Interim Management Statement

RNS Number : 1600W

Beazley PLC

15 November 2010

 



Beazley plc Interim management statement for the 9 months ended 30th September 2010

Dublin, 15 November 2010

Overview

·      Premiums up 2% to $1,349.6m (2009 $1,327.3m)

·      Premium rates on renewal business decreased by 2%

·      In spite of high profile losses in the market, the combined ratio of Beazley remains in line with previous periods

·      Annualised investment yield of 0.8%

Andrew Horton, Chief Executive Officer, said: 

"Profit-focused underwriting underpinned a continuing strong performance at Beazley in the third quarter.  We remain on track to achieve an excellent result in 2010 despite increasing competition for business and catastrophes in Chile and New Zealand."

Beazley recorded a strong trading performance in the first nine months of 2010. Our investment performance was satisfactory in the third quarter, with the annualised yield increasing from 0.5%, as reported in July, to 0.8%. 

	30 Sep 2010	30 Sep 2009 (*)	% increase/ (reduction)
Gross premiums written ($m)	1,349.6	1,327.3	2%
Investments and cash ($m)	3,706	3,578	3.6%
Investment return (% YTD) - annualised	0.8%	2.8%	-
Rate increase / (decrease)	(2%)	4%	-

Premiums

The first nine months of 2010 saw gross written premiums increase modestly - by 2% - over the equivalent period of 2009, driven by growth in our reinsurance and life, accident and health accounts.  Renewal premium rates have reduced by an average of 2% across the portfolio and we have continued to adjust our underwriting appetite in areas where competition is most intense. 

Our performance to the end of September 2010 by business division was as follows:

	Gross premiums written 9 months to 30 Sep 2010	Gross premiums written 9 months to 30 Sep 2009 (*)	% increase / (decrease)	Rate change  9 months to 30 Sep 2009
	$m	$m	%	%
Life, Accident and Health	63.5	53.4	19%	-
Marine	202.4	207.4	(2%)	(3%)
Political risk and contingency	78.7	98.9	(20%)	(2%)
Property	302.2	302.8	0%	(4%)
Reinsurance	166.6	134.7	24%	(3%)
Specialty lines	536.2	530.1	1%	(1%)
OVERALL	1,349.6	1,327.4	2%	(2%)

The growth in gross premiums written in the reinsurance division of 24% includes business written by our new special purpose syndicate (6107), supported by third party capital. By the end of September the group had written $16.0m on behalf of this syndicate, this is included in the gross figure above and all is reinsured out to syndicate 6107.

Beazley's life, accident and health business, which was acquired in 2008, has continued to develop, writing $63.5m in the period compared to $53.4m in the equivalent period of 2009, an increase of 19%.

We have successfully established a number of lines in 2010 such as professional indemnity cover for environmental risks, cover for internal crime within an organisation and insurance for certain aspects of mergers and acquisitions activity. At the same time our data breach product, Beazley Breach response, continues to develop well. These new activities have compensated for premium reductions made in a number of existing underwriting lines such as directors and officers insurance.  

The reduction in premium written by the political risks and contingency group reflects our prudent underwriting approach in more difficult market conditions. 

US operations

Locally underwritten US premium grew 6.7% to $293.2m for the period ended 30 September 2010, compared to $274.9m in the equivalent period last year.

Claims update

Our estimate of the claims cost from the Chile earthquake remains in the range of $55m to $75m based on market wide losses in the range of $5bn to $8bn.  For the New Zealand earthquake, our estimate of the claims cost is in the range of $15m to $30m based on market wide losses in the range of $2bn to $4bn.  The development to date of incurred claims from both events has been lighter than expected but earthquake events typically have a longer reporting pattern compared to hurricanes. 

The level of claims notifications from our political risk account reduced to normal levels at the start of 2010. We are confident with the overall level of reserves we hold for this class. 

In all other lines claims experience remains in line with our expectations. 

Investment performance

Income for the first nine months was $22.3m, or an annualised return of 0.8%, compared with $68.6m (2.8%) over the same period in 2009. This represents an improvement over the 0.5% annualised investment return achieved in the first six months of 2010.

Investment Portfolio

Beazley continues with its strategy of holding a large core portfolio of sovereign or high grade short term investment bonds.  This is complemented by a portfolio of capital growth assets. 

The investment environment remains challenging due to uncertainty over the global macro environment and elevated debt levels in the developed world. In the last quarter the bond portfolio duration has been moderately increased and the weighting to high quality credit rated assets within this portfolio is being increased to 6%.

As of the end of September, our portfolio breakdown was:

			30 Sep 2010			31 Dec 2009 (*)
			$m	%		$m	%
Cash and cash equivalents		1,342		36.2%		813	22.2%
Government, Agency and Supranational		1,279		34.5%		1,578	43.2%
AAA		620		16.7%		842	23.0%
AA+ to AA-		27		0.7%		82	2.2%
A+ to A-		39		1.1%		72	2.0%
BBB+ to BBB-		-		-		5	0.1%
	Core portfolio		3,307	89.2%		3,392	92.7%
	Capital growth assets		399	10.8%		269	7.3%
	Total		3,706	100.0%		3,661	100.0%

The weighted average duration of our core portfolio was 8 months (31 December 2009: 8 months).  The weighted average yield to maturity of our overall portfolio was 0.6% (31 December 2009: 0.7%).

Investment Return

Comparison of return by major asset class:

	30 Sep 2010	30 Sep 2010 annualised return		31 Dec 2009 (*)	31 Dec 2009 annualised return
	$m	%		$m	%
Core portfolio	15.6	0.6%		55.8	2.4%
Capital growth assets	6.7	2.2%		12.8	8.9%
Overall return	22.3	0.8%		68.6	2.8%

Capital

During the year to date Beazley plc has acquired 15.5m of its own shares to be held in treasury at an average price of 112.2p.

In October 2010 we renewed our existing syndicated banking facility led by Lloyds Banking Group. The facility provides potential borrowings up to $150m.  The new agreement is based on a commitment fee of 0.7% per annum and any amounts drawn are charged at a margin of 1.75% per annum. The cash element of the facility will last for three years, expiring on 31 December 2013, whilst letters of credit issued under the facility can be used to provide support for the 2011 and 2012 underwriting years.

 

ENDS

(*) Figures quoted for 2009 have been translated at the third quarter 2009 prevailing exchange rates. In our 2010 financial statements, we will be following the guidance under International Accounting Standard 21 (foreign currency translation), where all 2009 comparative information will be converted at the exchange rate as at the transition date when we changed our functional currency to US dollars.

 For further information, please contact:

Beazley plc                                             Finsbury

Martin Bride                                           Guy Lamming

[phone]                             [phone]

 

END

 

 

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