Insights

Beazley Capital Markets day

Posted 19.05.2022 – Quick takes

On Wednesday 18th May, Beazley plc held a Capital Markets Day for investment analysts. Adrian Cox, group CEO, explained that it was Beazley’s first ever such event and that it was designed to provide an opportunity for the group to both explain what makes Beazley plc different from its listed UK insurance peers, as well as to showcase more of the group’s products and explain how they fit within the group. Cox also outlined the recent restructuring of the underwriting teams and changes to the executive management team (which we have previously reported). Cox continued explaining how being specialists allows Beazley to lead the market in select classes and also to demand higher rates. Cox described how the overall group strategy is the intersection of its Platform strategy & its Product strategy. Beazley continues to build its US platform, a process that will take around fifteen years to complete, in order to capture the growth potential of that important market, particularly in the Admitted and Excess & Surplus Lines (E&S) markets. Asia (via Singapore) and Europe (France, Germany & Spain) will also be important regions for growth in the future. The group’s product strategy is designed around specialisation, long-term forecast demand growth and higher returns on capital.

Although all of the product groups presented (Cyber, MAP, Property, Specialty & Digital), Cyber was the main area of focus both in terms of the presentation time allotted to the head of Cyber, Paul Bantick, and the questions asked by analysts. This is undoubtedly due to the level of rate rises in Cyber of late, as well as the planned growth (both rate and exposure) for the class. Bantick covered many of the topics that our members will be familiar with, given his presentations to both Alpha’s Autumn 2021 Pre-Auction members’ meeting and his recent Conversation with an Underwriter. He said that Beazley have an ambition for cUS$1.3bn of Cyber GWP in 2022 within a cUS$9bn global market, explaining that Beazley has a very large market share amongst US Small & Medium-sized Enterprises (SMEs), largely due to the success of its Beazley Breach Response (BBR) product. Cyber is organised under four products: (i) the flagship BBR for SMEs; (ii) Information Security & Privacy (for the large enterprise market); (iii) MediaTech (for specialist technology and business services companies) & (iv) Beazley Media (specialist multimedia companies). BBR is a unique offering and has propelled Beazley to its market-leading position in Cyber, largely due to the fact that it provides Cyber-related services as well as traditional insurance cover. In the case of Cyber, prevention is now seen as more important than the cure by buyers of cover. Bantick also explained that the US market will continue to be an important driver of growth, but that Asian markets (out of Singapore) and Europe will also be a focus for growth, given that these Cyber markets are six, or more, years behind the US & UK.

Beazley’s short-term outlook for Property (covered by Bob Quane, Beazley’s CUO, in the absence of the lead underwriter Richard Montminy) remains cautious given questionable pricing adequacy and further group analysis on climate change and non-modelled perils. Exposure to 1-in-10 year events has been decreasing since 2019. In the MAP division (Marine, Aviation and Political Risks) Tim Turner explained that the group has no plans to withdraw from lines impacted by the war in Ukraine, although Beazley has ceased to write business in impacted locations. During the presentation on Specialty Risks, Bethany Greenwood explained that US casualty trends appear to remain subdued, but that it is hard to disaggregate the impact of court closures during COVID on the data. D&O is still seen as ‘high risk’, but management still believes that the market is allowing underwriters to price for this and, as such, Beazley is happy to continue to grow this class. Digital, now a stand-alone division focusing upon clients with less than US$35m of revenues, is led by Ian Fantozzi. The digital business encompasses a broad range of business lines, but built around a light touch, self-service offering in the US, UK, Canada, France, Germany and Spain. Growth in this division should generate significant operational leverage on a relatively fix cost base (post-investment).

Alpha comment

Although the event covered the group’s activities (rather than solely its Lloyd’s underwriting) and was aimed at City analysts, it was interesting to listen in to the various divisional heads speak about their specialist areas of underwriting. The CEO, Adrian Cox, gave a clear summary of the group’s strategy and Paul Bantick gave a very comprehensive explanation of both the growth prospects in Cyber, as well as Beazley’s strategies for risk management in the class. We continue to feel completely comfortable with our support of the diversified Beazley syndicates (623 & 5623) and, in particular, 6107, which has an increased level of Cyber exposure.

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