Last checked at 11 Nov 2022 07:00
Beazley remains on track for high 80s FY 2022 combined ratio
London, 11 November 2022
Beazley plc trading statement for the nine months ended 30 September 2022
Overview
· Gross premiums written increased by 22% to $3,980m (Q3 2021: $3,271m)
· Premium rates on renewal business increased by 17% (Q3 2021: 23%)
· Initial Hurricane Ian loss estimate of $120m net of reinsurance
· Mark to market investment loss of $289m or 3.6% year to date (Q3 2021: income of $99m or 1.4%)
· High 80s combined ratio guidance remains for 2022 full year
Adrian Cox, Chief Executive Officer, said:
"We have had a strong underwriting performance over the quarter with all divisions continuing to grow. As expected overall rates have moderated, however we are seeing increased demand across many lines of business which supports our growth ambitions.
Whilst mark to market losses have occurred due to rising yields in our fixed income portfolio, rising yields also mean we anticipate significant future investment returns.
We remain confident of our guidance of high 80s combined ratio assuming claims experience is as expected for the remainder of the year.
30 September 2022 | 30 September 2021 | % increase | |
Gross premiums written ($m) | 3,980 | 3,271 | 22 |
Investments and cash ($m) | 8,093 | 7,453 | 9 |
Year to date investment return | (3.6%) | 1.4% | |
Rate increase | 17% | 23% |
Premiums
Our performance to the end of September 2022 by business division is as follows:
Gross premiums written
30 September 2022
| Gross premiums written
30 September 2021
| % increase | Year to date Rate change | |
$m | $m | % | % | |
Cyber Risks | 838 | 505 | 66% | 51% |
Digital | 160 | 139 | 15% | 16% |
MAP Risks | 830 | 659 | 26% | 5% |
Property Risks | 700 | 642 | 9% | 10% |
Specialty Risks | 1,452 | 1,326 | 10% | 3% |
OVERALL | 3,980 | 3,271 | 22% | 17% |
We have seen growth across all divisions. Key points to highlight are as follows:
Cyber Risks: in the year to date we have seen rate increases of 51%, albeit this trend moderated somewhat in Q3. We have been taking advantage of new business opportunities and have put more exposure on the book this year, as planned, resulting in premium growth of 66%. We expect continued growth into 2023 and beyond.
Property Risks: given the change in market sentiment in Q3 we expect growth to accelerate. We are now beginning to see positive movement on rates and as material hardening occurs with outsized returns available, we would expect to deploy more capital across our primary property and reinsurance books.
Specialty Risks: The D&O market has been more competitive than we originally thought at the start of 2022. As a result, growth is slightly less than expected within Specialty Risks, however, it is still strong at 10%.
Claims update
Total natural catastrophes so far this year have been within the margins held in our reserves for such events, with an initial Hurricane Ian estimate of around $120m net of reinsurance.
The improving trajectory on the frequency of our ransomware claims in our cyber portfolio has continued following the remediation action we have been taking since October 2020. The latest data shows frequency reductions of 35% per policy, and 70% when premium rate changes are also allowed for.
We continue to monitor inflation to ensure adequate pricing and remain cautious in areas where our product set is most exposed. The impact of inflation on our claims environment has been as expected.
Investments
Our portfolio allocation was as follows:
| 30 September 2022 | 30 September 2021 | ||
| Assets | Allocation | Assets | Allocation |
| $m | % | $m | % |
Cash and cash equivalents | 625 | 7.7 | 444 | 6.0 |
Fixed and floating rate debt securities | ||||
- Government, quasi-government and supranational | 4,443 | 54.9 | 3,775 | 50.6 |
- Corporate bonds | ||||
- Investment grade | 1,876 | 23.2 | 1,824 | 24.5 |
- High yield | 297 | 3.7 | 440 | 5.9 |
Syndicate loans | 31 | 0.4 | 41 | 0.5 |
Derivative financial assets | 1 | - | 7 | 0.1 |
Core portfolio | 7,273 | 89.9 | 6,531 | 87.6 |
Equity funds | 107 | 1.3 | 229 | 3.1 |
Hedge funds | 506 | 6.2 | 455 | 6.1 |
Illiquid credit assets | 207 | 2.6 | 238 | 3.2 |
Capital growth assets | 820 | 10.1 | 922 | 12.4 |
Total | 8,093 | 100.0 | 7,453 | 100.0 |
Our investments returned a loss of 1.2%, or $96m in the third quarter of 2022, bringing the year-to-date loss to 3.6%, or $289m. This is a consequence of the unprecedented increase in interest rates, in the first nine months of the year, generating mark to market losses in our fixed income portfolio. Risk assets have also seen weakness, as global equity markets fell by more than 25%. At 30 September, our fixed income portfolio had a duration of 1.9 years and a market yield of 4.6%, which is indicative of the much higher returns we hope to achieve in future periods, once yields stabilise.
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/63454c3e6a85cc120078eb08/ertf
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 seven Lloyd's syndicates and, in 2021, underwrote gross premiums worldwide of $4,618.9 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