Beazley plc (LON:BEZ) has announced its trading statement for the nine months ended 30 September 2023.
Overview
· Insurance written premiums increased by 9% to $4,325m (Q3 2022: $3,978m)
· Net insurance written premiums increased by 26% to $3,532m (Q3 2022: $2,800m)
· Property insurance written premium is up 63% with rates up 24%
· Premium rates on renewal business increased by 5% (Q3 2022: 17%)
· Investment income of $202m or 2.1% year to date (Q3 2022: loss of $99m or 3.6%)
· Combined ratio guidance on an undiscounted basis remains at low 80s for 2023 full year
· Growth guidance for the year on a net basis remains mid 20s
· Growth on a gross basis is expected to be in line with year to date performance
Adrian Cox, Beazley Chief Executive Officer, said:
“We have taken advantage of the opportunities in the property market this year with our Property Risks division growing 63% as rates increased by 24%. In the Cyber Risks division we continue to experience sustained, demand led growth. We remain committed to disciplined underwriting and have delivered a level performance in Specialty Risks despite significant dislocation in the D&O market.
The insurance business is cyclical and market conditions are evolving quickly. We have chosen to exercise underwriting discipline meaning growth to date is less than we had planned at the start of the year. However, our agile underwriting and the strength of our platform strategy means we have delivered profitable growth to date and our claims experience is better than anticipated.
With sustained discipline and agility in our underwriting I look forward to reporting a strong profit at year end.”
| 30 September 2023 | 30 September 2022 | % increase | |
| Insurance written premiums ($m) | 4,325 | 3,978 | 9% |
| Net insurance written premiums ($m) | 3,532 | 2,800 | 26% |
| Investments and cash ($m) | 9,983 | 8,093 | 23% |
| Year to date investment return | 2.1% | (3.6%) | |
| Rate increase | 5% | 17% |
Premiums
Our performance to the end of September 2023 by business division is as follows:
| Insurance written premiums 30 September 2023 | Insurance written premiums 30 September 2022 | % increase/(decrease) | Year to date Rate change | |
| $m | $m | % | % | |
| Cyber Risks | 872 | 839 | 4% | (4%) |
| Digital | 169 | 180 | (6%) | (1%) |
| MAP Risks | 754 | 835 | (10%) | 7% |
| Property Risks | 1,128 | 691 | 63% | 24% |
| Specialty Risks | 1,402 | 1,433 | (2%) | (2%) |
| OVERALL | 4,325 | 3,978 | 9% | 5% |
Cyber Risks: Overall there has been a moderate rate decrease during 2023. However given the extraordinary rate rises since 2019, pricing remains adequate in this area. Growth conditions in the US mid-market remain promising however competition in the SME end of the market and saturation in the large risk space has slowed growth in the US. The majority of our growth during the year has been outside of the US where penetration rates are lower and the medium term growth prospects are significant.
MAP Risks: The experience and expertise in our MAP division continues to be valued by our clients and has seen a 7% increase in rates, year to date. As previously highlighted, insurance written premium has reduced due to the portfolio underwriting business now being written by syndicate 5623 which is backed predominantly by third party capital. This has the effect of reducing year on year gross premium growth in the division. Net premium growth is not materially affected.
Property Risks: Conditions in the property market have been exceptional so far this year and we have achieved significant growth in the division of 63% year on year. We anticipate favourable conditions to continue in to 2024.
Specialty Risks: The D&O market remains competitive driving the level performance in specialty risks. We will continue to exercise disciplined underwriting where we are not seeing rate adequacy.
Claims
Overall, claims experience year to date is better than expected.
Total natural catastrophes so far this year have been within the margins held in our reserves for such events. Currently, we are confident that there will be no impact on our full year results as a result of the conflict in the middle east although we continue to closely monitor the situation.
In Cyber Risks, despite an increase in ransomware attacks we are not seeing an uptick in claims frequency.
Capital
We aim to maintain a Solvency II ratio in excess of 170% of Solvency Capital Requirement. As we remain committed to active capital management, the level of capital will continue to be driven by opportunities for organic growth, market environment, prudence, regulatory framework and a desire to maximise returns for investors.
We will consider capital management actions in light of the market conditions, our 2023 performance and the outlook for 2024.
Investments
Our portfolio allocation was as follows:
| 30 September 2023 | 30 September 2022 | |||
| Assets | Allocation | Assets | Allocation | |
| $m | % | $m | % | |
| Cash and cash equivalents | 856 | 8.5 | 625 | 7.7 |
| Fixed and floating rate debt securities | ||||
| – Government, quasi-government and supranational | 4,053 | 40.6 | 4,443 | 54.9 |
| – Corporate bonds | ||||
| – Investment grade | 3,538 | 35.4 | 1,876 | 23.2 |
| – High yield | 434 | 4.4 | 297 | 3.7 |
| Syndicate loans | 33 | 0.3 | 31 | 0.4 |
| Derivative financial assets | 15 | 0.2 | 1 | – |
| Core portfolio | 8,929 | 89.4 | 7,273 | 89.9 |
| Equity funds | 267 | 2.7 | 107 | 1.3 |
| Hedge funds | 556 | 5.6 | 506 | 6.2 |
| Illiquid credit assets | 231 | 2.3 | 207 | 2.6 |
| Capital growth assets | 1,054 | 10.6 | 820 | 10.1 |
| Total | 9,983 | 100.0 | 8,093 | 100.0 |
Beazley’s investments have returned $202m, or 2.1%, after nine months of 2023. The benefit of attractive starting yields on our fixed income investments have been offset by further increases in yields throughout the year, generating mark to market losses. However, the average yield of our fixed income investments reached 5.5% at 30 September and this is an encouraging indication for future returns.
Conference call for analysts and investors will be held at 8am GMT on Tuesday 7 November
Dial in details for analysts:
UK-local: +44 (0) 33 0551 0200
UK Toll Free: 0808 109 0700
