Beazley 2019 Interim Results

Beazley plc, the owner of Beazley Furlonge Ltd (managing agent of syndicates 623, 6107 & 5623), has today (23 July) announced its half year 2019 annualised results

Andrew Horton, Chief Executive Officer, said:

“Beazley achieved strong premium growth of 12% in the first half of the year. Claims concentrated largely in our marine and reinsurance divisions drove our combined ratio to 100%, but premium rates have adjusted accordingly and margins in many lines of business now look healthier than they have in some years. We expect to achieve double digit growth over the full year, while continuing to reserve prudently. Our investment return was 3.3% for the first half of 2019, with nearly all asset classes performing strongly. Investment returns are expected to be lower in the second half of the year.”
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Alpha comment:

These are a mixed set of results for Beazley. On the positive side, the overall profit is up handsomely, which was made possible by a very much improved investment return, driven by the positive effect of rising interest rates on the capital valuation of its bond holdings as well by record high US stock market valuations. On the negative side, the underwriting performance has deteriorated, despite an improved rating environment which, taken as a whole, has increased by 5 points. By not giving accident year as well as calendar year combined ratios per division, it is difficult to determine whether the drivers of this under performance were due to recent or prior year losses. In his commentary, however, Horton paid mention to Typhoon Jebi, the loss creep for which has had an impact across the industry. On this basis one might assume Jebi was the key determinant of the 140% calendar year combined ratio for the reinsurance division, an uncommonly high figure for it produce given the 2019 North Atlantic hurricane season had not yet opened (the equivalent figures for 2018 and 2017 were 68% and 75%, respectively). Also cited was poor experience on the aggregate excess of loss reinsurance policies it has sold. Away from the short tail business it underwrites, a strategy of submitting higher ultimate loss predictions for its medium tail books was also highlighted as a contributing factor to the worsening of the group combined ratio performance as at 30th June 2019. In doing so, however, it is hoped that a bolstered reserving position will give Beazley greater future opportunity to make prior year reserve releases, to the benefit of the bottom line, having seen reserves held depleted by the particularly high amount of catastrophe activity over the past two years. The stockbroking community has on the whole had a favourable reaction to these interim results, with the Beazely plc share price today up by 5.2% on yesterday’s closing.