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Beazley PLC -Trading Statement

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    • Financial Results

Gross premiums written increased by 16% to $971m (Q1 2020: $840m)...


·      Premium rates on renewal business increased by 16%, ahead of our expectations

·      COVID-19 first party loss estimate remains unchanged at $340m net of reinsurance

·      Q1 catastrophe losses estimated to be approximately $70m net of reinsurance

·      Early indications suggest that underwriting actions taken since September 2020 are having a positive impact on cyber ransomware trends

·      Investment return of $27m (Q1 2020: loss of $55m)

·      Capital surplus remains within our preferred range

  

Adrian Cox, Chief Executive Officer, said: 

"We have had a positive start to the year with good rate momentum that is well ahead of our expectations as well as continued strong targeted growth. We expect favourable market conditions to continue and are well positioned to take advantage of them given our capital surplus remains within our preferred range."           

 31 March 202131 March 2020% increase
Gross premiums written ($m)97184016
    
Investments and cash ($m)6,7405,77417
    
Year to date investment return0.4%  (0.9)% 
    
Rate increase16%8% 

 

Premiums

Growth has been achieved in most of our divisions with gross premiums written for the three months ended 31 March 2021 increasing by 16% year on year to $971m.  This is driven by a combination of rate increases and adding exposure in a number of areas. 

Our performance to the end of March 2021 by business division is:

 

Gross premiums written

 

31 March 2021

 

Gross premiums written

 

31 March 2020

 

% increase/ (decrease)Year to date Rate change
 $m$m%%
     
Cyber & Executive Risk23219519%32%
Marine100100-12%
Market Facilities423135%9%
Political, Accident & Contingency8491(8%)6%
Property1139124%9%
Reinsurance978810%14%
Specialty Lines30324424%14%
OVERALL97184016%16%

 

Whilst the overall growth we are seeing is in line with expectations, we are benefitting from higher than expected rate changes.

The Cyber & Executive Risk division overall achieved premium growth of 19%. This was driven in part by continued growth in Executive Risk as the market continues to respond to the claims environment in D&O. The market conditions and rate environment within Cyber have exceeded our expectations in the year so far, however as we are also taking significant underwriting action the overall premium growth is lower than the rate change. 

Our largest division, Specialty Lines, continues to benefit from positive market conditions.

The Marine, Property and Reinsurance divisions are performing broadly as expected with respect to both growth and pricing. 

We have seen lower contingency renewals within the Political, Accident and Contingency team which is largely expected due to ongoing uncertainty around the ability to hold in person events.

 

Business update

In April this year, Adrian Cox replaced Andrew Horton as CEO.  Adrian was previously the Chief Underwriting Officer ("CUO") and has been a member of the Beazley plc board since 2010 playing a significant role in the formation of Beazley's strategy and underwriting philosophy.  His appointment as CEO provides continuity for the business.  

Andrew Pryde, who has been Chief Risk Officer ("CRO") since 2011, will be leaving Beazley at the end of May.  Rob Anarfi, Global Head of Compliance, will combine his current role with that of the CRO to become the Chief Compliance and Risk Officer ("CCRO")   We thank Andrew for his valuable contribution to the business as CRO and a member of the leadership team for the last 10 years.

In February, we announced the formation of a new digital business unit led by Ian Fantozzi to bring together multiple strands of work and multi-skilled teams to build a cohesive, transformative etrading strategy. 

 

Claims update

Since September 2020, the cyber team has been deploying underwriting action due to the heightened claims environment  driven by ransomware trends.  These actions include working with clients on ensuring robust risk management practices.  While it is too early to determine the full impact, we are seeing early positive indications within the emerging claims trends. 

Catastrophe losses for Q1 are estimated to be approximately $70m net of reinsurance, largely driven by the storms which affected large parts of the West and South West US.

We announced in September 2020 that our first party COVID-19 claims estimate was $340m net of reinsurance, with this estimate assuming a resumption to some form of normality in the second half of 2021. Were this not to be the case, we estimate that there is potential for a further $50m of claims net of reinsurance to the end of 2021.

The Ever Given marine loss has had a negligible impact.

           

Investments

Our portfolio allocation was as follows:

 

 31 March 202131 March 2020
 AssetsAllocationAssetsAllocation
 $m%$m%
Cash and cash equivalents 387       5.7        3425.9
Fixed and floating rate debt securities    
-     Government, quasi-government and supranational 2,852     42.32,21638.4
-     Corporate bonds    
-     Investment grade 2,164     32.12,60545.1
-     High yield 305       4.5        50.1
Syndicate loans 41       0.7            8            0.1
Derivative financial assets 21       0.3            170.3
Core portfolio 5,770     85.6      5,193         89.9
Equity funds 278       4.1        52            0.9
Hedge funds 468       7.0        325            5.6
Illiquid credit assets 224       3.3        204            3.6
Capital growth assets 970     14.4        581          10.1
Total 6,740   100.05,774       100.0

 

Our investments returned $27m, or 0.4%, in the first quarter. This was a difficult period for fixed income assets, as rising yields generated losses on these exposures. We reduced the duration of our portfolio in the period, which has helped to protect asset values. Equities have performed well and we were able to benefit by adding to our exposures during the period. Our hedge fund portfolio also generated a good return, helping us achieve a positive, though modest, overall return in the quarter. We expect investment returns to remain low in the near term.

Our fixed income portfolio yield was 0.7% at 31 March 2021 (31 December 2020: 0.6%) and the duration of this portfolio was 1.5 years (31 December 2020: 1.8 years).

 

Capital update

Beazley continues to manage capital actively and prudently during these times of continued strong growth.  Capital surplus is measured with reference to the Lloyd's economic capital requirement (ECR), which also allows for future growth.  We remain within our preferred range of 15-25% above the ECR, allowing sufficient flexibility to take advantage of the favourable market conditions.

 

Conference call

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

 

Webcast URL:

https://www.investis-live.com/beazley/608c2e0b30248e180003e997/ythr