Trading Statement

RNS Number : 5369K

Beazley PLC

06 May 2022

 

Press

Release

Beazley plc trading statement for the three months ended 31 March 2022

London, 6 May 2022

Overview

· Gross premiums written increased by 27% to $1,229m (Q1 2021: $971m)

· Premium rates on renewal business increased by 17% (Q1 2021: 16%)

· Claims experience in the year so far better than expected

· Investment loss of $92m as at 31 March 2022 (Q1 2021: gain of $27m)

· Initial estimate of exposure to the Russia-Ukraine conflict, excluding Aviation, of approximately $50m net of reinsurance

· Combined ratio guidance remains around 90% for 2022 full year

Adrian Cox, Chief Executive Officer, said: 

'The year has started well with gross premiums written increasing by 27% and growth slightly ahead of our expectations across all divisions.  This is primarily driven by Cyber where rates have doubled in the first three months of 2022.  Whilst the overall rating environment remains positive, the rate change across parts of our business is beginning to moderate.

The impacts of the war in Ukraine go far beyond those which are financial, and our thoughts are with everyone who is impacted by this terrible conflict. We continue to monitor the situation closely and have assessed our potential exposures across our business. To date we have seen a small number of claims with respect to the conflict and we remain confident in our combined ratio guidance of around 90% for the full year.'

	31 March 2022	31 March 2021	% increase/ (decrease)
Gross premiums written ($m)	1,229	971	27%
Investments and cash ($m)	7,785	6,740	16%
Year to date investment return	(1.2%)	0.4%	(400%)
Rate increase	17%	16%	1%

Premiums

Growth has been achieved in most of our divisions with gross premiums written for the three months ended 31 March 2022 increasing by 27% year on year to $1,229m.  This is driven by a combination of rate increases and adding exposure in a number of areas.

Our performance to the end of March 2022 by business division is:

	Gross premiums written 31 March 2022	Gross Premiums  written 31 March 2021	% increase/ (decrease)	Year to date Rate change
	$m	$m	%	%
Cyber & Executive Risk	342	232	47%	49%
Digital*	47	32	47%	19%
Marine	94	100	(6%)	5%
Market Facilities	71	42	69%	6%
Political, Accident & Contingency	106	84	26%	3%
Property	130	113	15%	6%
Reinsurance	93	97	(4%)	13%
Specialty Lines*	346	271	28%	5%
OVERALL	1,229	971	27%	17%

*The comparative figures for Specialty Lines have been represented due to the split out of Digital business into its own segment

Overall, gross premiums written and rate change year to date are slightly ahead of expectations across all divisions.

Our Cyber & Executive Risk division made a good start to 2022, with continued momentum in both premium growth at 47% and rate change of 99% in the Cyber and Tech book benefiting from the dislocated market conditions.

Our newly created Digital division is now reported separately, and saw strong growth within the International Lines business and further positive rate change in the Cyber portfolio.

In Marine, n ew entrants to the Hull market have led to a small reduction in the first quarter, however we expect this position to move to overall growth in the remainder of the year. 

Political, Accident & Contingency have started 2022 well, aided by ending of lockdowns across large parts of the world. Growth can be seen across most lines of business, in particular within Political and Contingency.

Specialty Lines achieved 28% premium growth in the first quarter of 2022. Compared to the first quarter of 2021, International Specialties, Professions and Specialty Risks & US Programmes (previously US PE) have all seen strong growth. There is positive rate change across the division and particularly in our Healthcare business.

Our Reinsurance division saw a slight premium reduction in Q1 2022, as we continue to exercise restraint in the light of the rating environment which remained below expectations, but with a view to achieving some targeted growth at the mid-year.

Our Property division achieved premium growth of 15% for the first quarter of 2022 backed by rate change of 6%, as we continued our growth trajectory from 2021.

Business update

From the second quarter of 2022 our results will be presented on the basis of our new divisional structure: Cyber Risks, Specialty Risks which combines Specialty Lines with Executive Risk, MAP Risks which brings together our Political, Accident & Contingency division with Marine, Property Risks which now includes our primary Property book and Property Reinsurance division and Digital.

The divisions will be interconnected, able to operate at scale and will generate efficiencies and deliver innovation that will benefit Beazley's clients and brokers.

Claims update

Claims experience during the first quarter of 2022 has been better than expected.  In particular, we continue to see further improvements in ransomware frequency following continued underwriting actions. The latest data shows frequency reductions since Q4 2020 of 25% per policy, and 65% when premium rate changes are also allowed for.

Following the Russian invasion of Ukraine, we have seen a small number of claims to date.  We have reviewed all areas of our underwriting portfolio to identify those classes that we believe may be directly impacted by the conflict. The relevant exposures are within our Political Violence, Trade Credit, Aviation and Marine books.  Our review is predicated on the current scope of the conflict, and therefore does not contemplate further escalation. Our estimate of potential exposure within these classes is $50m net of reinsurance. 

The number above does not allow for potential claims for aircraft stranded in Russia as the environment is complex and the outcome uncertain. However, were we to include these our combined ratio guidance would remain unchanged. We have also not included potential second order impacts, such as D&O, within this estimate.

Investments

Our portfolio allocation was as follows:

	31 March 2022		31 March 2021
	Assets	Allocation	Assets	Allocation
	$m	%	$m	%
Cash and cash equivalents	573	7.3	387	5.7
Fixed and floating rate debt securities
-  Government, quasi-government and supranational	4,099	52.7	2,852	42.3
-  Corporate bonds
-  Investment grade	1,777	22.8	2,164	32.1
-  High yield	378	4.9	305	4.5
Syndicate loans	38	0.5	41	0.7
Derivative financial assets	41	0.5	21	0.3
Core portfolio	6,903	88.7	5,770	85.6
Equity funds	127	1.6	278	4.1
Hedge funds	443	5.7	468	7.0
Illiquid credit assets	309	4.0	224	3.3
Capital growth assets	882	11.3	970	14.4
Total	7,785	100.0	6,740	100.0

Our investments lost $92m, or 1.2%, in the first quarter, as US Treasury yields recorded their largest quarterly increase in more than forty years, generating significant losses in our fixed income investments. Inflation concerns were pushing yields higher even before the Russia-Ukraine conflict and this trend has become more prevalent since. We maintained very low duration in our portfolio throughout the period and this has materially improved our investment performance. Market yields are now more than 1.5 percentage points higher than at the end of last year, which will help our return to recover in the remainder of 2022 and into 2023, as well as improving the longer term outlook for investment returns. However, the global economic outlook remains uncertain and further market volatility is likely.

Our fixed income portfolio yield was 2.3% at 31 March 2022 (31 December 2021: 0.9%). However, the derivative instruments we are using to shorten the duration of our portfolio have the effect of reducing overall yield by 1.0%, to 1.3%. This 'drag' on our fixed income yield will reverse as we return duration to more normal levels. At 31 March 2022, the duration of this portfolio (adjusted for derivative exposures) was 1.0 years (31 December 2021: 1.5 years).

Conference call

We will be hosting a conference call for analysts at 8am this morning, dial in details are below, please join 5 minutes before the start:

Tel number: [phone]

Quote Beazley when prompted by the operator.

Or alternatively join the webcast using the following link:

Webcast link:

https://www.investis-live.com/beazley/6260299d93f81712000627a2/regqf

ENDS

For further information, please contact:

Beazley plc

Sarah Booth

[phone]

Note to editors:

Beazley plc (BEZ.L), is the parent company of specialist insurance businesses with operations in Europe, North America, Latin America and Asia. Beazley manages seven Lloyd's syndicates and, in 2021, underwrote gross premiums worldwide of $4,618.9 million. All Lloyd's syndicates are rated A by A.M. Best. 

Beazley's underwriters in the United States focus on writing a range of specialist insurance products. In the admitted market, coverage is provided by Beazley Insurance Company, Inc., an A.M. Best A rated carrier licensed in all 50 states. In the surplus lines market, coverage is provided by the Beazley syndicates at Lloyd's.

Beazley's European insurance company, Beazley Insurance dac, is regulated by the Central Bank of Ireland and is A rated by A.M. Best and A+ by Fitch.

Beazley is a market leader in many of its chosen lines, which include professional indemnity, cyber liability, property, marine, reinsurance, accident and life, and political risks and contingency business.

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

 

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