Beazley plc, the owner of Beazley Furlonge Ltd, (managing agent of syndicates 623, 6107 & 5623) has announced its 2019 calendar year results.
A summary of the key ratios is set out below:
|Gross written premium||$3,004m||$2,615m||15%|
|Combined ratio||100%||98%||(2 points)|
|Profit before tax||$268m||$76m||250%|
Andrew Horton, Chief Executive Officer, commented:
“Beazley achieved a profit before tax of $268m in 2019, driven by a very strong investment return of $264m. Overall gross premiums written increased by 15% to $3,004m, with three of our six divisions achieving double digit growth. An adverse claims experience across several lines of business, leading to reduced prior year reserve releases, meant that our combined ratio rose to 100% for 2019. Despite this, we are optimistic that the re-medial action that we have been taking across several lines of business in recent years, alongside the expected continued premium rate increase, will favour us as we move into 2020.”
Click here to read the full report.
Alpha comment: these figures show a break-even underwriting result, compared to a modestly profitable performance in 2018. Though disappointing, the stock market community reacted favourably to this news, following the Q3 trading update in November 2019, which forecast a combined ratio of up to 102%. Of the six divisions, the combined ratio of 154% for reinsurance was the most heavily loss-making (2018: 103%) and the key driver of the Group’s inferior underwriting result compared to 2018; with only the marine division, which produced a combined ratio of 107%, joining it as a loss-making business unit. A far smaller prior year reserve release than for 2018 was a major contributing factor to the Group’s overall underwriting result. Though the reinsurance, marine and property divisions’ reserves each required strengthening, a negative swing in prior year contributions was also present in the specialty lines division (i.e. traditional long tail casualty business), which contributed a release of $37m for 2018, somewhat down on the $86m reported for 2018. The underlying causes for reserve deterioration in these shorter-tail classes followed under-reserving of ‘one off’ events, namely loss creep experienced from claims relating to Typhoon Jebi and the Woolsey wildfires in California. Conversely, the falling prior year contribution from the specialty lines division points to a underlying trend of larger US jury awards and settlements contributing to so called ‘social inflation’. It is therefore reassuring that market pricing was shown to respond in kind, with the directors’ and officers’ (D&O) book registering a 31% rate increase, the largest of any subclass, which compared to a 6% increase across the Group’s entire underwriting.