Beazley plc - interim results to 30 June 2020
Beazley plc has reported interim results for the half year that ended on 30 June. The half year results are dominated by the Covid-19 pandemic, which Beazley estimates as costing the business $170m in claims. This claims cost is split $70m to the political, accident and contingency book and the balance spread across marine, property and reinsurance accounts. There remains scope for losses to the liability book arising out of economic conditions in the wake of the pandemic. However, the company has sought to mitigate exposures on renewal of potentially exposed business, amending cover and policy wordings where appropriate.
The group raised almost $300m of additional equity in the first half, which it plans to deploy on growth opportunities.
Headlines from the results are as follows
- Gross premiums up 12% to $1,664m
- Rate change on renewal 11%
- Loss before income tax $14m
- Combined ratio 107%
- Prior year reserve releases $59m
- Investment return $83m
The combined ratio for the half year was 107% (H1 2019 was 100%) although the group is optimistic that a full year ratio of 100% remains achievable.
Rates have increased in all operating divisions. The average renewal increase is 11%. The largest increases are in the property market, where the average rate is 15% up on 2019 and 35% up on 2015 levels. Rates for larger commercial properties have increased 22% in the year to date. We have extracted the data from the rate indices and reproduced it as a chart here.
Although there has been dramatic volatility in the investment sphere over the first half of the year, in the first quarter capital gains on fixed income exposures largely offset losses on risk assets. The risk assets recovered in the second quarter. Overall, the investment result was a return of 1.4%. Beazley sees elevated risk of further volatility in the rest of the year. It says it will maintain a cautious strategy and therefore expects returns to be modest.
The group has released $58m from reserves. The reserve margin, the margin over the actuarial best estimate that gives a scope for uncertainty, has increased from 5.2% at 30 June 2019 to 7.0% at 30 June 2020.
Forecasts results for the three Beazley syndicates supported by third party capital (syndicates 623, 5623 and 6107) are not released at this stage