Interim Results

RNS Number : 8577Z

Beazley Group PLC

25 July 2008

 



Press 

Release

Beazley Announces Interim Results

Beazley Group plc results for the six months ended 30 June 2008

London, 25 July 2008

•   Profit before tax of £45.0m (2007: £60.2m)

•   Profit before tax and foreign exchange on non-monetary items £46.0m (2007: £60.6m)

•   Investment performance impacted by poor returns in credit and equity markets; annualised return 2008 of 1.7% (2007: 5.2%)

•   Return on equity of 16.8% (2007: 24.8%)

•   Interim dividend of 2.2p per share (2007: 2.0p)

·      Gross written premiums decreased 6% to £407.3m (2007: £434.1m)

·      Continued growth in the US - US$139.1m of business written (2007: US$77.9m)

Strong financial position

•   Investment and cash balances increased 20% to £1,569.7m (2007: £1,310.9m)

•   Prior year reserve releases of £23.4m (2007: £25.2m)

 

	6 months ended 30 Jun 2008	6 months ended 30 Jun 2007	% increase/ (decrease)
Gross written premiums (£m)	407.3	434.1	(6)
Net written premiums (£m)	292.3	325.6	(10)
Net earned premiums (£m)	312.2	290.4	8
Profit before tax (£m)	45.0	60.2	(25)
Comprises:
Profit before tax and foreign exchange adjustments on non-monetary items (£m)	46.0	60.6	(24)
Foreign exchange on non-monetary items (£m)	(1.0)	(0.4)	N/A
Earnings per share	9.1p	11.6p	(22)
Dividend per share - interim	2.2p	2.0p	10
Net assets per share	111.3p	97.6p	14

Cont.

Beazley Group Chief Executive Andrew Beazley said:

'The first half of 2008 has been a challenging period for underwriters and investment managers. Despite this, we have still achieved a highly creditable result that is consistent with our track record of unbroken profitability.  In markets like this, our steady, long term investments in underwriting talent make a major difference to performance.'

'Our US venture continues to thrive and is giving us opportunities to write attractive new business to complement our core Lloyd's accounts. The US is now well established and continues to grow.' 

For further information, please contact:

Beazley Group plc

Andrew Beazley

Andrew Horton

T: [phone]

Finsbury

Vanessa Neill

Andrew Holt

T: [phone]

Note to editors:

Beazley Group, plc (BEZ.L), based in London, is the parent company of global, specialist insurance businesses with operations in the UK, US, France, Singapore and Hong Kong.  Beazley manages two Lloyd's syndicates (Syndicate 2623 and Syndicate 623) with aggregate underwriting capacity in 2008 of £814m (US$1.6bn). Both syndicates are rated A by A.M. Best. In the US, Beazley's underwriters focus on writing specialist insurance products in the admitted market, backed by Beazley Insurance Company, Inc., an admitted carrier in all 50 states; and surplus lines risks, backed by the Beazley syndicates at Lloyd's. Beazley Insurance Company, Inc. is rated A by A.M. Best. 

Beazley is a market leader in many of its chosen lines, which include professional indemnity, commercial property, marine, reinsurance, and personal lines. 

For more information please go to: www.beazley.com

The board announces a profit before tax for the first six months of 2008 of £45.0m (2007: £60.2m). Our underwriting performance remains robust with premium growth in the locally underwritten US operation balancing out to some extent reductions in the Lloyd's business. Claims activity has increased during 2008 but remains in line with our expectation - enabling us to release £23.4m of prior year reserves. Our investment performance has been impacted by the continued turmoil in the credit and equity markets resulting in below expected annualised returns of 1.7% (2007: 5.2%) across all asset types.  This resulted in investment income in the first half of 2008 being £19.4m below that achieved in the first half of 2007.

Underwriting

Gross premiums written in the first half of 2008 decreased to £407.3m from £434.1m at the interim stage last year.  Through this stage of the cycle we have maintained underwriting discipline and our underwriters are declining business where rates fail to meet our minimum pricing levels. Our larger syndicated business written in Lloyd's remains under the most pressure and the consequent reduction in premium is partially offset by smaller less volatile business written in our US offices. The average premium rate reduction was 8% across all lines. This reduction in premiums has been partially balanced out by the growth of our locally underwritten US business which has increased premiums written by 79% over the same period in 2007 to $139.1m. 

Our combined ratio has remained at 90% (2007: 90%). Within this the claims ratio has increased from 51% to 54%, whilst the expenses ratio has decreased to 36% from 39%. The increase in the claims ratio arose mainly in our property portfolio, which saw an increased incidence of claims in both our UK homeowners accounts and US commercial property accounts.

In the first half of 2008 we have released £23.4m of prior year claims reserves (2007: £25.2m). Releases have come from across all divisions, including specialty lines claims reserves which have continued to develop well.

Rating environment

	2001	2002	2003	2004	2005	2006	2007	HY 2008
Marine	100	118	128	128	131	140	131	121
Political risk and contingency	100	120	122	114	107	101	92	87
Property	100	127	132	126	124	139	136	125
Reinsurance	100	142	148	148	149	189	197	185
Specialty lines	100	137	165	173	175	175	166	153
Total	100	131	145	146	146	154	148	136

Overall premium rates have reduced in the first six months of 2008 by 8%. This competitive rating environment is evident across all areas of our business as rates continue to fall from the record highs we saw in 2006. Our catastrophe accounts have been particularly affected following the second successive catastrophe free year in Florida and the Gulf of Mexico. Across reinsurance, commercial property and offshore energy, we have seen rates fall by 6%, 16% and 18% respectively. We expect the trading environment to remain challenging during the remainder of 2008. 

Specialty lines, our largest division, has seen renewal rates fall by 8% in the past six months.  This should be seen in the context of the historic highs we saw in rating up to 2006. Even at current prices our rating levels are 53% above similar risks written in 2001. We believe we can capitalise in areas where the marketplace is less crowded and where experienced and empowered underwriting can be a competitive advantage. We continue to focus on our core competencies of exceptional customer service, careful risk selection and market leading claims services. We believe these competencies set us aside from our competition.   

US business

Our locally underwritten US business continues to make good progress in 2008, writing $139.1m in the first six months (2007: $77.9m). Developing our business in the US, the largest non-life insurance market in the world, remains core to our group strategy. We write business in the US through our own managing general agent (MGA), on behalf of both the syndicates at Lloyd's and the US domestic insurance company, Beazley Insurance Company, Inc. The business we underwrite in the admitted market for the account of our US insurance company has been growing, as we expected, faster than our non-admitted business.  

Last year, we underwrote $175.2m for the full year through our US operations and set ourselves an estimate for 2008 of $250m. In the first half of 2008 the specialty lines division accounted for 77%, or $106.7m, of our locally underwritten US premiums. Within this, our biggest lines were professional liability for architects and engineers ($54.6m); technology, media and business services professional liability ($19.6m); and management liability, both directors and officers insurance and employment practices liability insurance ($19.1m). 

In all of our markets, we bring a distinct value proposition to brokers and clients: expert and empowered underwriters, supported by excellent claims service. We have continued to invest in both underwriting talent and claims talent in the US market. 

Our US property business continues to develop well, despite highly competitive conditions after two years of low catastrophe losses. The high-value homeowners' team underwrote $9.3m in gross premiums in the first half, up 31% on the first half of 2007.  The US admitted market commercial property team, which underwrites mid-sized commercial risks and started trading in February 2007, wrote $9.3m in the first half of this year (2007:$2.9m). 

Reinsurance protection

The reinsurance market has witnessed price reductions over the past year, although these have not kept pace with the reductions that have been seen in areas of the primary insurance market. Clear disconnects have emerged between primary, reinsurance and retrocessional pricing, with each tier seeing incrementally less in the form of rate reductions.

Retrocessional reinsurance protecting our reinsurance team remains scarce and expensive but for all the other areas of our business cover is available at realistic terms.  We have continued to reposition our reinsurance account to be less reliant on the retrocessional market.

Reserve releases

In the first six months of 2008 we released £23.4m (2007: £25.2m) of prior year claims reserves across a number of business lines. The table below highlights where we have been able to make these releases.  

	2008	2007
	£m	£m
Marine	5.4	5.1
Political risk and contingency	2.4	1.8
Property	2.6	6.1
Reinsurance	4.0	1.2
Specialty lines	9.0	11.0
TOTAL	23.4	25.2

As previously disclosed, we hold a higher level of reserves in the specialty lines classes of business initially, when the corridor of uncertainty around the value of claims is wider. We are typically able to release these reserves from the fourth year onwards as we gain more certainty around the portfolio's performance. This can be seen clearly in our loss development tables which are set out in note 7.

In 2008 we have made releases mainly from our 2004 and 2005 underwriting years. 

In addition to the specialty lines releases, we have also been able to lower reserves held in our reinsurance, political risk and contingency, and marine accounts. We have released less claims reserves from the property account than in 2007, due to a higher than expected incidence of large risk losses. We have reduced the size of our UK homeowners account as a result of higher claims frequency in this class of business.  

As our business matures we will continue to assess the claims reserves. We believe that our reserves are robust. 

Sub-prime losses

As highlighted in our interim management statement released in April 2008, we remain satisfied with our overall reserving levels including those reserves held against sub-prime related claims. During 2007, we established an internal working party tasked with monitoring the risks to and opportunities for Beazley. Since the late 1990's Beazley has had a limited appetite for professional liability risks within the financial institution sector. Whilst the number of sub-prime related lawsuits (as reported by Advisen) now exceeds 300, we provide directors and officers (D&O) coverage for only six of the affected entities and other types of professional or liability related coverage for a further eight.  

Marine

The marine team made a solid start to 2008, writing gross premiums of £71.2m (2007: £79.6m) despite increasing competition in most areas of the account. The team continues to develop the existing portfolio, consolidating their strong market position. 

Premium growth in the hull insurance account has been offset by reduction in cargo and energy physical damage. Premium renewal rates for hull, cargo and energy have been under pressure throughout 2008. Overall rates have reduced by 8%, which is in line with our expectations at the start of the year. We are confident that these areas are still trading profitably and we continue to search out ways to expand the marine account in a profitable manner, investigating and insuring niche risks that we can fully understand and service.

Political risk and contingency 

Formerly part of specialty lines, our political risk and contingency business was established as a separate division of Beazley this year. The account includes political violence risks as well as the more traditional political risks such as nationalisation, expropriation and currency convertibility risk. In the first half of 2008, the new division underwrote £29.7m in gross premiums (2007: £35.1m).

Competition for standalone terrorism was balanced by lower than expected rate declines for political risk business and for contingency risks. Demand for political risks cover continues to be strong, particularly among banks and commodity traders, and attractive underwriting opportunities continue to present themselves. Our political risks underwriters also continue to identify opportunities to ally their expertise to that of other Beazley underwriters to create new and broader forms of cover, such as a more comprehensive marine cargo product that includes political violence insurance. 

Property

Rates have declined by 8% during the first half of 2008, with strong competition and an over supply of capacity in most property classes and territories. Large commercial property risks have seen the greatest pressure on rates with terms and conditions also being targeted by some markets. We continue to maintain underwriting discipline which has meant turning away certain business. This is reflected in our written premiums, which for the first six months of 2008 totalled £85.0m compared to £106.0m in the first half of 2007.  

In the US we have seen further growth in both our admitted and surplus lines businesses with written premiums increasing from $16.7m to $32.5m. Our wide range of products and diverse underwriting platforms have enabled us to access business that is retained within the US domestic market. We continue to find that our distinct value proposition in the admitted commercial property market - highly experienced underwriters, broad and flexible coverage, and rapid and accurate policy issuance - have been well received by brokers and clients alike.

The first half of 2008 has seen a significant increase in worldwide loss activity, with a number of headline making catastrophe events and several large single risk losses. Our exposure to these losses is modest and contained within our planned loss ratios. Whilst these are not market changing events, we expect them to have a positive effect on rates in the sectors affected, such as mining.

Reinsurance

We achieved written premiums of £50.9m in our reinsurance business during the first half of 2008 (2007: £43.2m). At this point in the market cycle, there is a disconnect between reinsurance pricing and insurance pricing, with reinsurers generally exercising greater pricing discipline than in the primary market. Reinsurance market conditions have continued to ease in line with our expectations. Rates in the larger insurance economies outside the US reduced by  5% on a risk adjusted basis. In the US, rates reduced by 8% with the larger changes occurring on smaller, regional and less complex accounts.

The first half of the year has been marked by more than $4bn of large property risk losses being reported to the market. Our reinsurance account does not have material exposure to these occurrences. The largest catastrophe event of the year so far has been the Chinese earthquake which occurred in May. Although it is still too early to estimate insured losses for this event, we believe that they will be a relatively small percentage of the economic loss. Our exposures in the region are modest and any losses will be contained within our planned attritional loss ratios for the catastrophe account.

Specialty lines

Our specialty lines division performed well in a challenging environment during the first half of the year, writing gross premiums of £170.5m (2007: £170.2m). For the first time, the account did not include the political risk and contingency business that was established as a separate division of Beazley at the beginning of the year. The 2007 comparative figures have been restated to reflect this change.

Rates declined across the account by approximately 8%, but as highlighted above claims experience from prior years remained positive, permitting reserve releases of £9.0m.  Competition intensified, particularly for the large risks business underwritten at Lloyd's in the markets for lawyers professional liability, healthcare professional liability, and D&O insurance.  

In this softening market, part of our cycle management strategy is to grow in the smaller risk business written locally in the US which displays a less volatile claim pattern and more stable premiums.  Specialty lines business underwritten locally in the US continued to grow, reaching $106.7m, up from $60.3m in the first half of last year.  

We continued to broaden our product range in the US admitted market, launching new products in D&O insurance, regional lawyers liability cover, and employment practices liability. We now underwrite 13 lines of business in the US market on an admitted basis. In addition to the mid-sized risks that were an early focus of our US operations, we are underwriting an increasing volume of small scale 'private enterprise' business in the US, covering both professional and management liability risks. Our US private enterprise team wrote $33.5m in premiums in the first half of 2008 (2007: $19.4m).   

Investment income

Invested assets continued to grow - cash and investments now amount to £1,569.7m which compares to £1,310.9m at the end of June 2007 and £1,490.6m at the end of December 2007.  Investment income reduced to £13.2m in the first six months of 2008, compared with £32.6m over the same period in 2007. This represents an annualised investment return of 1.7% on average assets for the period (2007: 5.2%).  The decline in investment income has been the result of the stress in credit markets, resulting in falling bid prices for both corporate and asset-backed securities, especially in the first quarter of 2008. At the same time, weak equity markets have resulted in negative returns from our small equity portfolio. Due to the stresses in most asset classes, our hedge fund portfolio has also posted a reduced return.  Although the strategy in terms of asset mix and duration is unchanged since the end of December, we and our managers continue to monitor events in the credit markets and are maintaining a high quality short duration investment portfolio. We continue to search out opportunities to enhance returns over the medium term.

Capital management and dividends

During the first half we paid out both the final and special dividend totalling £27.9m as well as completing the 5% share buyback announced in November 2007 distributing a total of £28.3m, of which £23.2m was paid out in the first half of 2008.  On 27th June 2008 we also bought back a further £1.7m of shares. We will continue to monitor our surplus capital position closely.

The board is pleased to report that it will pay an increased interim dividend of 2.2p (2007: 2.0p). This will be paid on 29 August 2008 to shareholders on the register on 8 August 2008. 

Management changes

In June 2008 we announced that, from 1 September, I will become deputy chairman and existing group finance director Andrew Horton will succeed me as chief executive. Andrew is exceptionally well placed to undertake the role, having extensive financial services experience and having been actively involved in the successful management of the business since joining the group as finance director in 2003.  The board has initiated the process to select a new group finance director:  an announcement on this appointment will be made in due course.  

We also announced in June that Johnny Rowell, would be leaving the company.  Johnny had been with Beazley for 16 years and put an enormous amount of energy into building the specialty lines business into what it is today. Adrian Cox, who has been with Beazley since 2001 and has been in charge of the majority of the specialty lines division for the past year, has become head of specialty lines. 

To further support the new management team, we have appointed David Marock as our chief operating officer. David has been with the company for three years leading our claims team in specialty lines.

Outlook

The first half of 2008 has proved to be a challenging period for both our underwriters and investment managers. Despite this we have still achieved a highly creditable result that is consistent with our track record of unbroken profitability since we commenced underwriting in 1986. Our US venture continues to thrive and is giving us opportunities to write attractive new business to complement our core Lloyd's accounts. The US is now well established and continues to grow substantially.

Our other initiatives, such as investment in claims management within specialty lines, also continue to reap rewards through enhanced customer service, increased client retention rates, lower costs of claims and improved confidence in results and reserving. 

The claims initiative and the US expansion are core to us managing the current downturn in the market effectively. The challenges of a softening market are familiar to us - and we expect that the proven expertise and hard work of our people will enable us to continue to generate significant profit across the market cycle.

Income Statement

         For the period ended 30 June 2008

	Note		6 months ended 30 June 2008  £m		6 months ended 30 June 2007 £m		Year to 31 December 2007 £m
Gross premiums written	2		407.3		434.1		780.5
Written premiums ceded to reinsurers			(115.0)		(108.5)		(128.3)
Net premiums written	2		292.3		325.6		652.2
Change in gross provision for unearned premiums			(25.3)		(73.6)		(24.7)
Reinsurers' share of change in the provision for unearned premiums			45.2		38.4		(10.3)
Change in net provision for unearned premiums			19.9		(35.2)		(35.0)
Net earned premiums	2		312.2		290.4		617.2
Net investment income	3		13.2		32.6		64.9
Other income	4		4.1		4.8		10.1
			17.3		37.4		75.0
Revenue	2		329.5		327.8		692.2
Insurance claims			214.2		161.7		338.6
Insurance claims recovered from reinsurers			(45.4)		(13.2)		(31.2)
Net insurance claims	2,7		168.8		148.5		307.4
Expenses for the acquisition of insurance contracts			82.0		83.1		179.2
Administrative expenses			29.1		29.3		58.2
Foreign exchange (gain)/ loss			(1.4)		1.0		(3.1)
Operating expenses			109.7		113.4		234.3
Expenses	2		278.5		261.9		541.7
Results of operating activities			51.0		65.9		150.5
Finance costs			(6.0)		(5.7)		(12.0)
Profit before tax			45.0		60.2		138.5
Comprises:
Profit before tax and foreign exchange adjustments on non-monetary items			46.0		60.6		130.3
Foreign exchange on non-monetary items			(1.0)		(0.4)		8.2
Income tax expense			(12.9)		(18.6)		(38.1)
Profit after tax			32.1		41.6		100.4
Earnings per share (pence per share):
Basic	5		9.1		11.6		28.1
Diluted	5		8.8		11.3		27.1

  Balance Sheet

       As at 30 June 2008

		30 June 2008  £m		30 June 2007  £m		31 December 2007 £m
Assets
Intangible assets		26.7		29.2		28.7
Plant and equipment		6.7		7.0		7.2
Investments in associates		1.3		1.3		1.3
Deferred acquisition costs		91.4		89.6		82.0
Deferred income tax		4.7		4.3		4.5
Financial investments		1,198.9		956.3		1,132.3
Derivative financial instruments		-		-		1.2
Insurance receivables		248.9		259.5		199.9
Reinsurance assets		443.8		410.2		353.3
Other receivables		19.7		17.0		12.0
Cash and cash equivalents		370.8		354.6		358.3
Total assets		2,412.9		2,129.0		2,180.7
Equity
Share capital		18.5		18.4		18.4
Reserves		196.7		226.5		223.1
Retained earnings		161.3		105.7		157.1
Total equity		376.5		350.6		398.6
Liabilities
Insurance liabilities		1,692.4		1,440.0		1,471.9
Borrowings		153.8		151.2		156.7
Derivative financial instruments		1.1		4.1		-
Deferred income tax		34.2		13.7		34.0
Current income tax liabilities		5.4		9.2		12.0
Creditors		149.5		159.3		106.6
Retirement benefit obligations		-		0.9		0.9
Total liabilities		2,036.4		1,778.4		1,782.1
Total equity and liabilities		2,412.9		2,129.0		2,180.7

    Statement of changes in equity

          For the period ended 30 June 2008

			Share Capital  £m		Reserves £m		Retained Earnings £m		Total £m
Balance as at 1 January 2007			18.1		225.8		75.6		319.5
Profit for the period			-		-		41.6		41.6
2006 final dividends paid			-		-		(11.5)		(11.5)
Issue of shares			0.3		4.0		-		4.3
Equity settled share-based payments			-		1.1		-		1.1
Acquisition of own shares held in trust			-		(3.6)		-		(3.6)
Change in net investment hedge			-		(1.0)		-		(1.0)
Foreign exchange translation differences			-		0.2		-		0.2
Balance as at 30 June 2007			18.4		226.5		105.7		350.6
Profit for the period			-		-		58.8		58.8
2007 interim dividends paid			-		-		(7.1)		(7.1)
Equity settled share-based payments			-		2.3		(0.3)		2.0
Acquisition of own shares held in trust			-		(1.8)		-		(1.8)
Purchase of treasury shares			-		(5.1)		-		(5.1)
Change in net investment hedge			-		1.0		-		1.0
Transfer of shares to employees			-		0.3		-		0.3
Foreign exchange translation differences			-		(0.1)		-		(0.1)
Balance as at 31 December 2007			18.4		223.1		157.1		398.6
Profit for the period			-		-		32.1		32.1
2007 final dividends paid			-		-		(27.9)		(27.9)
Issue of shares			0.1		-		-		0.1
Equity settled share-based payments			-		2.3		-		2.3
Acquisition of own shares held in trust			-		(5.4)		-		(5.4)
Purchase of treasury shares			-		(24.9)		-		(24.9)
Change in net investment hedge			-		0.7		-		0.7
Transfer of shares to employees			-		0.9		-		0.9
Balance as at 30 June 2008			18.5		196.7		161.3		376.5

    Cash flow statement

    For the period ended 30 June 2008

		6 months ended 30 June 2008  £m		6 months ended 30 June 2007  £m		Year to 31 December 2007 £m
Cash flow from operating activities
Profit before tax		45.0		60.2		138.5
Adjustments for non-cash items:
Amortisation of intangibles		2.5		0.9		2.4
Depreciation of plant and equipment		0.6		0.7		1.6
Equity settled share based compensation		2.5		0.8		3.4
Foreign exchange on translation of foreign subsidiary		-		(1.8)		(1.2)
Net fair value gains on financial investments		(16.2)		(1.0)		(14.3)
Changes in operating assets and liabilities
Increase in insurance liabilities		220.3		214.4		246.4
Decrease/(increase) in insurance receivables		(49.0)		(15.5)		36.2
Decrease/(increase) in other receivables		(7.6)		(2.7)		2.4
Increase in deferred acquisition costs		(9.4)		(10.7)		(3.1)
Increase in reinsurance assets		(90.5)		(64.9)		(0.2)
Increase/(decrease) in other payables		41.5		3.4		(49.2)
Income tax paid		(17.9)		(22.1)		(18.7)
Contribution to pension fund		(0.9)		(1.0)		(1.0)
Acquisition of own shares in trust		(5.4)		(3.6)		(5.4)
Net cash from operating activities		115.5		157.1		337.8
Cash flow from investing activities
Purchase of plant and equipment		(0.3)		(0.6)		(1.8)
Purchase of software development		(0.3)		(0.6)		(1.7)
Purchase of goodwill		-		(5.7)		(5.7)
Purchase of investments		(1,659.8)		(1,073.0)		(2,522.5)
Proceeds from sale of investments		1,609.3		1,076.2		2,363.0
Net cash used in investing activities		(51.1)		(3.7)		(168.7)
Cash flow from financing activities
Proceeds from issue of shares		0.9		4.5		4.4
Purchase of treasury shares		(24.9)		-		(5.1)
Dividends paid		(27.9)		(11.5)		(18.6)
Net cash used in financing activities		(51.9)		(7.0)		(19.3)
Net increase in cash and cash equivalents		12.5		146.4		149.8
Cash and cash equivalents at beginning of period		358.3		209.4		209.4
Effect of exchange rate changes on cash and cash equivalents		-		(1.2)		(0.9)
Cash and cash equivalents at end of period		370.8		354.6		358.3

    Notes to the financial statements

    For the period ended 30 June 2008

1.    Statement of accounting policies

Beazley Group plc is a group incorporated in England and Wales. The interim condensed financial statements of the group for the six months ended 30 June 2008 comprise the parent company and its subsidiaries and the group's interest in associates.

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 2007 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 2007 annual report.

The comparative figures for the financial year ended 31 December 2007 are extracted from the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or 237 (3) of the Companies Act 1985.

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. 

Foreign exchange differences on non-monetary items have been left unallocated. This has been separately disclosed as it provides a fairer representation of the loss ratios, which would otherwise be distorted by the mismatch arising under IFRSs whereby unearned premium reserve, reinsurers' share of unearned premium reserve and DAC are treated as non-monetary items and claims reserves are treated as monetary items. Non-monetary items are carried at historic exchange rates, while monetary items are translated at closing rates. This imbalance creates volatility in our accounts which cannot be hedged as the mismatch is not monetary in nature.  

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

As mentioned on page 7 of the 2007 Annual Report a new operating segment has been formed, political risk and contingency, which was formerly included within the specialty lines division. Prior period comparatives for the operating segments have been re-presented to reflect this change.

The expenses ratio was re-stated in 2007 to include all operating costs as we believe that this is a fairer and more transparent representation. This has resulted in a revision to the expenses ratios in the comparative table.

2. Segmental analysis 

30 June 2008
	Marine £m	Political risk and contingency £m	Property  £m	Reinsurance £m	Specialty lines £m	Total reportable segments	Unallocated £m	Total £m
Gross premiums written	71.2	29.7	85.0	50.9	170.5	407.3	-	407.3
Net premiums written	53.9	19.3	57.9	39.7	121.5	292.3	-	292.3
Net earned premiums	54.7	24.0	63.3	28.6	142.4	313.0	(0.8)	312.2
Net investment income	1.4	1.0	1.7	1.6	7.5	13.2	-	13.2
Other income	1.1	0.5	1.2	0.4	0.9	4.1	-	4.1
Revenue	57.2	25.5	66.2	30.6	150.8	330.3	(0.8)	329.5
Net insurance claims	21.4	10.2	36.3	12.1	88.8	168.8	-	168.8
Expenses for the acquisition of insurance contracts	16.6	7.1	18.3	5.0	34.8	81.8	0.2	82.0
Administrative expenses	4.6	3.1	5.7	2.8	12.9	29.1	-	29.1
Foreign exchange gain	(0.2)	-	(0.2)	(0.3)	(0.7)	(1.4)	-	(1.4)
Expenses	42.4	20.4	60.1	19.6	135.8	278.3	0.2	278.5
Segments result	14.8	5.1	6.1	11.0	15.0	52.0	(1.0)	51.0
Finance costs								(6.0)
Profit before tax								45.0
Income tax expense								(12.9)
Profit after tax								32.1
Claims ratio	39%	43%	57%	42%	62%	54%	-	54%
Expense ratio	39%	43%	38%	27%	33%	35%	-	36%
Combined ratio	78%	86%	95%	69%	95%	89%	-	90%

30 June 2007
	Marine £m	Political risk and contingency £m	Property  £m	Reinsurance £m	Specialty lines £m	Total reportable segments	Unallocated £m	Total £m
Gross premiums written	79.6	35.1	106.0	43.2	170.2	434.1	-	434.1
Net premiums written	57.7	30.1	78.2	32.7	126.9	325.6	-	325.6
Net earned premiums	55.3	19.4	73.3	19.5	121.3	288.8	1.6	290.4
Net investment income	3.1	0.9	4.1	3.2	21.3	32.6	-	32.6
Other income	0.4	0.9	1.4	0.6	1.5	4.8	-	4.8
Revenue	58.8	21.2	78.8	23.3	144.1	326.2	1.6	327.8
Net insurance claims	22.8	8.3	36.6	8.5	72.3	148.5	-	148.5
Expenses for the acquisition of insurance contracts	15.5	4.8	21.2	5.0	35.4	81.9	1.2	83.1
Administrative expenses	3.7	3.8	6.6	2.2	13.0	29.3	-	29.3
Foreign exchange loss	-	-	0.1	-	0.1	0.2	0.8	1.0
Expenses	42.0	16.9	64.5	15.7	120.8	259.9	2.0	261.9
Segments result	16.8	4.3	14.3	7.6	23.3	66.3	(0.4)	65.9
Finance costs								(5.7)
Profit before tax								60.2
Income tax expense								(18.6)
Profit after tax								41.6
Claims ratio	41%	43%	50%	44%	60%	51%	-	51%
Expense ratio	35%	44%	38%	37%	40%	39%	-	39%
Combined ratio	76%	87%	88%	81%	100%	90%	-	90%

31 December 2007
	Marine £m	Political risk and contingency £m	Property  £m	Reinsurance £m	Specialty lines £m	Total reportable segments	Unallocated £m	Total £m
Gross premiums written	139.8	64.8	188.0	57.8	330.1	780.5	-	780.5
Net premiums written	119.0	56.5	157.4	49.6	269.7	652.2	-	652.2
Net earned premiums	116.1	43.3	158.0	45.9	243.2	606.5	10.7	617.2
Net investment income	6.0	3.0	8.6	7.1	40.2	64.9	-	64.9
Other income	1.6	1.4	2.1	1.3	3.7	10.1	-	10.1
Revenue	123.7	47.7	168.7	54.3	287.1	681.5	10.7	692.2
Net insurance claims	45.2	11.1	76.6	16.2	158.3	307.4	-	307.4
Expenses for the acquisition of insurance contracts	33.6	12.2	56.3	10.1	64.0	176.2	3.0	179.2
Administrative expenses	8.3	6.8	13.7	3.9	25.5	58.2	-	58.2
Foreign exchange gain	(0.7)	(0.3)	(0.4)	(0.5)	(0.7)	(2.6)	(0.5)	(3.1)
Expenses	86.4	29.8	146.2	29.7	247.1	539.2	2.5	541.7
Segments result	37.3	17.9	22.5	24.6	40.0	142.3	8.2	150.5
Finance costs								(12.0)
Profit before tax								138.5
Income tax expense								(38.1)
Profit after tax								100.4
Claims ratio	39%	26%	48%	35%	65%	51%	-	50%
Expense ratio	36%	44%	44%	31%	37%	39%	-	38%
Combined ratio	75%	70%	92%	66%	102%	90%	-	88%

3.  Net investment return

		6 months ended 30 June 2008  £m		6 months ended 30 June 2007  £m		Year to 31 December 2007 £m
Investment income at fair value through income statement
- interest income		26.2		24.6		53.1
Realised gains/(losses) on financial investments at fair value through income statement
- realised gains		15.4		8.8		18.9
- realised losses		(32.7)		(8.2)		(11.5)
Net fair value gains/(losses) on financial investments through income statement
- fair value gains		21.4		18.5		22.9
- fair value losses		(15.9)		(10.0)		(16.0)
Investment management expenses		(1.2)		(1.1)		(2.5)
		13.2		32.6		64.9

4. Other income

		6 months ended 30 June 2008  £m		6 months ended 30 June 2007  £m		Year to 31 December 2007 £m
Profit commissions		2.5		3.6		7.6
Agency fees		0.5		0.5		1.0
Other income		1.1		0.7		1.5
		4.1		4.8		10.1

5. Earnings per share

		6 months ended 30 June 2008		6 months ended 30 June 2007		Year to 31 December 2007
Basic		9.1p		11.6p		28.1p
Diluted		8.8p		11.4p		27.1p

Basic

Basic earnings per share is calculated by dividing profit after tax of £32.1m (2007: £41.6m) by the weighted average number of issued shares during the period of 351.4m (2007: 358.3m). The shares held in the ESOP have been excluded from the calculation until such time as they vest unconditionally with the employees. 

Diluted

Diluted earnings per share is calculated by dividing profit after tax of £32.1m (2007: £41.6m) by the adjusted weighted average number of shares of 363.4m (2007: 369.4m). The adjusted weighted average number of shares assumes conversion of all dilutive potential ordinary shares, being share options. The shares held in the ESOP have been excluded from the calculation until such time as they vest unconditionally with the employees.

The comparative figures for both basic and diluted EPS have been restated by calculating a daily weighted average number of shares in issue.

6. Dividends

An interim net dividend of 2.2p (2007: 2.0p) per ordinary share is payable on 29 August 2008 to shareholders registered on 8 August 2008 in respect of the six months to 30 June 2008. These financial statements do not provide for the dividends as a liability.

During the six month period to 30 June 2008 dividends were paid of 8.0p per share comprising the 2007 final dividend of 4.0p per share and a special dividend of 4.0p per share.

7. Insurance claims

The loss development tables below provide information about historical claims development by the five segments - marine, political risk 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 balance sheet.

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 redundancies or deficiencies of the past on current claims liabilities. The group believes that the estimates of total claims liabilities as at 30 June 2008 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
				%		%		%		%	%	%
Marine
12 months				59.9		62.8		82.2		57.2	57.1	-
24 months				44.7		64.0		78.6		44.1	-	-
36 months				39.1		61.8		69.3		-	-	-
48 months				36.2		61.4		-		-	-	-
60 months				35.8		-		-		-	-	-
Position at 30 June 2008				35.8		60.9		68.0		39.2	56.4	-
Political risk and contingency
12 months				59.3		69.0		61.4		58.2	57.4	-
24 months				36.6		55.5		38.2		36.3	-	-
36 months				31.7		52.1		28.8		-	-	-
48 months				28.5		37.1		-		-	-	-
60 months				30.3		-		-		-	-	-
Position at 30 June 2008				26.0		39.2		27.3		34.3	57.8	-
Property
12 months				51.3		65.1		84.7		59.3	59.0	-
24 months				38.4		65.0		82.1		46.8	-	-
36 months				35.7		65.3		80.4		-	-	-
48 months				35.1		63.5		-		-	-	-
60 months				34.7		-		-		-	-	-
Position at 30 June 2008				34.7		64.0		80.8		46.2	56.6	-
Reinsurance
12 months				58.6		86.1		189.9		52.5	59.8	-
24 months				33.5		78.9		179.7		24.5	-	-
36 months				28.0		74.1		180.5		-	-	-
48 months				28.2		71.8		-		-	-	-
60 months				25.2		-		-		-	-	-
Position at 30 June 2008				25.1		71.8		177.2		24.5	54.3	-
Specialty lines
12 months				72.6		72.3		72.4		70.6	70.3	-
24 months				70.4		71.6		72.4		70.6	-	-
36 months				68.6		68.0		70.2		-	-	-
48 months				60.5		64.9		-		-	-	-
60 months				53.5		-		-		-	-	-
Position at 30 June 2008				53.0		62.7		69.2		70.6	70.3	-
Total
12 months				63.0		70.4		89.5		63.2	63.4	-
24 months				52.6		68.7		86.4		53.8	-	-
36 months				49.4		66.2		83.1		-	-	-
48 months				45.2		63.3		-		-	-	-
60 months				41.7		-		-		-	-	-
Position at 30 June 2008				41.3		62.5		82.1		52.6	62.4	-
Total ultimate losses(£m)		1,056.1		266.8		461.9		660.6		478.9	608.1	598.4	4,130.8
Less paid claims (£m)		(848.4)		(159.6)		(278.7)		(363.6)		(115.5)	(51.6)	(4.2)	(1,821.6)
Less unearned portion of ultimate losses (£m)		-		-		-		-		(26.3)	(137.7)	(526.5)	(690.5)
Gross claims liabilities (100% level) (£m)		207.7		107.2		183.2		297.0		337.1	418.8	67.7	1,618.7
Less unaligned share (£m)		(45.7)		(23.6)		(40.3)		(65.3)		(72.9)	(78.0)	(11.9)	(337.7)
Gross claims liabilities, group share (£m)		162.0		83.6		142.9		231.7		264.2	340.8	55.8	1,281.0
Net ultimate claims	2002ae		2003		2004		2005		2006		2007	2008
			%		%		%		%		%	%
Marine
12 months			55.5		58.5		55.7		54.2		54.4	-
24 months			44.4		52.7		48.6		43.0		-	-
36 months			39.7		48.7		42.4		-		-	-
48 months			39.2		48.1		-		-		-	-
60 months			39.1		-		-		-		-	-
Position at 30 June 2008			39.3		47.5		41.6		39.4		52.8	-
Political risk and contingency
12 months			57.2		65.4		64.2		56.7		55.7	-
24 months			37.9		57.7		46.9		40.5		-	-
36 months			35.1		54.0		36.3		-		-	-
48 months			32.8		40.0		-		-		-	-
60 months			34.2		-		-		-		-	-
Position at 30 June 2008			27.8		42.7		35.3		40.4		56.2	-
Property
12 months			49.2		59.6		64.8		62.3		61.8	-
24 months			42.6		61.5		62.5		51.9		-	-
36 months			40.3		60.7		58.7		-		-	-
48 months			39.8		59.2		-		-		-	-
60 months			39.3		-		-		-		-	-
Position at 30 June 2008			39.3		59.1		59.6		50.8		58.6	-
Reinsurance
12 months			60.5		87.9		153.8		54.4		55.3	-
24 months			38.3		83.1		125.5		35.8		-	-
36 months			33.4		80.3		124.4		-		-	-
48 months			34.2		74.6		-		-		-	-
60 months			31.1		-		-		-		-	-
Position at 30 June 2008			31.1		74.4		120.6		35.5		49.0	-
Specialty lines
12 months			69.2		69.7		69.6		68.8		69.5	-
24 months			67.5		68.9		69.6		68.8		-	-
36 months			65.9		66.1		67.9		-		-	-
48 months			58.3		62.6		-		-		-	-
60 months			53.1		-		-		-		-	-
Position at 30 June 2008			52.7		60.0		67.7		68.8		68.8	-
Total
12 months			60.4		66.9		73.5		62.5		63.0	-
24 months			53.1		65.3		68.5		55.2		-	-
36 months			50.5		62.8		65.0		-		-	-
48 months			46.9		59.5		-		-		-	-
60 months			44.2		-		-		-		-	-
Position at 30 June 2008			43.7		58.4		64.7		54.0		61.3	-
Total ultimate losses(£m)	556.4		229.1		354.6		412.5		388.0		511.5	502.9	2,955.0
Less paid claims net of reinsurance (£m)	(473.5)		(142.6)		(212.0)		(188.2)		(107.5)		(49.3)	(4.2)	(1,177.3)
Less unearned portion of ultimate losses (£m)	-		-		-		-		(15.8)		(121.8)	(426.8)	(564.4)
Net claims liabilities (100% level) (£m)	82.9		86.5		142.6		224.3		264.7		340.4	71.9	1,213.3
Less unaligned share (£m)	(18.2)		(19.0)		(31.4)		(49.3)		(57.9)		(63.2)	(12.7)	(251.7)
Net claims liabilities, group share (£m)	64.7		67.5		111.2		175.0		206.8		277.2	59.2	961.6

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 2008 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.

Although there has been an increase in claims activity within the market during the first half of 2008, most notably property risk losses, Beazley's relatively light involvement means that the general trend of reducing loss ratios across our business has continued. We comment on the other notable movements by team below.

The reserves established for the 2004 and 2005 hurricanes continue to remain sufficient and the level of paid claims has now reached 91% and 79% of the estimated ultimate claims costs respectively.

In addition, we have yet to fully release our catastrophe loading on the 2007 underwriting year. This should be considered when comparing the interim 30 June 2008 position of the 2007 underwriting year against the development of the previous catastrophe free years, such as 2003 and 2006.

Marine

All years have exhibited a stable or reducing trend. The 2006 reductions have arisen from an improving view on most of the classes.

Political risk and contingency

There have been small deteriorations on the 2004 underwriting year as a precautionary case reserve has been established for a claim on the contingency class.

Property

Despite the increase in claims within the market, all years have exhibited a relatively stable or reducing trend, although releases in the past six months have been lower than in previous years. The slight increases on the 2005 underwriting year have arisen from the homeowners class where we have experienced a general deterioration on two large accounts that we no longer write. This has been partially offset by a release of redundant 2005 hurricane claim reserves, albeit at a gross of reinsurance level only, given that the hurricane claims remain within our catastrophe reinsurance programme and, as such, these releases benefit reinsurers.

Reinsurance

The reductions on the 2005 underwriting year have been caused by increases in inwards reinstatement premium income rather than a reduction in estimated claims liability.

Specialty Lines

We continue to get clarity on the 2004 underwriting year and, as such, the ultimate loss ratios have continued to reduce. Comparing the progression of net incurred loss ratios (exhibit x), the 2004 underwriting year is still tracking the 2003 underwriting year. However as more volatility remains on the open claims on the 2004 underwriting year compared to the 2003 underwriting year at the same stage of development, the ultimate loss ratio reductions on the 2004 underwriting year have lagged.

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.

6 months ended 30 June 2008	Marine  £m	Political risk and contingency £m	Property  £m	Reinsurance  £m	Specialty Lines £m	Total £m
Current year	26.8	12.6	38.9	16.1	97.8	192.2
Prior year
- 2005 and earlier	(0.7)	(2.4)	0.6	(1.3)	(9.0)	(12.8)
- 2006 year of account	(3.9)	-	(1.1)	(0.2)	-	(5.2)
- 2007 year of account	(0.8)	-	(2.1)	(2.5)	-	(5.4)
	(5.4)	(2.4)	(2.6)	(4.0)	(9.0)	(23.4)
Net insurance claims	21.4	10.2	36.3	12.1	88.8	168.8

6 months ended 30 June 2007	Marine  £m	Political risk and contingency £m	Property  £m	Reinsurance  £m	Specialty Lines £m	Total £m
Current year	27.9	10.1	42.7	9.7	83.3	173.7
Prior year
- 2004 and earlier	0.2	-	(0.8)	0.1	(10.5)	(11.0)
- 2005 year of account	(2.6)	(1.8)	(2.0)	-	(0.5)	(6.9)
- 2006 year of account	(2.7)	-	(3.3)	(1.3)	-	(7.3)
	(5.1)	(1.8)	(6.1)	(1.2)	(11.0)	(25.2)
Net insurance claims	22.8	8.3	36.6	8.5	72.3	148.5

Year to 31 December 2007	Marine  £m	Political risk and contingency £m	Property  £m	Reinsurance  £m	Specialty Lines  £m	Total £m
Current year	55.2	20.0	87.4	26.1	182.8	371.5
Prior year
- 2004 and earlier	(0.3)	(4.5)	(2.0)	(3.0)	(21.0)	(30.8)
- 2005 year of account	(4.6)	(2.2)	(3.5)	(1.7)	(3.2)	(15.2)
- 2006 year of account	(5.1)	(2.2)	(5.3)	(5.2)	(0.3)	(18.1)
	(10.0)	(8.9)	(10.8)	(9.9)	(24.5)	(64.1)
Net insurance claims	45.2	11.1	76.6	16.2	158.3	307.4

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 balance sheet strength, operating performance and business profile. Beazley Group plc obtained an A rating, while Beazley Insurance Company, Inc., received a rating of A.

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.

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 the acquisition of insurance contracts and administrative expenses to net earned premiums.  This is also the sum of the expense ratio and the claims ratio.

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, 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 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 the acquisition of insurance contracts and administrative expenses to net earned premiums.

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.

Lloyd's

Lloyd's is the world's leading specialist insurance market. It occupies sixth place in terms of global reinsurance premium income, and is the second largest surplus lines insurer in the US. In 2007, 66 syndicates underwrote insurance at Lloyd's, covering all classes of business from more than 200 countries and territories worldwide.

Managed syndicate

The combination of syndicate 2623 and 623 through which the group underwrite insurance business.

Managing agent

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

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 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 balance sheet 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 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.

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.

Stamp capacity

The volume of business measured in gross written premiums net of acquisition costs underwritten by the group through its managed syndicates at Lloyd's of London.

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 sheet date is accounted for as unearned premiums in the underwriting provisions.

The financial information contained in this document for the year ended 31 

December 2007 does not constitute statutory accounts as defined in section 240 

of the Companies Act 1985. A copy of the statutory accounts for the year ended 

31 December 2007 has been delivered to the Registrar of Companies. The 

auditors' report on those accounts was not qualified and did not contain 

statements under section 237(2) or (3) of the Companies Act 1985. 

The interim financial statements were approved by the Board on 25 July 2008.

 

END

 

 

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