TIDMBEZ
RNS Number : 4177K
Beazley PLC
22 April 2020
Press
Release
Beazley plc trading statement for the three months ended 31
March 2020
London, 22 April 2020
Overview
-- Gross premiums written increased by 13% to $840m (2019: $743m)
-- Premium rates on renewal business increased by 8%
-- Investment loss of 1% year to date
-- Early estimate of losses resulting from Covid-19 of $170m net of reinsurance
Andrew Horton, Chief Executive Officer, said:
"The events seen in the first quarter of 2020 have been
unprecedented. Covid-19 has touched every corner of the globe and
the impact of this pandemic is still being assessed. In mid-March
we successfully moved to remote working arrangements for all our
employees and from an operational perspective there has been no
material disruption to our business. We continue to monitor closely
all developments relating to the coronavirus outbreak and our
priorities remain the wellbeing of our colleagues and delivering an
excellent service to our clients."
31 March 31 March % increase
2020 2019
-------------------- --------- --------- -----------
Gross premiums
written ($m) 840 743 13
Investments and
cash ($m) 5,774 5,095 13
Year to date
investment return (1%) 2%
Rate increase 8% 3%
-------------------- --------- --------- -----------
Premiums
Gross premiums written for the three months ended 31 March 2020
increased by 13% year on year to $840m.
From 1 January 2020, our market facilities business has been
split out of specialty lines to form a new division. This new
division saw premiums increase by $17m as we begin to gain traction
for writing this type of business.
Three of our divisions each saw strong growth of 23%. Our marine
division and specialty lines division had good performances from
both our rest of world and US platforms, while growth in our cyber
& executive risk division was driven by the executive risk
team.
Our political, accident and contingency division saw growth of
6%, with growth within our personal accident direct business.
Our catastrophe exposed divisions, property and reinsurance, saw
premium decreases of 11% and 15% respectively. Our property
division experienced a particularly strong Q1 2019 which has
impacted year on year growth. However, our full year expectation
remains for overall growth in the property portfolio.
Rate changes in the market were particularly encouraging with an
average rate increase of 8% and with three divisions achieving
double digit increases.
Our performance to the end of March 2020 by business division
is:
Gross premiums written Gross premiums written % increase/ Q1 2020 Rate change
(decrease)
31 March 2020 31 March 2019
$m $m % %
-------------------------------- ----------------------- ----------------------- ------------ --------------------
Cyber and executive risk 195 159 23 12
Marine 100 81 23 16
Market facilities* 31 14 121 9
Political, accident &
contingency 91 86 6 -
Property 91 102 (11) 11
Reinsurance 88 103 (15) 6
Specialty lines 244 198 23 6
-------------------------------- ----------------------- ----------------------- ------------ --------------------
OVERALL 840 743 13 8
-------------------------------- ----------------------- ----------------------- ------------ --------------------
*From 1 January 2020, our market facilities business has been
split out of specialty lines to form a new division. The 2019 gross
premiums written have been split to allow comparability with the
2020 figures.
Investments
As at the end of March our portfolio allocation was as
follows:
31 March 2020 31 December 2019
Assets Allocation Assets Allocation
$m % $m %
------------------------------ ----------- --------------- ------------- -----------------
Cash and cash
equivalents 342 5.9 279 4.8
Sovereign, quasi-sovereign
and supranational 2,216 38.4 1,871 32.0
Corporate debt
* Investment grade 2,605 45.1 2,698 46.1
* High yield 5 0.1 236 4.0
* Syndicate loan 8 0.1 8 0.1
Derivative financial
instruments 17 0.3 25 0.4
------------------------------ ----------- --------------- ------------- -----------------
Core portfolio 5,193 89.9 5,117 87.4
------------------------------ ----------- --------------- ------------- -----------------
Equity linked
funds 52 0.9 164 2.8
Hedge funds 325 5.6 354 6.1
Illiquid credit
assets 204 3.6 217 3.7
------------------------------ ----------- --------------- ------------- -----------------
Overall portfolio 5,774 100.0 5,852 100.0
------------------------------ ----------- --------------- ------------- -----------------
The year to date investment loss to 31 March 2020 was $55m, or
(1%) (31 March 2019: investment gain of $98m or 2%). We generally
hold around 85% of assets in our fixed income portfolio, and the
remaining in capital growth assets which include equities, hedge
funds, illiquid credit and absolute return portfolios. The
investment team take management actions according to prevailing
market conditions within certain parameters, and further actions
with the approval of the investment committee. We have seen a great
deal of volatility in markets during 2020, and uncertainty
continues as Covid-19 persists. During the first quarter of 2020 we
reduced our exposure to a number of capital growth assets, and
temporarily lengthened the duration of our fixed income investments
in order to reduce the impact of the market volatility.
The weighted average duration of our fixed income portfolio was
2.0 years at 31 March 2020 (31 March 2019: 1.9 years). The yield on
our core portfolio as at 31 March 2020 was 1.6% (31 December 2019:
2.1%). The average credit rating of this portfolio at 31 March 2020
was 'A+' (31 March 2019: 'A') following the sale of nearly all
sub-investment grade credit exposures during the first quarter,
with proceeds reinvested in US Treasury securities.
Company update
Operations
On 17 March the company moved from an office based environment
to a remote, working from home environment. Over the past few years
Beazley has been focussed on flexible working where technology is
available anywhere and our people can also work anywhere with
flexibility around hours. This has stood the company in good stead
as we switched to remote working. Our people are doing well and the
infrastructure for remote working is performing well, and the
business is fully operational.
Business
Business is being done. Our aim is to support our brokers and
clients as much as possible in these challenging times - this has
included extending credit terms for the payment of premiums. The
global pandemic and expected subsequent recession has led us to
review all the classes of business we underwrite. Some will be
affected more than others. We have been communicating with our
brokers any changes to our risk appetite based on our expectations
for the future. There are different opportunities and potential
threats emerging as we continue to underwrite in 2020, and at this
stage it is difficult to determine the overall impact of these on
the growth of our well-balanced book.
Claims
We have been reviewing each area of our underwriting portfolio
to identify those classes that we believe will be impacted by
Covid-19 claims. We estimate the total claims from Covid-19 on
first party business to be $170m net of reinsurance.
We discussed at the full year results that we write a
contingency book of event cancellation and that, within a defined
risk appetite, we provided communicable disease cover. This is
covered by specific reinsurances designed for this type of
exposure. The book has had a number of claims but the frequency of
new notifications has been decreasing since the end of March.
Our expectation is that the cost of Covid-19 across the
political, accident and contingency division, which includes event
cancellation, personal accident and accident and health, is around
$70m net of reinsurance.
The property team has also had a number of claims, mostly
related to business interruption and mostly from US domiciled
companies. The majority of our business is written on an ISO form
which does not extend cover for Covid-19 but we do provide such
protection on some bespoke policies and our aim is to respond
quickly to these claims.
Based on analysis to date across our marine, property and
reinsurance divisions we estimate our Covid-19 claims to be around
$100m net of reinsurance.
It is too early to say what the quantum of claims within our
liability classes will be as these will emerge as the impact of the
pandemic is fully realised over the next one to two years. We have
taken a number of underwriting actions, including the changes to
our risk appetite approach mentioned above, which should reduce
this impact.
Capital
When we announced our full year results on 6 February we
reported that we had surplus capital of 19% of our Lloyd's economic
capital requirement ($1,828m) after the payment of our second
interim dividend. We also had an unutilised letter of credit
facility of $225m.
We have taken two actions since the end of 2019 to augment our
capital. First, we have drawn down $140m of our letter of credit
facility to continue to support growth as well as maintain our
capital strength during this period of uncertainty. Additionally,
from 1 April we are ceding about 10% of specialty lines and
executive risk (not cyber), two of our fastest growing businesses,
to reinsurance partners. This is estimated to reduce our capital
requirements by around $50m.
Executive leadership
We are delighted to announce that Bethany Greenwood has been
appointed as our new head of cyber and executive risk. Bethany will
be taking over from Mike Donovan and will join the executive
committee. Bethany joined as head of executive risk in September
2019 and has quickly established herself as a leader with the
skills needed for the future of the team.
Outlook
Our focus is on supporting our clients in these very challenging
times amid ongoing uncertainty. We have strong, diversified
businesses in the US and Lloyd's and a growing presence
internationally. This combination should stand us in good stead as
opportunities arise.
END
For further information, please contact:
Beazley plc
Sally Lake
+44 (0) 207 6747291
Note to editors:
Beazley plc (BEZ.L), is the parent company of specialist
insurance businesses with operations in Europe, North America,
Latin America and Asia. Beazley manages six Lloyd's syndicates and,
in 2019, underwrote gross premiums worldwide of $3,003.9 million.
All Lloyd's syndicates are rated A by A.M. Best.
Beazley's underwriters in the United States focus on writing a
range of specialist insurance products. In the admitted market,
coverage is provided by Beazley Insurance Company, Inc., an A.M.
Best A rated carrier licensed in all 50 states. In the surplus
lines market, coverage is provided by the Beazley syndicates at
Lloyd's.
Beazley's European insurance company, Beazley Insurance dac, is
regulated by the Central Bank of Ireland and is A rated by A.M.
Best and A+ by Fitch.
Beazley is a market leader in many of its chosen lines, which
include professional indemnity, cyber liability, property, marine,
reinsurance, accident and life, and political risks and contingency
business.
For more information please go to: www.beazley.com
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END
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