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* Beazley stock among top gainers on UK midcap index
* Company says falling yields lifted investment returns
* Company sets aside $80 mln to cover hurricane, other
claims
(Adds details, share moves, analyst comments)
By Muvija M
Nov 8 (Reuters) - Stock in London-based insurer Beazley
climbed more than 7% on Friday despite pointing to an
underwriting loss for the year as falling U.S. yields boosted
investment returns, helping it fare better in comparison to
larger rival Hiscox.
While Beazley set aside $80 million to cover catastrophe
claims at the end of an expensive quarter for listed Lloyd's
insurers, it said year-to-date returns on investment had surged
to $215 million from $26 million while gross written premiums
also rose.
The U.S. Federal Reserve has cut interest rates thrice this
year to help boost the world's largest economy, which has been
bruised by a trade war with China.
Last month, two-year U.S. Treasury yields slipped to levels
not seen since 2017 while 10-year yields in September hit
three-year lows amid weak investor sentiment.
That has helped push up bond prices, benefiting Beazley
after a relatively weaker 2018 in terms of investment returns
when the Fed hiked rates four times.
Beazley, however, said it expects its full-year combined
ratio - normally the main gauge of profitability for insurers -
to be between 100% and 102%. Readings over 100% indicate claims
exceeded premiums earned.
The $80 million reserved by Beazley for payouts on natural
catastrophes compares to the $33.2 million set aside by rival
Lancashire.
Larger player Hiscox earmarked $165 million to cover
claims earlier this week while also increasing combined ratio
targets for its retail business.
The Bank of England has warned it will scrutinise insurers
that are overly optimistic about how much capital they require
to cover growing risks from the United States and elsewhere.
The Hiscox update sparked a 15% plunge in its share price
since Monday as at least five brokerages cut their price targets
on the stock.
In Friday's statement, Beazley Chief Executive Andrew Horton
said the company continued to experience heightened claims
activity due to its exposure to catastrophes in the third
quarter.
He also said the firm had been increasing reserves since the
start of 2018 in expectation of more claims in liability
insurance.
UBS analysts have estimated natural catastrophe losses for
2019 would reach $70 billion, adding that could eat into
insurers' reserves and lead to higher prices.
Aside from claims relating to hurricanes, typhoons and
wildfires, some Lloyd's insurers are also exposed to claims
around litigation, which analysts say could include the U.S.
opioid epidemic and child sex abuse cases.
"Casualty rates are increasing at 4-5% but it is not clear
whether this is sufficient to offset the underlying claims
trends which seem to be widening their impact across various
casualty lines," Peel Hunt analysts wrote in a note on Beazley.
(Reporting by Muvija M and Noor Zainab Hussain in Bengaluru,
additional reporting by Carolyn Cohn in London; editing by
Patrick Graham and Dale Hudson)
