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Beazley plc trading statement for the nine months ended 30 September 2018

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  • Topics:
    • Accident & Health / Contingency
    • Construction
    • Financial Results
    • Marine Cargo
    • Marine Hull
    • Marine Liability
    • Property - International
    • Property - North America
    • Property - UK
    • Rates
    • Solvency II

Gross premiums written increased by 11% to $1,958m (2017: $1,762m); Premium rates on renewal business increased by 3%. Andrew Horton, Chief Executive Officer, said...

"Our business continues to deliver double digit premium growth and has been aided by higher rates in some classes following last year's catastrophe losses.  Geographically, the main engine of our premium growth continues to be the US market, where we saw premiums rise 18% relative to the first nine months of last year. We expect this positive momentum to continue and are aiming to deliver high single digit growth for the group again in 2019."

 

 

30 September 2018

30 September 2017

% increase/(decrease)

Gross premiums written ($m)

1,958

1,762

11

 

 

 

 

Investments and cash ($m)

5,012

4,829

4

 

 

 

 

Year to date investment return

0.5%

2.4%

(79)

 

 

 

 

Rate increase/(decrease)

3%

(1%)

 

 

 

Premiums

 

Gross premiums written for the nine months ended 30 September 2018 increased by 11% year on year to $1,958m. Growth has been achieved across all our divisions.

 

Specialty lines, our largest division, grew by 11% to $1,026m. This was driven by a strong performance in the US.

 

Our political, accident and contingency division has achieved premium growth of 5% year on year, writing $183m in the nine months to 30 September 2018. The growth was driven by a strong performance of the accident & health portfolio in the US and was in spite of a continued rate decrease primarily in terrorism.

 

The property team continue to benefit from the positive rate change as a result of last year's catastrophe events. Premiums have increased by 21% year on year to $340m.

 

 

Our performance to the end of September 2018 by business division is:

 

 

Gross premiums written

 

30 September 2018

Gross premiums written

 

30 September 2017

% increase

Q3 2018 Rate change

 

$m

$m

%

%

 

 

 

 

 

Marine

221

205

8%

2%

Political, accident & contingency

183

175

5%

(2%)

Property

340

281

21%

11%

Reinsurance

188

176

7%

6%

Specialty lines

 

1,026

925

11%

 -

OVERALL

1,958

1,762

11%

3%

 

 

Business update

 

We continue to invest in growth and have recently launched new SL international products in a number of European countries. We are also working with Lloyd's to ensure a smooth transition for customers in all Brexit outcomes.

 

We have taken the decision to cease underwriting construction and engineering business. This business accounted for approximately 10% of our property division's premiums in 2017. After careful analysis, we concluded it was unlikely to satisfy our cross-cycle profitability requirements in the foreseeable future.   

 

Our business plan for our Lloyd's syndicates for 2019 has been approved by Lloyd's together with the accompanying capital requirements. Taking these into account we expect to have surplus capital (on a Solvency II basis) of 23% of the projected year end ECR.

 

 

Claims update

 

We have concluded our nine month claims review and the development in our specialty lines book is in line with expectations. There has been a series of natural catastrophe events and individual risk losses that in aggregate have generated material incurred losses in our short tail lines. Our initial estimate of the cost of the hurricanes Florence and Michael and the typhoons Jebi and Trami is around $105m net of reinsurance and reinstatement premiums.

 

 

Investments

 

As at the end of September our portfolio allocation was as follows:

 

 

              30 September 2018

            30 September 2017

 

  Assets

Allocation

Assets

Allocation

 

$m

%

$m

%

Cash and cash equivalents

388

7.7

496

10.3

Sovereign, quasi-sovereign and supranational

1,304

26.0

1,231

25.5

Corporate debt

-     Investment grade

 

2,499

 

49.9

 

2,148

 

44.5

-     High yield

 

60

1.2

108

 

2.2

 

Senior secured loans

 

135

2.7

100

2.1

Asset backed securities

-

-

2

-

Derivative asset

3

0.1

7

0.1

Core portfolio

4,389

87.6

4,092

84.7

Equity linked funds

89

1.8

211

4.4

Hedge funds

352

7.0

349

7.2

Illiquid credit assets

182

3.6

177

3.7

Overall portfolio

5,012

100.0

4,829

100.0

 

The year to date investment return to 31 October 2018 was $26.0m (0.5% year to date), or 0.6% annualised. Rising yields and volatile markets have adversely impacted the value of many of our investments, leading to a return below our expectations in this period. However, higher yields are an encouraging sign for future returns.

 

The weighted average duration of our fixed income portfolio was 1.8 years at 30 September 2018 (30 September 2017: 2.0 years).