Forecasts & Results

Beazley plc releases 3Q22 trading statement

Posted 11/11/2022 – Quick takes

  • Gross written premiums (GWP) increased by +22% to US$3,980m (vs. 3Q21 US$3,271m).
  • Premium rates on renewal business increased by +17% (3Q21 +23%).
  • The initial Hurricane Ian loss estimate is US$120m, net of reinsurance.
  • The group has reported mark-to-market investment loss of $289m or 3.6% year to date (Q3 2021: income of $99m or 1.4%).
  • Beazley plc is guiding for a high 80’s combined ratio for the 2022 full (fiscal) year.

Adrian Cox, CEO, said: “We have had a strong underwriting performance over the quarter with all divisions continuing to grow. As expected overall rates have moderated, however we are seeing increased demand across many lines of business which supports our growth ambitions. Whilst mark to market losses have occurred due to rising yields in our fixed income portfolio, rising yields also mean we anticipate significant future investment returns. We remain confident of our guidance of high 80s combined ratio assuming claims experience is as expected for the remainder of the year.”

 

  • Premium growth and rate change for the divisions was as follows:

Source: Beazley plc

  • Cyber saw rate increases of 51%, albeit the trend moderated in 3Q22. The group took advantage of new business opportunities and has therefore grown premiums by +66%. Further growth is expected into 2023 and beyond. The latest data shows frequency reductions of 35% per policy, and 70% when premium rate changes.
  • Property saw a change in market sentiment in 3Q22 and Beazley expects growth to accelerate, with rates hardening. Natural catastrophes so far in 2023 have been within the cat budget, with an initial Hurricane Ian estimate of around US$120m, net of reinsurance.
  • In Specialty Risks, the D&O market has been more competitive than anticipated.
  • The group continues to monitor inflation to ensure adequate pricing.
  • The group’s investment portfolios produced a loss of -1.2% (-US$96m) in 3Q22, with the total loss year-to-date of -3.6% (-US$289m) due to rising interest rates which generated mark-to-market losses in the fixed income portfolios. As at 30th September, Beazley’s fixed income portfolio had a duration of 1.9 years and a market yield of 4.6%, which the group believes is indicative of the much higher returns available in future periods, once yields stabilise.

Alpha comment

This is an encouraging trading statement from Beazley, which combines (i) growth in the underwriting book(s); (ii) continuing positive rate increases; (iii) a Hurricane Ian loss that is in-line with equity market expectations; and (iv) a forecast combined ratio for 2022 that is ahead of its peer group. This combined ratio forecast bodes really well for supporters of Beazley’s syndicates 623, 5623 & 6107 for the 2022 year of account.

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