Forecasts & Results
Beazley 1Q22 trading statement
Posted 06/05/2022 – Quick takes
Beazley plc has released a trading statement for 1Q22 ending 31st March 2022
Main highlights from the statement:
- Gross written premiums (GWP) increased by 27% to US$1,229m (vs. US$971m in 1Q21) driven largely by Cyber and the Smart Tracker
- Premium rate growth on renewal business was “slightly ahead of expectations across all divisions” at +17% (vs. 16% in 1Q21) primarily driven by Cyber (+49%), the new ‘Digital’ division (+19%) and Reinsurance (+13%), albeit this rate growth is starting to moderate
- 1Q222 saw an investment loss of US$92m as at 31 March 2022 (vs. an investment gain of US$27m in 1Q21)
- Initial estimate of exposure to the Russia-Ukraine conflict, excluding Aviation, of cUS$50m net of reinsurance
- Combined ratio guidance remains c90% for FY22
Adrian Cox, CEO, said: “The year has started well with gross premiums written increasing by 27% and growth slightly ahead of our expectations across all divisions. This is primarily driven by Cyber where rates have doubled in the first three months of 2022. Whilst the overall rating environment remains positive, the rate change across parts of our business is beginning to moderate. The impacts of the war in Ukraine go far beyond those which are financial, and our thoughts are with everyone who is impacted by this terrible conflict. We continue to monitor the situation closely and have assessed our potential exposures across our business. To date we have seen a small number of claims with respect to the conflict and we remain confident in our combined ratio guidance of around 90% for the full year.”
The group’s GWP and rate changes in 1Q22 are as follows:
Beazley’s claims experience during 1Q22 was better than expected, in particular given further improvements in ransomware frequency following continued underwriting actions.
Beazley has exposure to the Russian-Ukrainian war via its Political Violence, Trade Credit, Aviation and Marine books. Beazley estimates its potential exposure within these classes to be cUS$50m net of reinsurance, excluding potential claims for aircraft stranded in Russia given the complexity of that environment and the uncertain outcome. Beazley has said, however, that were they to include these its combined ratio guidance would remain unchanged. Beazley have also not included potential second order impacts, such as D&O, within this estimate.
Beazley’s group investment portfolio lost US$92m (-1.2%) in 1Q22 as US Treasury yields rose at the highest rate in more than forty years. This means that Beazley is seeing market yields up more than 1.5 percentage points than at the end of last year, improving the longer-term outlook for investment returns. Beazley notes, however, that the global economic outlook remains uncertain and that further market volatility is likely.
This is an encouraging trading statement from Beazley given the continued growth, above expectation rate increases and a lower than expected claims experience. The Ukraine reserve is in line with what we have seen from the likes of Lancashire & Hiscox and although it does not include a reserve for the aircraft stranded in Russia, we are encouraged that the group states that its full year combined ratio for (the financial year) 2022 would not change were a reserve to be put in place for losses in this regard. We regard this as a positive overall statement for those members that support syndicate 623 and the growth in market facilities and cyber is also encouraging for those members that support syndicates 5623 and 6107 too. We continue to monitor the Ukraine situation very closely and will keep members informed as we receive more granular data on exposures.