Beazley plc reports encouraging 9m21 results despite higher than expected nat cat losses

Posted 05/11/2021 – Quick takes

Beazley plc has released its financial results to the 30th September 2021. Group gross written premium (GWP) is +29% year-on-year on the back of rate growth that is higher than expectations. The group’s blended rate change across the first 9 months of the year was +23% (including cyber +48%).

The breakdown of the rate increases is as follows:

Beazley’s initial estimate of catastrophe losses for 3Q21 is $125m net of reinsurance (vs. $150m for Hiscox and $225m for Lancashire), including an early estimate of $85m for Hurricane Ida and $40m for the European floods. The frequency of ransomware claims continues on a downwards trajectory after significant remediation of the cyber book. The full year combined ratio is now expected to be in the mid-90s, assuming similar claims experience in 4Q21.

Investments returned 0.2% in 3Q21 and 1.4% ($99m) in 9m21.

Bob Quane has now joined Beazley as the new Chief Underwriting Officer (taking over from Adrian Cox, who has moved to CEO). Quane was previously the CUO at Axis and has more than three decades of industry experience.

Adrian Cox, group CEO, said: “I am delighted that the momentum from the first half has persisted into the second with rate rises and premium growth that have exceeded our expectations. We continue to be strongly capitalised and are well placed to take advantage of these favourable market conditions. I remain excited about the opportunity in the cyber market and with our disciplined and prudent risk selection, our market leading product offering and the ongoing investment in our cyber infrastructure, I believe we are in a great position to capitalise on this.”

Alpha comment: We are pleased to see: (i) the continuing upwards rate trajectory (particularly in cyber); (ii) the falling claims frequency for ransomware; and (ii) Beazley’s forecast for a full-year combined ratio in the mid-90s. We believe these factors more than offset the fact that total catastrophe losses in 2021 have been in excess of the margins held within Beazley’s reserves. This sentiment has been reflected in the stock market, with Beazley’s shares +c5% on the back of the results.

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