534 2,192 16
Investments and cash
($m) 6,511 5,657 15
Year to date investment
return 2.0% 4.0%
Rate increase 14% 6%
Premiums
Gross premiums written for the nine months ended 30 September
2020 increased by 16% year on year to $2,534m achieved through a
combination of rate increases, adding exposure in a number of areas
and taking underwriting remediation action on certain areas of
business. Growth has been achieved in most of our divisions.
Our performance to the end of September 2020 by business
division is:
Gross premiums written Gross premiums written
Year to date Rate
30 September 2020 30 September 2019 % increase/ (decrease) change
$m $m % %
Cyber & executive risk 686 567 21% 16%
Marine 256 231 11% 18%
Market facilities 96 34 182% 12%
Political, accident &
contingency 205 204 - 4%
Property 354 337 5% 16%
Reinsurance 192 191 - 11%
Specialty lines 745 628 19% 13%
OVERALL 2,534 2,192 16% 14%
From 1 January 2020, the market facilities business has been
split out of the specialty lines division to form a separate
division. The prior year comparatives have been re-presented to
allow comparison.
Our cyber & executive risk division achieved premium growth
of 21% with particularly strong rate rises driving the executive
risk side as the market continues to respond to the claims
environment in directors' & officers' and employment practice
liability.
Following a rebalancing of the account our marine division took
advantage of improved market conditions particularly in war, cargo
and aviation, growing overall by 11%.
Elsewhere, our market facilities division grew 182% year on year
albeit from a small base. At the start of 2020, we decided to split
out this business from specialty lines into its own division.
The political, accident & contingency division remained
steady year on year, with growth dampened by significant market
contractions particularly in political and contingency due to
COVID-19.
In the property division we saw an increase in premiums of 5%
being the net result of continued portfolio optimisation and growth
supported by market wide rate increases. The hardening of the
global property market continues to be bolstered by a variety of
events including the effects of COVID-19, Australian and US
wildfires and the active 2020 hurricane season.
Whilst benefiting strongly from rate rises, reinsurance was also
steady year on year driven by more selective underwriting.
Our specialty lines division saw premium growth of 19% when
excluding the prior year inclusion of market facilities business
which at the start of this year was established as a standalone
division. We have seen rate rises across the division combined with
strong volume growth particularly outside of the US.
Business update
We continue to actively engage in cycle management, ensuring we
maintain a balanced portfolio whilst fully capitalising on the
opportunities. Rates are increasing in most of our classes and in
many areas are now at levels where the risk reward ratio warrants
writing materially more business. This is particularly true in
directors' and officers' liability, despite the heightened risk
environment, and most marine classes of business where the teams
are significantly growing market share. Off-setting this, we
continue to restrict appetite where there is particular exposure to
the impacts of social inflation, pandemic claims or a recession.
The main areas impacted by this are employment practices liability
and some professional and healthcare liability classes.
Ransomware attacks have continued to rise in 2020 and are now
the dominant cyber exposure faced by our clients. Malicious attacks
are, unfortunately, not new but have been increasingly prevalent in
the last 18 months and we have been adjusting our underwriting and
risk management services accordingly. The investments we made in
using technology for threat detection are now being implemented and
this enables us, amongst other things, to scan our clients for
vulnerabilities and actively underwrite and help our clients
remediate them. The market is currently repricing and restricting
coverage in response to these issues.
Our 2021 business plan for our syndicates has been approved by
Lloyd's, together with the accompanying capital requirements. We
are planning for mid-teens percentage growth in 2021. We also plan
to use reinsurance to manage growth in some of the more volatile
lines, and so expect growth of around 10% net of reinsurance next
year.
Claims update
We announced in September that our first party COVID-19 claims
estimate was $340m net of reinsurance, with almost all of the
increase compared to our previous expectations being caused by
further event cancellation losses. This figure assumes a resumption
to some form of normality in the second half of 2021. Were this not
to be the case, we estimate that there is potential for a further
$50m of claims net of reinsurance to the end of 2021.
We have also considered the recent FCA judgement on business
interruption wording and do not expect this outcome to have a
material impact on Beazley's insurance business.
Our initial estimate of the costs of the third quarter
catastrophe events including hurricanes Laura and Sally and the
wildfires in California is approximately $80m net of reinsurance
and reinstatement premiums.
We have chosen to open our cyber reserves higher in response to
the current claims trends discussed in the business update. Our
prudent and consistent approach to reserving continues and taking
all the above into account we are expecting a full year combined
ratio of around 110% assuming normalised claims levels for the
remainder of the year.
Capital update
Capital surplus is measured with reference to the Lloyd's
economic capital requirement (ECR), which considers requirements on
an ultimate basis as well as incorporating a further 35% uplift.
This number already allows for the business we expect to write
through to the end of 2021 and the current forecast places us
within our preferred range of 15-25% above the ECR at the end of
the year. We have a further unutilised $225m banking facility which
is available in addition.
Investments
Our portfolio allocation was as follows:
30 September 2020 30 September 2019
Assets Allocation Assets Allocation
$m % $m %
Cash and cash equivalents 305.8 4.7 423.0 7.5
Fixed and floating rate
debt securities
- Government, quasi-government
and supranational 2,726.0 41.8 2,003.0 35.4
- Corporate bonds
- Investment grade 2,598.8 39.9 2,411.6 42.6
- High yield 154.3 2.4 182.0 3.2
Syndicate loans 17.0 0.3 7.4 0.1
Derivative financial assets 18.4 0.3 3.0 0.1
Core portfolio 5,820.3 89.4 5,030.0 88.9
Equity funds 121.7 1.9 105.0 1.9
Hedge funds 364.3 5.6 311.0 5.5
Illiquid credit assets 204.5 3.1 211.0 3.7
Capital growth assets 690.5 10.6 627.0 11.1
Total 6,510.8 100.0 5,657.0 100.0
The year to date investment return to 30 September 2020 was
$124m, or 2.7% annualised. Risk assets continued to rally for much
of the third quarter, helping add 0.6% to our return in this
period. US Sovereign bond yields remain very low, such that our
high quality fixed income assets are not likely to contribute
materially to returns in the near future. Our investment strategy
remains cautious in view of continuing uncertainty in the economic
outlook. The yield on our core portfolio as at 30 September 2020
was 0.5% (31 December 2019: 2.1%).
The weighted average duration of our fixed income portfolio was
2.0 years at 30 September 2020 (30 September 2019: 1.9 years).
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:
Tel number: +44 (0) 20 3003 2666
Quote Beazley when prompted by the operator.
ENDS
For further information, please contact:
Beazley plc
Sally Lake
+44 (0) 207 6747375
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 2019, underwrote gross premiums worldwide of $3,003.9 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'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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END
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