Interim Results Statement

RNS Number : 8642K

Beazley PLC

22 July 2011

 



Press Release

Resilient performance during a period of record industry losses

Dublin, 22 July 2011

Beazley plc results for six months ended 30 June 2011

• Loss before income tax of $24.2m (2010 profit: $115.5m)

• Gross written premiums reduced by 1.7% to $924.8m

• Combined ratio of 108% (2010: 90%)

• No rate change on renewal business compared to 2010 (2010: 2% reduction)

• Prior year reserve releases of $88.6m (2010: $65.9m)

• Investment income increased to $22.5m (2010: $8.5m)

• Interim dividend of 2.5p (2010: 2.4p)

	Six months ended 30 June 2011	Six months ended 30 June 2010
Gross premiums written ($m)	924.8	940.6
Net premiums written ($m)	635.5	624.7
(Loss) /profit before income tax ($m)	(24.2)	115.5
(Loss)/ earnings per share (pence)	(1.7)	12.6
Net assets per share (pence)	123.8	128.4
Net tangible assets per share (pence)	107.8	114.1
Dividend per share (pence)	2.5	2.4

Andrew Horton, Chief Executive Officer, said:

"Beazley benefited from its diverse underwriting portfolio in the first half, as profits from non-catastrophe exposed classes of business enabled us to largely absorb the impact of record insurance industry catastrophe losses."

"In the absence of further catastrophes we expect a mid nineties combined ratio for the full year.  Further large losses in the second half would likely cause significant capital erosion and sharply rising premium rates across the industry. Beazley is well prepared for such a scenario, in which our underwriting skills, operating platform and financial flexibility should position the group favourably."

For further information, please contact:

Beazley plc	Finsbury
Martin Bride	Don Hunter
Tel: [phone]	Tel: [phone]

Note to editors:

Beazley plc (BEZ.L), is the parent company of our specialist insurance businesses with operations in Europe, the US, Asia and Australia.  Beazley manages five Lloyd's syndicates and, in 2010, underwrote gross premiums worldwide of $1,741.6m. 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

Interim results statement

Overview

The first six months of 2011 brought home to millions the value of insurance and reinsurance, as an exceptional series of catastrophes hit Australia, New Zealand, Japan and the US. 

Beazley incurred a pretax loss of $24.2m for the first half of the year and a combined ratio of 108%. This resilient performance during one of the worst periods ever for insured catastrophe events demonstrates the strength of our business model, underwriting a full range of specialty insurance products whose profitability is driven by different factors.

Overall, gross written premiums fell by 1.7%, reflecting the disciplined approach of our underwriters.  In catastrophe exposed lines of business we started to see rate rises in the second quarter, while rates in other lines remain slightly reduced or flat compared to 2010. Overall, there was no change in premium rates in 2011.

In April, we estimated the net cost of catastrophes in Australia, New Zealand and Japan to be $154m and this estimate remains unchanged.  More recently, a number of destructive and costly tornadoes in the eastern US have generated market losses estimated at $15-$25bn. We estimate Beazley's exposure to these events at $29m. Support from our reinsurers remains strong and on 1 April we were able to renew the catastrophe programmes supporting our property and reinsurance business on similar terms to 2010.

We expect the aggregate effect of this sequence of catastrophes will be to increase rates for our property and reinsurance divisions. In loss affected areas we are seeing rates harden by up to 60% in our international reinsurance portfolio, whilst in the US reinsurance rates are increasing by 5-10%. Although market conditions remain generally competitive, the underwriting environment could potentially change quite rapidly, both for short tail risks where the impact of recent catastrophe losses is already being felt, and for medium tail lines of business such as our specialist professional and management liability lines.   Beazley has prepared for this scenario including extending and increasing our undrawn letter of credit facility from $150m to $225m.

Beazley's long term profitability is underpinned by a consistent reserving approach that entails setting initial reserves prudently. This has enabled us to release $88.6m (2010: $65.9m) in the first half of 2011.  We aim to maintain margins in net held reserves within a range of between 5% and 10% over and above the actuarial best estimate.  This margin currently stands at 6.4% (2010: 7.9%).

Cumulative rate changes since 2001

Rates on our 2011 renewal business are in line with those achieved in 2010 (2010: down 2%). The following table shows cumulative rate changes since 2001 by business division.

	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	HY 2011
Life, Accident and Health	-	-	-	-	-	-	-	100%	100%	100%	101%
Marine	100%	117%	128%	127%	130%	140%	131%	123%	131%	128%	129%
Political and contingency	100%	120%	122%	114%	107%	101%	93%	89%	88%	85%	84%
Property	100%	128%	133%	125%	124%	140%	137%	128%	135%	130%	133%
Reinsurance	100%	144%	150%	149%	150%	191%	200%	187%	204%	198%	200%
Specialty lines	100%	138%	166%	175%	177%	177%	168%	158%	157%	155%	154%
Total	100%	132%	145%	146%	147%	156%	149%	140%	144%	141%	141%

Within our marine division, premium rates for energy risks, particularly in the Gulf of Mexico, remain attractive.  Through careful risk selection, rates in our specialty lines division have remained flat in spite of downwards pressure in a number of areas. Demand continues to be strong for some of our niche products, notably data breach insurance and cover for mergers and acquisitions transactions. A number of recent high profile data breach incidents underlines how important it has become for organisations to consider purchasing insurance protection in this area.

Expenses 

The group's expense ratio has risen to 37% (2010: 34%), mainly in the area of administrative and underwriting costs.  This is largely the result of foreign currency fluctuations arising from the group's sterling administrative cost base. In addition underwriting costs have increased through our investment in a number of areas, notably in life, accident and health (in Australia) and specialty lines.

Investment performance

Our conservative investment strategy yielded an annualised return of 1.1% in the first half of the year (2010: 0.5%).  Our strategy remains to hold a majority of our assets (80-90%), in a core portfolio of cash, cash equivalents and principally sovereign or supranational bonds, the balance (10-20%) allocated to capital growth assets. The group has no direct exposure to sovereign bonds issued from Portugal, Ireland, Italy, Greece or Spain. The investment environment remains challenging this year with equity and credit markets exhibiting a high degree of volatility and interest rates at near record low levels. We maintain our strategy of limiting risk on the investment portfolio. The core portfolio of cash and fixed income securities amounted to $3,577m (89.4%) of our overall portfolio.  The capital growth assets remain allocated to a well diversified selection of alternative strategies and managers. 

The breakdown of our investment portfolio at 30 June 2011 was:

	30 June 2011	30 June 2011	31 December 2010	31 December 2010
	$m	%	$m	%
Cash and cash equivalents	1,267	31.7	1,265	32.9
Government, Government Agency, Regional and Supranational	1,480	37.0	1,187	30.9
AAA	538	13.5	743	19.3
AA+ to AA-	122	3.0	105	2.7
A+ to A-	125	3.1	94	2.5
BBB+ to B-	45	1.1	15	0.4
Core portfolio	3,577	89.4	3,409	88.7
Capital growth assets	424	10.6	433	11.3
Total	4,001	100.0	3,842	100.0

The weighted average duration of our core portfolio is 13 months (31 December 2010: 12 months). The weighted average yield to maturity of our core portfolio is 0.8% (31 December 2010: 0.7%).

Investment Return

Analysis of returns on major asset classes are set out below:

	30 June 2011	30 June 2011 annualised return	30 June 2010	30 June 2010 annualised return
	$m	%	$m	%
Core portfolio	18.3	1.0	8.8	0.6
Capital growth assets	4.2	2.0	(0.3)	(0.1)
Overall return	22.5	1.1	8.5	0.5

Building the life, accident and health division

We continue to seek opportunities to grow this division which we started in 2008.  In April we announced a significant expansion of our life, accident and health division through the purchase of two managing general agencies based in Australia, Australian Income Protection (AIP) and Blue-GUM Special Risks (Blue-GUM). We are combining the two companies with our existing Australian accident and health business, creating a business able to offer a full product range, including permanent and temporary disability benefits, to superannuation funds, employers and affinity groups.  In 2010 the agencies wrote combined premiums of circa $32m.

Broker relations

Strong broker relationships are critical to our business: we grow our business by helping brokers grow theirs. Our broker relations team, headed by Dan Jones, has been active in deepening awareness of our risk appetite and the range of our products among brokers in the UK, the US and, increasingly, continental Europe. These efforts have been greatly facilitated by our recently implemented Customer Relationship Management (CRM) system.

Capital position

We closely monitor the amount of capital we hold, ensuring it is sufficient to enable us to take advantage of business opportunities as these arise.

At the 30 June 2011 we have a margin over our current target capital buffer. In addition the group has access to its currently undrawn letter of credit facility recently renewed and increased to $225m. This was renewed at identical terms to the previous facility and we also extended the duration by one year.  The facility can be used to provide support for the 2011, 2012 and 2013 underwriting years.

	2011 HY	2010 FY
	$m	$m
Sources of funds
Shareholders' funds	1,011.8	1,082.9
Tier 2 subordinated debt	241.9	230.8
Long-term subordinated debt	18.0	18.0
	1,271.7	1,331.7
Uses of funds
Lloyd's underwriting	788.0	776.9
US insurance company	107.7	107.7
	895.7	884.6
Surplus	376.0	447.1
Unavailable surplus*	-	(80.2)
Fixed and intangible assets	(142.5)	(126.6)
Available surplus	233.5	240.3
Unutilised banking facility**	225.0	150.0

* The principal element of this is profit on business underwritten at Lloyd's that has not yet been released under the Lloyd's accounting system.

**The letter of credit facility was increased from $150.0m to $225.0m on 21 July 2011.

New joint corporate broker

We are pleased to announce that JP Morgan Cazenove have been appointed alongside Numis Securities as our joint corporate broker.

Solvency II

We continue to progress in line with our plans towards Solvency II implementation.  We will be ready by 1 January 2013 to operate in the new regulatory regime.  We are making significant investments into Beazley to achieve this and we are focused in doing this in a way in which we can achieve a competitive advantage as a result of enhanced management information and process efficiency.

Dividend

The board has declared a first interim dividend of 2.5 pence (2010: 2.4 pence).  This will be paid on 2 September 2011 to shareholders on the register at 5.00pm on 3 August 2011.

Board changes

As announced in April, Jonathan Agnew will be retiring as chairman of the group at the next annual general meeting (AGM), having led the group since June 2003. 

We are pleased to announce that Dennis Holt, currently chairman of Liverpool Victoria insurance group, will be joining Beazley as a non-executive director of Beazley plc. Mr Holt, formerly the group chief executive of Axa UK is, subject to regulatory approval, expected to take up the position of non-executive chairman following the AGM in March 2012. 

Andy Pomfret, who was senior independent director and chairman of the remuneration committee has left the board to concentrate on his role as chief executive officer of Rathbone Brothers Plc. I would like to thank him for the substantial contribution he has made to the group since he joined in 2003.  George Blunden will take over the role of senior independent director and Padraic O'Connor the chair of the remuneration committee.

Nick Furlonge, who co-founded Beazley with Andrew Beazley 25 years ago, retired from the board of the public company at the end of June. Nick's contribution to Beazley is immeasurable. He has played a wide variety of key roles as the company has grown, most recently as director of risk management. Beazley's exceptional track record of prudent growth and profitability owes a great deal to Nick's wisdom and enthusiasm. I am delighted that Nick will continue to contribute to Beazley as a non-executive director of Beazley Furlonge Ltd, our Lloyd's managing agency.

Executive committee changes

David Marock, the former chief operating officer, left the group at the end of June 2011 to join Charles Taylor Consulting plc as their new CEO. We would like to thank David for his considerable efforts in refining the group's operating model over the past three years and wish him every success for the future. 

Ian Fantozzi and Penny Malik have joined the executive committee.  Ian, who was previously head of underwriting and claims operations and is very familiar with the operational needs of our growing global business, succeeds David Marock as chief operating officer.   Penny Malik heads our talent management team, a key role in a business such as ours that depends on its ability to attract and retain highly skilled and capable individuals. 

Outlook

The outlook for the insurance industry has changed significantly in the past six months with a portion of the surplus capital held by insurers at the end of 2010 being required to meet the strongest and most destructive earthquake Japan has experienced in modern times, amid a series of other natural catastrophes. 

With the US hurricane season having more than four months still to run, there may be more large losses for the insurance industry yet to come in 2011.  If that proves to be the case we would expect to see significant capital erosion in the market and sharply rising premium rates. Beazley possesses the underwriting skills, the operating platform and the financial flexibility to take advantage of such a scenario.   In the absence of any further significant loss activity in the remainder of 2011, we confirm our guidance of achieving a combined ratio for 2011 in the mid nineties range. 

Condensed consolidated Income Statement

For the six months ended 30 June 2011

			Unaudited		Unaudited		Audited
	Note		6 months ended 30 June 2011 $m		6 months ended 30 June 2010 $m		Year to 31 December 2010 $m
Gross premiums written	2		924.8		940.6		1,741.6
Written premiums ceded to reinsurers			(289.3)		(315.9)		(339.5)
Net premiums written	2		635.5		624.7		1,402.1
Change in gross provision for unearned premiums			(88.0)		(63.5)		38.4
Reinsurer's share of change in the provision for unearned premiums			123.0		117.0		(35.3)
Change in net provision for unearned premiums			35.0		53.5		3.1
Net earned premiums	2		670.5		678.2		1,405.2
Net investment income	3		22.5		8.5		37.5
Other income	4		14.0		14.9		28.1
			36.5		23.4		65.6
Revenue	2		707.0		701.6		1,470.8
Insurance claims			708.8		454.0		860.6
Insurance claims recovered from reinsurers			(231.5)		(76.8)		(122.4)
Net insurance claims	2,7		477.3		377.2		738.2
Expenses for the acquisition of insurance contracts			190.2		173.3		381.4
Administrative expenses			60.6		56.5		119.2
Foreign exchange gain	2		(5.2)		(27.6)		(34.6)
Operating expenses			245.6		202.2		466.0
Expenses	2		722.9		579.4		1,204.2
Share of loss in associate	2		(0.4)		-		(0.9)
Results of operating activities			(16.3)		122.2		265.7
Finance costs			(7.9)		(6.7)		(14.9)
(Loss)/profit before income tax			(24.2)		115.5		250.8
Income tax credit/ (expense)	8		10.1		(17.6)		(33.8)
(Loss)/profit after income tax -  all attributable to the owners of the parent			(14.1)		97.9		217.0
(Loss)/Earnings per share (cents per share):
Basic	5		(2.8)		18.8		42.1
Diluted *	5		(2.8)		18.1		40.2
(Loss)/Earnings per share (pence per share):
Basic	5		(1.7)		12.6		27.4
Diluted *	5		(1.7)		12.0		26.1

* The diluted impact of potential shares is excluded when it decreases the loss per share in accordance with IAS 33 Earnings per share, as set out in note 5.

Condensed consolidated Statement of comprehensive income

For the six months ended 30 June 2011

		Unaudited		Unaudited		Audited
		6 months to 30 June 2011 $m		6 months to 30 June 2010 $m		Year to 31 December 2010 $m
(Loss)/profit after income tax		(14.1)		97.9		217.0
Other comprehensive income
Change in net investment hedge		-		(5.4)		(5.4)
Foreign exchange translation differences		4.1		10.1		12.6
Reversal of exceptional foreign exchange gain		-		(33.7)		(33.7)
Foreign exchange difference arising on change in presentational currency		-		(22.0)		(22.0)
Total other comprehensive income		4.1		(51.0)		(48.5)
Total comprehensive income recognised - all attributable to the owners of the parent		(10.0)		46.9		168.5

 

Condensed consolidated Statement of changes in equity

For the six months ended 30 June 2011

		Share capital $m		Share premium $m	Other reserves $m		Retained earnings $m		Total $m
Balance as at 1 January 2010		42.6		0.5	(68.4)		1,021.2		995.9
Total comprehensive income recognised		-		-	(51.0)		97.9		46.9
Dividends paid		-		-	-		(38.1)		(38.1)
Issue of shares		0.1		-	-		-		0.1
Equity settled share-based payments		-		-	(3.1)		-		(3.1)
Transfer out of own shares held in trust to employees		-		-	6.3		-		6.3
Purchase of treasury shares		-		-	(12.0)		-		(12.0)
Balance as at 30 June 2010		42.7		0.5	(128.2)		1,081.0		996.0
Total comprehensive income recognised		-		-	2.5		119.1		121.6
Dividends paid		-		-	-		(17.4)		(17.4)
Issue of shares		-		0.2	-		-		0.2
Equity settled share-based payments		-		-	12.2		-		12.2
Acquisition of own shares held in trust		-		-	(12.8)		-		(12.8)
Purchase of treasury shares		-		-	(16.9)		-		(16.9)
Balance as at 31 December 2010		42.7		0.7	(143.2)		1,182.7		1,082.9
Total comprehensive income recognised		-		-	4.1		(14.1)		(10.0)
Dividends paid		-		-	-		(62.1)		(62.1)
Equity settled share-based payments		-		-	4.6		-		4.6
Acquisition of own shares held in trust		-		-	(2.4)		-		(2.4)
Purchase of treasury shares		-		-	(1.2)		-		(1.2)
Balance as at 30 June 2011		42.7		0.7	(138.1)		1,106.5		1,011.8

Condensed consolidated Statement of financial position

As at 30 June 2011

		Unaudited		Unaudited		Audited
		30 June 2011 $m		30 June 2010 $m		31 December 2010 $m
Assets
Intangible assets and goodwill		133.6		111.3		117.0
Plant and equipment		8.9		11.0		9.6
Investments in associates		6.1		1.3		6.5
Deferred acquisition costs		156.3		176.6		164.0
Deferred income tax		14.1		10.0		9.5
Current income tax assets		4.2		-		26.4
Retirement benefit asset		4.8		3.0		3.1
Reinsurance assets		1,329.0		1,216.8		1,034.9
Financial investments		2,734.4		2,757.7		2,577.6
Insurance receivables		613.8		636.4		527.1
Other receivables		52.3		27.0		33.9
Cash and cash equivalents		1,266.8		894.1		1,264.7
Total assets		6,324.3		5,845.2		5,774.3
Equity
Share capital		42.7		42.7		42.7
Share premium		0.7		0.5		0.7
Other reserves		(138.1)		(128.2)		(143.2)
Retained earnings		1,106.5		1,081.0		1,182.7
Total equity		1,011.8		996.0		1,082.9
Liabilities
Insurance liabilities		4,508.1		4,121.5		4,046.8
Borrowings		278.5		270.9		268.2
Other payables		446.4		389.8		285.4
Deferred tax liabilities		79.5		40.6		91.0
Current income tax liabilities		-		26.4		-
Total liabilities		5,312.5		4,849.2		4,691.4
Total equity and liabilities		6,324.3		5,845.2		5,774.3

Condensed consolidated Statement of cash flows

For the six months ended 30 June 2011

		Unaudited		Unaudited		Audited
		6 months ended 30 June 2011 $m		6 months ended 30 June 2010 $m		Year to 31 December 2010 $m
Cash flow from operating activities
(Loss)/profit before income tax		(24.2)		115.5		250.8
Adjustments for:
Amortisation of intangibles		3.8		0.9		3.5
Equity settled share based compensation		4.6		3.2		9.1
Retranslation of overseas net assets		(7.1)		3.3		1.4
Net fair value (gains)/losses on financial assets		(13.6)		4.3		(6.2)
Loss on disposal of plant and equipment		-		-		0.3
Loss on associate		0.4		-		0.9
Depreciation of plant and equipment		1.9		2.2		4.2
Increase in insurance and other liabilities		657.3		208.1		19.2
(Increase)/decrease in insurance, reinsurance and other receivables		(433.9)		(201.9)		83.8
Decrease/(increase) in deferred acquisition costs		7.7		(21.1)		(8.5)
Financial income		(29.7)		(28.1)		(60.2)
Financial expense		7.9		6.7		14.9
Income tax received/(paid)		16.2		(14.6)		(26.2)
Contribution to pension fund		(1.6)		(1.5)		(1.5)
Net cash from operating activities		189.7		77.0		285.5
Cash flow from investing activities
Purchase of plant and equipment		(1.2)		(0.5)		(2.0)
Purchase of syndicate capacity		-		-		(0.2)
Acquisition of subsidiary (net of cash acquired)		(7.1)		-		-
Sale of intangible asset		5.0		-		-
Purchase of investments		(2,760.8)		(1,805.9)		(4,523.0)
Expenditure on software development		(7.0)		(2.3)		(7.9)
Proceeds from sale of investments		2,617.6		1,892.2		4,799.9
Investment in associate		-		-		(6.0)
Interest and dividends received		29.7		28.1		60.2
Net cash (used in) / from investing activities		(123.8)		111.6		321.0
Cash flow from financing activities
Proceeds from issue of shares		-		0.1		0.3
Purchase of treasury shares		(1.2)		(12.0)		(28.9)
Acquisition of own shares in trust		(2.4)		-		(6.5)
Interest paid		(7.9)		(6.7)		(14.9)
Dividends paid		(62.1)		(38.1)		(55.5)
Net cash used in financing activities		(73.6)		(56.7)		(105.5)
Net (decrease)/ increase in cash and cash equivalents		(7.7)		131.9		501.0
Cash and cash equivalents at beginning of period		1,264.7		813.4		813.4
Effect of exchange rate changes on cash and cash equivalents		9.8		(51.2)		(49.7)
Cash and cash equivalents at end of period		1,266.8		894.1		1,264.7

Notes to the financial statements

      For the six months ended 30 June 2011

1.         Statement of accounting policies

Beazley plc is a group incorporated in Jersey and domiciled in the Republic of Ireland.  The condensed consolidated interim financial statements of the group for the six months ended 30 June 2011 comprise the parent company and its subsidiaries and the group's interest in associates.

The condensed consolidated financial statements have been prepared and approved by the directors in accordance with IFRS as adopted by the EU ('Adopted IFRS').

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses.  Actual results may differ from these estimates.  The accounting policies applied by the group in these consolidated interim financial statements are the same as those applied by the group in its consolidated financial statements as at and for the year ended 31 December 2010 and have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Our full accounting policies are set out in the group's 2010 annual report.  There have been no amendments to accounting policies as a result of new standards or interpretations that have become effective during 2011.

The functional currency of Beazley plc and its principal subsidiaries is US dollars and the presentational currency of the group is US dollars.  Following the change in functional currency to US dollars on 1 April 2010 and the change in presentation currency to US dollars on 1 January 2010 all comparative information is stated in US dollars in accordance with the guidance defined in IAS 21.  For further information on this change please refer to the 2010 annual report which gives a detailed explanation behind the main factors that led to this change. All amounts are stated in US dollars and millions, unless stated otherwise.

The financial information included in this document does not comprise statutory financial statements within the meaning of Companies (Jersey) Law 1991. The comparative figures for the financial year ended 31 December 2010 are those for the group and are not the company's statutory financial statements for that financial year. Those financial statements have been reported on by the company's auditors and delivered to the Jersey Financial Services Commission. The report of the auditors was unqualified.

2.         Segmental analysis

Segment information is presented in respect of reportable segments.   This is based on the group's management and internal reporting structures and represents the level at which financial information is reported to the board, being the chief operating decision maker as defined in IFRS 8.

Finance costs and taxation have not been allocated to operating segments as these items are determined by group level factors and do not relate to operating performance.

Previously we reported the IFRS non-monetary items adjustment in respect of unearned premium and deferred acquisition costs in the unallocated column of the segmental analysis as we believed this adjustment was subject to significant volatility and could distort our reported segmental results. This volatility was driven by the majority of our business being US dollar denominated when our functional currency was sterling.  Since we changed functional currency to the US dollar on 1 April 2010 the volatility and materiality of this adjustment has significantly reduced and as such we now allocate the IFRS non-monetary items adjustment between our business segments.  The 2010 segmental analyses have been restated on this basis. The remaining item disclosed in the unallocated column is in respect of a $33.7m non-recurring foreign exchange gain the details of which are disclosed in our 31 December 2010 report and accounts.  Accordingly, all future segmental analyses will not contain an unallocated column.

	30 June 2011
	Life, accident and health $m	Marine $m	Political risks and contingency $m	Property $m	Reinsurance $m	Specialty lines $m	Total reportable segments $m
Gross premiums written	39.6	154.1	48.8	195.4	135.6	351.3	924.8
Net premiums written	34.9	127.3	34.4	111.2	89.2	238.5	635.5
Net earned premiums	34.1	110.8	38.5	140.4	55.1	291.6	670.5
Net investment income	0.4	2.1	1.2	3.3	2.1	13.4	22.5
Other income	2.9	0.7	0.6	5.1	-	4.7	14.0
Revenue	37.4	113.6	40.3	148.8	57.2	309.7	707.0
Net insurance claims	17.7	47.3	37.8	76.3	119.3	178.9	477.3
Expenses for the acquisition of insurance contracts	10.5	30.6	10.3	52.3	12.1	74.4	190.2
Administrative expenses	6.9	7.4	3.8	13.6	5.2	23.7	60.6
Foreign exchange (gain)	(0.2)	(0.9)	(0.4)	(1.1)	(0.4)	(2.2)	(5.2)
Expenses	34.9	84.4	51.5	141.1	136.2	274.8	722.9
Share of loss in associate	-	-	-	-	-	(0.4)	(0.4)
Segments result	2.5	29.2	(11.2)	7.7	(79.0)	34.5	(16.3)
Finance costs							(7.9)
Loss before income tax							(24.2)
Income tax credit							10.1
Loss after income tax							(14.1)
Claims ratio	52%	43%	98%	54%	217%	61%	71%
Expense ratio	51%	34%	37%	47%	31%	34%	37%
Combined ratio	103%	77%	135%	101%	248%	95%	108%

		30 June 2010
	Life, accident and health $m	Marine $m	Political risks and contingency $m	Property $m	Reinsurance $m	Specialty lines $m	Total reportable segments	Unallocated $m	Total $m
Gross premiums written	45.3	149.1	55.3	202.5	135.2	353.2	940.6	-	940.6
Net premiums written	39.5	123.4	45.4	109.6	97.1	209.7	624.7	-	624.7
Net earned premiums	30.7	112.2	47.1	136.1	56.8	295.3	678.2	-	678.2
Net investment income	0.5	0.8	0.4	1.1	0.5	5.2	8.5	-	8.5
Other income	0.6	2.5	1.0	5.4	1.5	3.9	14.9	-	14.9
Revenue	31.8	115.5	48.5	142.6	58.8	304.4	701.6	-	701.6
Net insurance claims	16.5	44.7	21.6	71.8	34.1	188.5	377.2	-	377.2
Expenses for the acquisition of insurance contracts	8.4	28.6	10.6	47.7	10.9	67.1	173.3	-	173.3
Administrative expenses	3.9	7.7	4.1	12.6	6.6	21.6	56.5	-	56.5
Non recurring foreign exchange gain		-	-	-	-	-	-	(33.7)	(33.7)
Foreign exchange loss	0.3	1.0	0.5	1.2	0.4	2.7	6.1	-	6.1
Expenses	29.1	82.0	36.8	133.3	52.0	279.9	613.1	(33.7)	579.4
Segments result	2.7	33.5	11.7	9.3	6.8	24.5	88.5	33.7	122.2
Finance costs									(6.7)
Profit before income tax									115.5
Income tax expense									(17.6)
Profit after income tax									97.9
Claims ratio	54%	40%	46%	53%	60%	64%			56%
Expense ratio	40%	32%	31%	44%	31%	30%			34%
Combined ratio	94%	72%	77%	97%	91%	94%			90%

		31 December 2010
	Life, accident and health $m	Marine $m	Political risks and contingency $m	Property $m	Reinsurance $m	Specialty lines $m	Total reportable segments $m	Unallocated $m	Total $m
Gross premiums written	78.1	261.7	100.9	382.5	174.4	744.0	1,741.6	-	1,741.6
Net premiums written	71.4	235.6	79.9	283.8	134.4	597.0	1,402.1	-	1,402.1
Net earned premiums	65.7	233.9	87.4	285.9	131.6	600.7	1,405.2	-	1,405.2
Net investment income	0.9	3.3	2.2	4.9	2.9	23.3	37.5	-	37.5
Other income	2.0	3.1	1.3	10.3	2.3	9.1	28.1	-	28.1
Revenue	68.6	240.3	90.9	301.1	136.8	633.1	1,470.8	-	1,470.8
Net insurance claims	35.1	89.6	25.1	140.6	82.9	364.9	738.2	-	738.2
Expenses for the acquisition of insurance contracts	19.7	58.9	23.7	106.1	24.7	148.3	381.4	-	381.4
Administrative expenses	9.3	17.2	7.8	31.4	10.6	42.9	119.2	-	119.2
Non recurring foreign exchange gain	-	-	-	-	-	-	-	(33.7)	(33.7)
Foreign exchange (gain)	-	-	(0.1)	(0.3)	(0.2)	(0.3)	(0.9)	-	(0.9)
Expenses	64.1	165.7	56.5	277.8	118.0	555.8	1,237.9	(33.7)	1,204.2
Share of loss in associate	-	-	-	-	-	(0.9)	(0.9)	-	(0.9)
Segments result	4.5	74.6	34.4	23.3	18.8	76.4	232.0	33.7	265.7
Finance costs									(14.9)
Profit before income tax									250.8
Income tax expense									(33.8)
Profit after income tax									217.0
Claims ratio	53%	38%	29%	49%	63%	61%			53%
Expense ratio	44%	33%	36%	48%	27%	32%			36%
Combined ratio	97%	71%	65%	97%	90%	93%			89%

3.  Net investment income

		6 months ended 30 June 2011 $m		6 months ended 30 June 2010 $m		Year to 31 December 2010 $m
Interest and dividends on financial investments at fair value through income statement.		29.7		28.1		60.2
Realised losses on financial investments at fair value through income statement		(13.6)		(10.8)		(19.3)
Net unrealised fair value gains/(losses) on financial investments at fair value through income statement		13.1		(4.3)		6.2
Investment management expenses		(6.7)		(4.5)		(9.6)
		22.5		8.5		37.5

4.   Other income

		6 months ended 30 June 2011 $m		6 months ended 30 June 2010 $m		Year to 31 December 2010 $m
Commissions		10.0		8.8		15.4
Profit commissions		2.3		5.0		10.5
Agency fees		1.1		0.9		1.8
Other income		0.6		0.2		0.4
		14.0		14.9		28.1

5.    Earnings per share

		6 months ended 30 June 2011		6 months ended 30 June 2010		Year to 31 December 2010
Basic (cents)		(2.8)		18.8		42.1
Diluted (cents)		(2.8)		18.1		40.2

Basic (pence)		(1.7)		12.6	27.4
Diluted (pence)		(1.7)		12.0	26.1

Basic

Basic earnings per share is calculated by dividing loss after income tax of $14.1m (2010: $97.9m profit) by the weighted average number of issued shares during the six months of 505.7m (2010: 519.6m). The weighted average number of shares held in the ESOP of 12.6m (2010: 11.3m) have been excluded from the calculation until such time as they vest unconditionally with the employees. The weighted average number of treasury shares of 16.9m (2010: 8.2m) have been excluded from the calculation.

Diluted

In accordance with IAS 33 Earnings per share, when a loss after income tax is reported the diluted impact on shares is excluded when it decreases the loss per share. Accordingly, diluted earnings per share is calculated by dividing loss after income tax of $14.1m by the weighted average number of issued shares during the six months of 505.7m.

In a profit making period, diluted earnings per share is calculated by dividing profit after income tax (2010: $97.9m) by the adjusted weighted average number of shares (2010: 541.8m). The adjusted weighted average number of shares assumes conversion of all dilutive potential ordinary shares, being share options. The weighted average number of shares held in the ESOP of 12.6m (2010: 11.3m) have been excluded from the calculation until such time as they vest unconditionally with the employees. The weighted average number of treasury shares of 16.9m (2010: 8.2m) have been excluded from the calculation.

6.    Dividends

A first interim dividend of 2.5 pence (2010: 2.4 pence) per ordinary share is payable on 2 September 2011 to shareholders registered on 3 August 2011 in respect of the six months to 30 June 2011.  These financial statements do not provide for this dividend as a liability.

A second interim dividend of 7.6 pence per ordinary share, was paid on 30 March 2011 to shareholders registered at 5.00pm on 4 March 2011 in respect of the six months ended 31 December 2010.  This second interim dividend consisted of a regular dividend of 5.1 pence, together with a special dividend of 2.5 pence.

7.    Insurance claims

The loss development tables below provide information about historical claims development by the six segments - life, accident and health, marine, political risks and contingency, property, reinsurance and specialty lines. The tables are by underwriting year which in our view provides the most transparent reserving basis.  We have supplied tables for both ultimate gross claims ratio and ultimate net claims ratio.

The top part of the table illustrates how the group's estimated claims ratio for each underwriting year has changed at successive year-ends. The bottom half of the table reconciles the gross and net claims to the amount appearing in the statement of financial position.

While the information in the table provides a historical perspective on the adequacy of the claims liabilities established in previous years, users of these financial statements are cautioned against extrapolating excesses or deficiencies of the past on current claims liabilities. The group believes that the estimates of total claims liabilities as at 30 June 2011 are adequate.  However, due to inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to be adequate. 

Gross ultimate claims	2002ae	2003	2004	2005	2006	2007	2008	2009	2010	2011
		%	%	%	%	%	%	%	%	%
Life, accident and health
12 months		-	-	-	-	-	-	53.1	52.7	-
24 months		-	-	-	-	-	-	52.1	-	-
36 months		-	-	-	-	-	-	-	-	-
48 months		-	-	-	-	-	-	-	-	-
60 months		-	-	-	-	-	-	-	-	-
72 months		-	-	-	-	-	-	-	-	-
84 months		-	-	-	-	-	-	-	-	-
96 months		-	-	-	-	-	-	-	-	-
Position at 30 June 2011		-	-	-	-	-	-	49.4	52.8	-
Marine
12 months		59.2	62.6	82.4	57.0	57.7	68.9	56.2	50.6	-
24 months		44.9	65.1	79.6	42.7	59.9	65.2	52.4	-	-
36 months		39.0	62.2	70.2	32.8	50.4	59.1	-	-	-
48 months		36.2	61.7	68.2	29.1	48.0	-	-	-	-
60 months		35.8	60.5	66.0	28.9	-	-	-	-	-
72 months		35.7	56.0	64.1	-	-	-	-	-	-
84 months		34.9	55.7	-	-	-	-	-	-	-
96 months		35.5	-	-	-	-	-	-	-	-
Position at 30 June 2011		35.6	55.5	63.9	28.6	49.7	58.3	50.7	51.4	-
Political risks and contingency
12 months		59.1	67.6	61.0	57.8	57.2	57.5	61.1	61.4	-
24 months		36.3	55.5	38.0	36.1	38.5	67.9	38.7	-	-
36 months		31.6	52.2	28.4	33.0	56.3	72.4	-	-	-
48 months		28.6	37.7	25.2	43.0	52.5	-	-	-	-
60 months		31.0	36.7	18.0	38.9	-	-	-	-	-
72 months		25.0	34.8	17.6	-	-	-	-	-	-
84 months		24.2	26.3	-	-	-	-	-	-	-
96 months		21.2	-	-	-	-	-	-	-	-
Position at 30 June 2011		21.3	26.2	17.5	37.0	54.9	86.4	37.1	62.0	-
Property										-
12 months		51.0	65.4	87.1	58.6	58.4	71.0	54.0	58.8	-
24 months		37.7	65.1	83.8	44.6	56.6	66.0	43.0	-	-
36 months		34.9	65.7	82.3	43.6	54.5	64.9	-	-	-
48 months		34.3	63.8	87.3	50.9	55.5	-	-	-	-
60 months		33.9	64.3	86.7	51.0	-	-	-	-	-
72 months		34.0	63.0	85.1	-	-	-	-	-	-
84 months		35.1	62.8	-	-	-	-	-	-	-
96 months		34.8	-	-	-	-	-	-	-	-
Position at 30 June 2011		34.8	62.7	84.8	51.3	59.1	64.1	38.4	62.0	-
Reinsurance
12 months		58.7	87.6	195.8	52.4	59.6	60.0	60.8	68.2	-
24 months		34.2	81.3	187.0	25.1	26.6	51.0	49.0	-	-
36 months		28.4	76.0	186.0	24.8	22.0	42.4	-	-	-
48 months		28.6	73.6	178.5	23.2	20.0	-	-	-	-
60 months		25.6	71.7	174.7	21.3	-	-	-	-	-
72 months		25.6	70.7	172.2	-	-	-	-	-	-
84 months		24.4	69.6	-	-	-	-	-	-	-
96 months		23.7	-	-	-	-	-	-	-	-
Position at 30 June 2011		23.7	69.0	172.5	20.9	19.7	40.7	42.5	154.0	-
Specialty lines
12 months		72.9	72.9	72.1	72.6	72.8	72.2	72.8	75.1	-
24 months		70.2	71.5	72.1	72.7	72.5	72.2	72.8	-	-
36 months		68.8	67.7	69.8	72.7	72.5	72.0	-	-	-
48 months		60.0	64.5	66.3	72.6	72.2	-	-	-	-
60 months		53.2	59.5	62.8	70.8	-	-	-	-	-
72 months		52.3	58.4	56.0	-	-	-	-	-	-
84 months		50.4	56.5	-	-	-	-	-	-	-
96 months		47.2	-	-	-	-	-	-	-	-
Position at 30 June 2011		46.7	56.2	55.3	70.6	72.6	72.0	72.7	75.1	-
Total
12 months		63.0	69.6	90.4	63.0	63.5	68.7	62.6	65.2	-
24 months		52.6	69.1	87.5	53.2	59.2	67.6	57.6	-	-
36 months		49.4	66.4	83.9	50.8	58.1	66.1	-	-	-
48 months		44.9	63.4	82.3	52.4	58.4	-	-	-	-
60 months		41.5	60.9	79.3	51.9	-	-	-	-	-
72 months		40.9	59.1	75.7	-	-	-	-	-	-
84 months		40.1	57.8	-	-	-	-	-	-	-
96 months		38.4	-	-	-	-	-	-	-	-
Position at 30 June 2011		38.2	57.5	75.3	51.6	60.1	66.9	55.4	77.5	-
Total ultimate losses($m)	1,862.9	463.7	806.3	1,157.1	875.1	1,112.2	1,217.0	1,176.1	1,429.8	1,228.5	11,328.7
Less paid claims ($m)	(1,684.3)	(373.2)	(645.7)	(945.3)	(483.4)	(632.5)	(585.6)	(298.0)	(140.5)	(3.4)	(5,791.9)
Less unearned portion of ultimate losses ($m)	-	-	-	-	-	-	-	(22.0)	(152.9)	(984.0)	(1,158.9)
Gross claims liabilities (100% level) ($m)	178.6	90.5	160.6	211.8	391.7	479.7	631.4	856.1	1,136.4	241.1	4,377.9
Less unaligned share ($m)	(35.2)	(17.2)	(29.5)	(39.5)	(74.9)	(92.1)	(121.4)	(142.3)	(200.9)	(33.4)	(786.4)
Gross claims liabilities, group share ($m)	143.4	73.3	131.1	172.3	316.8	387.6	510.0	713.8	935.5	207.7	3,591.5

Net ultimate claims	2002ae	2003	2004	2005	2006	2007	2008	2009	2010	2011
		%	%	%	%	%	%	%	%	%
Life, accident and health
12 months		-	-	-	-	-	-	51.8	51.4	-
24 months		-	-	-	-	-	-	50.3	-	-
36 months		-	-	-	-	-	-	-	-	-
48 months		-	-	-	-	-	-	-	-	-
60 months		-	-	-	-	-	-	-	-	-
72 months		-	-	-	-	-	-	-	-	-
84  months		-	-	-	-	-	-	-	-	-
96 months		-	-	-	-	-	-	-	-	-
Position at 30 June 2011		-	-	-	-	-	-	48.2	51.4	-
Marine
12 months		55.4	58.3	55.5	53.9	54.9	61.2	54.7	52.3	-
24 months		44.6	53.1	48.7	42.1	56.2	57.2	48.7	-	-
36 months		40.2	48.6	42.6	32.9	49.3	50.9	-	-	-
48 months		39.1	47.8	39.5	31.5	46.6	-	-	-	-
60 months		39.0	46.6	39.0	31.0	-	-	-	-	-
72 months		39.1	44.3	37.9	-	-	-	-	-	-
84  months		38.0	43.9	-	-	-	-	-	-	-
96 months		37.5	-	-	-	-	-	-	-	-
Position at 30 June 2011		37.5	43.2	36.7	30.0	47.7	49.5	44.4	54.1	-
Political risks and contingency
12 months		56.7	64.1	63.4	56.3	55.4	55.9	58.8	57.3	-
24 months		37.4	58.0	46.4	40.3	38.9	75.7	35.1	-	-
36 months		34.8	53.8	35.8	37.4	55.0	74.5	-	-	-
48 months		32.9	40.5	30.4	46.8	53.2	-	-	-	-
60 months		34.9	40.2	24.0	41.0	-	-	-	-	-
72 months		27.2	35.7	22.9	-	-	-	-	-	-
84  months		25.6	25.9	-	-	-	-	-	-	-
96 months		22.5	-	-	-	-	-	-	-	-
Position at 30 June 2011		22.5	25.5	22.9	38.6	53.7	85.3	33.5	61.2	-
Property
12 months		48.8	59.7	64.9	61.3	61.1	67.3	53.7	59.0	-
24 months		41.7	60.9	61.9	49.3	59.7	67.3	48.8	-	-
36 months		39.3	60.3	58.3	47.8	58.9	65.0	-	-	-
48 months		38.7	58.6	61.1	51.5	59.6	-	-	-	-
60 months		38.3	58.3	61.7	50.7	-	-	-	-	-
72 months		38.3	57.5	59.9	-	-	-	-	-	-
84  months		39.8	57.4	-	-	-	-	-	-	-
96 months		39.6	-	-	-	-	-	-	-	-
Position at 30 June 2011		39.7	57.3	59.8	50.7	60.1	64.8	44.4	61.9	-
Reinsurance
12 months		60.2	88.5	153.0	54.3	55.2	67.0	55.6	77.0	-
24 months		39.4	85.2	131.2	36.7	30.6	56.5	53.0	-	-
36 months		33.9	81.9	127.8	34.6	25.3	47.4	-	-	-
48 months		34.5	75.8	117.1	32.3	22.8	-	-	-	-
60 months		31.6	72.6	110.8	30.9	-	-	-	-	-
72 months		31.6	71.0	109.9	-	-	-	-	-	-
84  months		30.2	70.3	-	-	-	-	-	-	-
96 months		29.4	-	-	-	-	-	-	-	-
Position at 30 June 2011		29.4	70.1	106.7	30.8	22.9	47.3	47.6	149.5	-
Specialty lines
12 months		68.7	69.8	69.2	68.6	69.6	70.2	69.9	73.0	-
24 months		67.3	68.6	69.3	68.6	68.8	70.2	69.8	-	-
36 months		66.0	65.8	67.4	68.6	68.8	70.1	-	-	-
48 months		57.8	62.2	63.8	68.5	67.4	-	-	-	-
60 months		52.7	57.0	58.8	63.8	-	-	-	-	-
72 months		50.8	53.7	53.7	-	-	-	-	-	-
84  months		48.9	51.1	-	-	-	-	-	-	-
96 months		45.2	-	-	-	-	-	-	-	-
Position at 30 June 2011		44.8	50.1	51.3	62.1	67.8	69.8	69.8	73.0	-
Total
12 months		60.2	65.9	73.1	62.1	63.0	66.2	60.4	65.1	-
24 months		53.0	65.3	68.6	54.4	59.2	66.8	57.0	-	-
36 months		50.6	62.6	64.9	51.8	58.7	64.2	-	-	-
48 months		46.4	59.2	62.1	52.3	57.5	-	-	-	-
60 months		43.7	56.3	59.0	50.1	-	-	-	-	-
72 months		42.7	53.9	56.2	-	-	-	-	-	-
84  months		41.9	52.1	-	-	-	-	-	-	-
96 months		39.9	-	-	-	-	-	-	-	-
Position at 30 June 2011		39.7	51.4	54.6	49.0	58.0	64.7	54.5	73.1	-
Total ultimate losses($m)	925.4	390.7	580.3	647.7	662.5	912.7	981.5	880.0	1,134.3	971.2	8,086.3
Less paid claims ($m)	(898.5)	(320.8)	(468.6)	(489.2)	(389.0)	(526.7)	(478.0)	(286.6)	(125.2)	(3.3)	(3,985.9)
Less unearned portion of ultimate losses ($m)	-	-	-	-	-	-	-	(17.2)	(143.9)	(777.8)	(938.9)
Net claims liabilities (100% level) ($m)	26.9	69.9	111.7	158.5	273.5	386.0	503.5	576.2	865.2	190.1	3,161.5
Less unaligned share ($m)	(8.4)	(13.2)	(21.9)	(30.7)	(51.4)	(72.4)	(93.9)	(95.1)	(151.9)	(24.9)	(563.8)
Net claims liabilities, group share ($m)	18.5	56.7	89.8	127.8	222.1	313.6	409.6	481.1	713.3	165.2	2,597.7

Analysis of movements in loss development tables

We have updated our loss development tables to show the interim ultimate loss ratios as at 30 June 2011 for each underwriting year.  As such, care should be taken when comparing these half year movements to the full year movements shown within the body of each table. 

In the first half of 2011 we reserved for the Christchurch New Zealand earthquake, the Japanese earthquake and tsunami, the Australian flooding and the US tornadoes.  These events had the greatest affect on the Property and Reinsurance classes of business.  The losses are still at an early stage of development, and we have employed an appropriate level of prudence in setting the reserves.

Life, accident and health

A reducing trend is emerging on the 2009 underwriting year.

Marine

Most years have exhibited a stable or reducing trend, with the exception of the 2007 underwriting year where the reserve was increased on a builders' binding authority.

Political risks and contingency

In the Political class, the conflict in Libya has given rise to a number of contract frustration related claims affecting, in particular, the 2008 underwriting year.  We have established reserves in respect of these.  The reserves in respect of claims arising from the financial crisis remain appropriate. 

Property

The 2010 underwriting year was affected by a number of catastrophe events.  There was a gross only movement on the 2007 underwriting year due to reserve increases on two wind storm claims. 

Reinsurance

The 2010 underwriting year reflects the reserves established in respect of catastrophes in Chile and New Zealand.  There was a net reduction on the 2005 underwriting year due to an increased reinsurance recovery on a hurricane Katrina loss. 

Specialty lines

The trend of releases, in particular from the 2003 to 2006 underwriting years, has continued. 

The table below analyses our net insurance claims between current year claims and adjustments to prior year net claims reserves.  These have been broken down by department and period. 

The Tohoku earthquake in Japan, the Christchurch earthquake in New Zealand, the Australian floods and the political unrest in Libya are all 2011 events.  The claims arising in respect of these events have all been classified as current year losses and the related claims have been disclosed as such in the table below. The net effect of these events has been to increase our net claims by $154m as disclosed in our first quarter interim management statement, plus a further $23m in respect of Libya.

Beazley's reserving policy is to maintain catastrophe margins either until the end of the exposure period or until catastrophe events occur.  Therefore margins have been released on those classes affected by the 2011 catastrophe events which has resulted in a higher than average prior year reserve release.

6 months ended 30 June 2011	Life, accident and health $m	Marine $m	Political risks and contingency $m	Property $m	Reinsurance $m	Specialty lines $m	Total $m
Current year	21.1	59.1	51.5	98.0	135.7	200.5	565.9
Prior underwriting year
- 2008 and earlier	(0.1)	(4.0)	(6.8)	(1.5)	(3.2)	(21.6)	(37.2)
- 2009	(1.5)	(8.5)	(5.9)	(14.1)	(5.7)	-	(35.7)
- 2010	(1.8)	0.6	(1.0)	(6.1)	(7.4)	-	(15.7)
	(3.4)	(11.9)	(13.7)	(21.7)	(16.3)	(21.6)	(88.6)
Net insurance claims	17.7	47.2	37.8	76.3	119.4	178.9	477.3

6 months ended 30 June 2010	Life, accident and health $m	Marine $m	Political risks and contingency $m	Property $m	Reinsurance $m	Specialty lines  $m	Total $m
Current year	16.5	59.6	28.5	76.9	50.2	211.4	443.1
Prior underwriting year
- 2007 and earlier	-	(5.1)	(6.9)	3.1	(4.1)	(22.8)	(35.8)
- 2008	-	(7.1)	-	(7.0)	(8.5)	-	(22.6)
- 2009	-	(2.8)	-	(1.3)	(3.4)	-	(7.5)
	-	(15.0)	(6.9)	(5.2)	(16.0)	(22.8)	(65.9)
Net insurance claims	16.5	44.6	21.6	71.7	34.2	188.6	377.2

Year to 31 December 2010	Life, accident and health $m	Marine $m	Political risks and contingency $m	Property $m	Reinsurance $m	Specialty lines $m	Total $m
Current year	33.8	120.3	43.9	158.1	105.0	421.7	882.8
Prior underwriting year
- 2007 and earlier	-	(10.2)	(8.0)	(2.0)	(6.8)	(56.9)	(83.9)
- 2008	1.8	(12.6)	1.3	(9.5)	(12.0)	-	(31.0)
- 2009	(0.5)	(7.9)	(12.1)	(5.9)	(3.3)	-	(29.7)
	1.3	(30.7)	(18.8)	(17.4)	(22.1)	(56.9)	(144.6)
Net insurance claims	35.1	89.6	25.1	140.7	82.9	364.8	738.2

8. Income tax expense

			6 months ended 30 June 2011 $m	6 months ended 30 June 2010 $m	Year to 31 December 2010 $m
Current income tax expense
Current year			4.1	37.3	23.4
Prior year adjustments			(0.3)	(25.5)	(44.9)
			3.8	11.8	(21.5)
Deferred income tax expense
Origination and reversal of temporary differences			(10.9)	(19.7)	14.9
Impact of change in UK tax rates			(3.0)	-	(3.4)
Prior year adjustments			-	25.5	43.8
			(13.9)	5.8	55.3
Income tax (credit)/ expense			(10.1)	17.6	33.8
(Loss)/ profit before income tax			(24.2)	115.5	250.8
Tax calculated at Irish tax rate (12.5%)			(3.0)	14.4	31.4
Effects of:
- Tax rates in foreign jurisdictions			(4.7)	3.2	7.8
- Non-deductible expenses			0.9	-	0.7
- Tax relief on share based payments - current and future years			-	-	0.7
- Under provided in prior years			(0.3)	-	(1.2)
-Change in UK tax rates			(3.0)	-	(3.4)
-Foreign exchange on tax			-	-	(2.2)
Tax for the period			(10.1)	17.6	33.8

9. Business Combinations

On 19 April 2011 Beazley plc through its 100% subsidiary Beazley Underwriting Pty Limited purchased the entire share capital of two managing general agencies (MGAs) Australian Income Protection (AIP) and Blue-GUM Special Risks along with the holding company of Blue-GUM, Beyond Group Holdings Pty Ltd (collectively known as "Blue GUM"), for an initial cash consideration of $11.7m and a deferred cash consideration of $13.7m, bringing the total expected consideration to $25.4m.  The deferred cash consideration is contingent on the business acquiring specific targets linked to premium growth and profitability over a four year period ending on 31 December 2014. The combined purchases have been accounted for as an acquisition.

The fair value of the tangible net assets acquired was $4.9m, and the fair value of intangible assets acquired was $10.3m, resulting in goodwill on acquisition of $10.2m. The intangible assets acquired relates to the existing customer relationships of the business.

This acquisition had no material impact on the revenue or loss of the group for the period. In accordance with IFRS 3 'Business Combinations' the assets and liabilities as at the acquisition date are stated at their initial fair values and may be remeasured as and when further evidence of the appropriate fair values emerges within a period of 12 months from the date of acquisition.

10.      Related party transactions

The nature of the related party transactions of the group are consistent in nature and scope with those disclosed in note 31 of the group's consolidated financial statements for the year ended 31 December 2010.

There were no transactions with related parties during the six months ended 30 June 2011 which have had a material effect on the results or financial position of the group.

11.      Foreign exchange rates

The group used the following exchange rates to translate foreign currency assets, liabilities, income and expenses into US dollars being the group's presentation currency:

			6 months ended 30 June 2011 $m	6 months ended 30 June 2010 $m	Year to 31 December 2010 $m
Average
Pound sterling			0.62	0.66	0.65
Canadian dollar			0.98	1.03	1.03
Euro			0.71	0.75	0.77
Spot
Pound sterling			0.62	0.66	0.65
Canadian dollar			0.98	1.05	1.00
Euro			0.69	0.82	0.75

Responsibility statement of the directors in respect of the interim report 

We confirm that to the best of our knowledge:

• the condensed consolidated financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

• the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that six months; and any changes in the related party transactions described in the last annual report that could do so.

Martin Bride

Finance Director

22 July 2011

Independent Review Report to Beazley plc

Introduction

We have been engaged by Beazley plc ('the company') to review the condensed consolidated set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 which comprises the income statement, statement of comprehensive income, statement of changes in equity, statement of financial position, the statement of cash flows and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Transparency Directive Regulations ("the TD Regulations") and the Disclosure and Transparency Rules of the UK's Financial Services Authority ("the FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the TD Regulations and the Disclosure and Transparency Rules of the UK FSA.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The directors are responsible for ensuring that the condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU, the TD Regulations and the Disclosure and Transparency Rules of the UK FSA.

KPMG

Chartered Accountants

1 Harbourmaster Place

IFSC

Dublin 1

22 July 2011

Glossary

Admitted carrier

An insurance company authorised to do business in the US.  An agreement is entered into which stipulates the terms and conditions under which a business must conduct within a state in the US.

Aggregates/aggregations

Accumulations of insurance loss exposures which result from underwriting multiple risks that are exposed to common causes of loss.

Aggregate excess of loss

The reinsurer indemnifies an insurance company (the reinsured) for an aggregate (or cumulative) amount of losses in excess of a specified aggregate amount.

A.M. Best

A.M. Best is a worldwide insurance-rating and information agency whose ratings are recognised as an ideal benchmark for assessing the financial strength of insurance related organisations, following a rigorous quantitative and qualitative analysis of a company's statement of financial position strength, operating performance and business profile.  Beazley plc obtained an A rating as did Beazley Insurance Company, Inc.

Binding authority

A contracted agreement between a managing agent and a coverholder under which the coverholder is authorised to enter into contracts of insurance for the account of the members of the syndicate concerned, subject to specified terms and conditions.

Capacity

This is the maximum amount of premiums that can be accepted by a syndicate. Capacity also refers to the amount of insurance coverage allocated to a particular policyholder or in the marketplace in general.

Capital growth assets

A portfolio of alternative or hedge fund assets constructed to provide exposure to a wide range of asset classes and investment strategies.  The majority of assets in the portfolio are funds with a specific sector focus and investment strategy. The objective for the portfolio is to deliver returns significantly above risk free rates on average.

Catastrophe reinsurance

A form of excess of loss reinsurance which, subject to a specified limit, indemnifies the reinsured company for the amount of loss in excess of a specified retention with respect to an accumulation of losses resulting from a catastrophic event or series of events.

Claims

Demand by an insured for indemnity under an insurance contract.

Claims ratio

Ratio, in percent, of net insurance claims to net earned premiums.

Combined ratio

Ratio, in percent, of the sum of net insurance claims, expenses for acquisition of insurance contracts and administrative expenses to net earned premiums.  This is also the sum of the expense ratio and the claims ratio. The calculation is performed excluding the impact of foreign exchange on non-monetary items.

Coverholder/managing general agent

A firm either in the United Kingdom or overseas authorised by a managing agent under the terms of a binding authority to enter into contracts of insurance in the name of the members of the syndicate concerned, subject to certain written terms and conditions.  A Lloyd's broker can act as a coverholder.

Deferred acquisition costs (DAC)

Costs incurred for the acquisition or the renewal of insurance policies (e.g. brokerage, premium levy and staff related costs) which are capitalised and amortised over the term of the contracts.

Earnings per share (EPS) - Basic/Diluted

Ratio, in pence and cents, calculated by dividing the consolidated profit after tax by the weighted average number of ordinary shares issued, excluding shares owned by the group.  For calculating diluted earnings per share the number of shares and profit or loss for the year is adjusted for all dilutive potential ordinary shares, such as share options granted to employees.

Excess per risk reinsurance

A form of excess of loss reinsurance which, subject to a specified limit indemnifies the reinsured company against the amount of loss in excess of a specified retention with respect of each risk involved in each loss.

Expense ratio

Ratio, in percent, of the sum of expenses for acquisition of insurance contracts and administrative expenses to net earned premiums. The calculation is performed excluding the impact of foreign exchange on non-monetary items.

Facultative reinsurance

A reinsurance risk that is placed by means of a separately negotiated contract as opposed to one that is ceded under a reinsurance treaty.

Gross premiums written

Amounts payable by the insured, excluding any taxes or duties levied on the premium, including any brokerage and commission deducted by intermediaries.

Hard market

An insurance market where prevalent prices are high, with restrictive terms and conditions offered by insurers.

Horizontal Limits

Reinsurance coverage limits for multiple events.

Incurred but not reported (IBNR)

These are anticipated or likely claims that may result from an insured event although no claims have been reported so far.

International accounting standards (IAS)/International financial reporting standards (IFRS)

Standards formulated by the IASB with the intention of achieving internationally comparable financial statements.  Since 2002, the standards adopted by the IASB have been referred to as International Financial Reporting Standards (IFRS).  Until existing standards are renamed, they continue to be referred to as International Accounting Standards (IAS).

International accounting standards board (IASB)

An international panel of accounting experts responsible for developing IAS/IFRS.

Lead underwriter

The underwriter of a syndicate who is responsible for setting the terms of an insurance or reinsurance contract that is subscribed by more than one syndicate and who generally has primary responsibility for handling any claims arising under such a contract.

Line

The proportion of an insurance or reinsurance risk that is accepted by an underwriter or which an underwriter is willing to accept.

Managing agent

A company that is permitted by Lloyd's to manage the underwriting of a syndicate.

Managing general agent (MGA)

An insurance intermediary acting as an agent on behalf of an insurer.

Medium tail

A type of insurance where the claims may be made a few years after the period of insurance has expired.

Net assets per share

Ratio, in pence and cents calculated by dividing the net assets (total equity) by the number of shares issued.

Net premiums written

Net premiums written is equal to gross premiums written less outward reinsurance premiums written.

Provision for outstanding claims

Provision for claims that have already been incurred at the statement of financial position date but have either not yet been reported or not yet been fully settled.

Rate

The premium expressed as a percentage of the sum insured or limit of indemnity.

Reinsurance to close (RITC)

A reinsurance which closes a year of account by transferring the responsibility for discharging all the liabilities that attach to that year of account (and any year of account closed into that year) plus the right to buy any income due to the closing year of account into an open year of account in return for a premium.

Retention limits

Limits imposed upon underwriters for retention of exposures by the group after the application of reinsurance programmes.

Return on equity (ROE)

Ratio, in percent calculated by dividing the consolidated profit after tax by the average daily total equity.

Retrocessional reinsurance

The reinsurance of the reinsurance account. It serves to 'lay-off' risk.

Risk

This term may variously refer to:

a)  the possibility of some event occurring which causes injury or loss;

b)  the subject matter of an insurance or reinsurance contract; or

c)  an insured peril.

Special purpose syndicate

Specialty reinsurance company designed to provide additional capacity to a specific insurance company. They operate by purchasing a portion or all of a group of insurance policies, typically cat exposures. They have become quite prominent in the aftermath of Hurricane Katrina as a vehicle to add risk-bearing capacity, and for investors to participate in the potential profits resulting from sharp price increases.

Short tail

A type of insurance where claims are usually made during the term of the policy or shortly after the policy has expired. Property insurance is an example of short tail business.

Soft market

An insurance market where prevalent prices are low, and terms and conditions offered by insurers are less restrictive.

Surplus lines insurer

An insurer that underwrites surplus lines insurance in the USA. Lloyd's underwriters are surplus lines insurers in all jurisdictions of the USA except Kentucky and the US Virgin Islands.

Total shareholder return

The increase in the share price plus the value of any dividends paid and proposed during the year.

Treaty reinsurance

A reinsurance contract under which the reinsurer agrees to offer and to accept all risks of certain size within a defined class.

Unearned premiums reserve

The portion of premium income in the business year that is attributable to periods after the balance date is accounted for as unearned premiums in the underwriting provisions.

 

END

 

 

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