TIDMBEZ
RNS Number : 3681G
Beazley PLC
26 July 2021
Press Release
Correction - Interim Results
London, 26 July 2021
The press release "Beazley plc results for period ended 30 June
2021" published at 7.00am on the 23 July 2021, contained an error
relating to the weighted average number of shares and exchange rate
used in the calculation of certain performance measures.
The table below sets out the corrected information:
Period ended
30 June 2021
Basic earnings/(loss) per share (pence) 16.7
Diluted earnings/(loss) per share (pence) 16.6
Net assets per share (pence) 229.4
Net tangible assets per share (pence) 214.6
Basic Earnings/(loss) per share (cents) 23.0
Diluted earnings/(loss) per share (cents) 22.8
Net assets per share (cents) 323.1
Net tangible assets per share (cents) 302.2
Weighted average number of shares during the
period (m) 606.0
Adjusted weighted average number of shares during
the period (m) 611.1
The same corrections apply in respect of the Group's Interim
Statement and Interim Results Presentation, which will be updated
and available on the Group's website.
All other details remain unchanged.
The full amended text is shown below.
Beazley returns to profit delivering 22% top line growth
London, 23 July 2021
Beazley plc results for period ended 30 June 2021
-- Profit before tax of $167.3m (30 June 2020: Loss before tax of $13.8m)
-- Return on equity (annualised) of 15% (30 June 2020: (1%))
-- Gross premiums written increased by 22% to $2,035.3 (30 June 2020: $1,663.9m)
-- Combined ratio of 94% (30 June 2020: 107%)
-- Rate increase on renewal portfolio of 20% (30 June 2020: increase of 11%)
-- Prior year reserve releases of $95.7m (30 June 2020: $58.6m)
-- Net investment income of $83.6m (30 June 2020: $83.2m)
-- No interim dividend (30 June 2020: nil)
Period ended Period ended %
30 June 2021 30 June 2020 movement
Gross premiums written
($m) 2,035.3 1,663.9 22%
Net earned premiums ($m) 1,390.2 1,233.8 14%
Profit/(loss) before tax
($m) 167.3 (13.8)
Earnings/(loss) per share
(pence) 16.7 (1.7)
Net assets per share (pence) 229.4 239.0
Net tangible assets per
share (pence) 214.6 222.9
Earnings/(loss) per share
(cents) 23.0 (2.2)
Net assets per share (cents) 323.1 303.0
Net tangible assets per
share (cents) 302.2 282.6
Adrian Cox, Chief Executive Officer, said:
"Beazley's gross premiums written increased by 22% to $2,035.3m
with all divisions achieving rate rises in the first six months of
2021. Reserve releases across all divisions supported a half year
combined ratio of 94% and the investment return achieved was also
strong at 1.2% year to date.
I am excited about the growth opportunities ahead. Our capital
base remains strong and we are well placed to support an ambitious
growth plan at similar levels to 2021. The board remains committed
to a dividend payment and will consider this at year end after
taking into account the 2021 results as a whole".
For further information, please contact:
Beazley plc Finsbury
Sarah Booth Guy Lamming/Humza Vanderman
Tel: +44 207 674 7582 Tel: +44 (020) 7251 3801
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 2020, underwrote gross premiums worldwide of $3,563.8 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.
Interim results statement
Overview
Beazley achieved strong growth of 22% with premiums increasing
to $2,035.3m (2020: $1,663.9m) in the first half of 2021. We
achieved strong premium growth in the first half of 2021, having
entered the year well capitalised to maximise the growth
opportunities this year presents. Our consistent underwriting
strategy to deploy our capacity and expertise where we know we add
value has delivered 22% growth in gross premiums. Having taken
continued underwriting action over the last three years in order to
address underperformance, changing exposures particularly in
respect of social inflation, preparation for an expected economic
downturn, and then in response to the onset of the pandemic, we
have benefited from stronger than expected rate increases in
certain areas, without being over-exposed to those recession-prone
liability lines in which pricing has not caught up with the scale
of the expected future losses.
We achieved good rate increases across all classes, platforms
and territories, with most significant hardening in cyber in
response to ransomware.
The cyber insurance market continues to battle against the
scourge of ransomware claims but, as we said at our first quarter
trading update, our approach to tackling the underlying causes of
losses is positively impacting claims frequency. Emerging data on
business written since October 2020 suggests that claims frequency
is 20% lower by policy count. Further, when comparing frequency to
premiums, the reduction is around 50%. We maintain our emphasis on
tackling the proximate cause of these losses by expanding our risk
management services and working with clients to build resilience
and reduce exposure. This, combined with our market experience and
carefully executed reinsurance programme, underpin our strong
market position. Ransomware, and cyber crime more generally, is
both a societal as well as an insurance issue. We welcome the
attention it is attracting at the highest levels and take very
seriously the significant contribution we can make in building
society's resilience to ransomware and cyber risk more broadly.
The storms which affected large parts of the South Central and
Western areas of the US impacted our combined ratio however, good
investment returns were achieved against market conditions that
reflected the ongoing but more manageable level of uncertainty that
the pandemic now brings.
Business overview
Following significant restructuring over the past two years, the
Marine book made a strong start to the year benefiting from solid
rate increases averaging 10%. As the cycle turned we were able to
deploy significant capital to support the opportunity in the marine
market. Gross premiums written increased year on year by 10% to
$194.1m (H1 2020: $176.3m). While growth and rate were most
favourable in Hull, Cargo and Aviation, it is pleasing to see all
areas gained ground. Our overall claims experience was benign in
the first half of the year.
Within our Political, Accident and Contingency division, overall
gross premium growth of 3% was achieved with premiums increasing to
$154.8m (H1 2020: $150.8m) driven by the Life, Accident and Health
lines as well as rate increases of 6%. The Contingency book
continues to experience the residual effects of the pandemic,
despite the gradual return of conferences, concerts and sporting
events in some parts of the world. It is encouraging to see
innovative approaches to staging 'trial' and safe events.
Our Cyber & Executive Risk business continues to rise to the
challenge of building innovative solutions and improved services to
protect our clients and help manage their intangible risks. Gross
premium reached $548.8m (H1 2020: $419.6m), an increase of 31%,
shaped by ongoing rate increases of 44% across the portfolio.
Having repositioned ourselves away from areas particularly exposed
to the pandemic or recession, strong premium growth in executive
risk has been tempered by our more reserved underwriting strategy
in cyber where we are benefiting from strong rate rises whilst at
the same time reducing our exposure by selecting only those risks
which met certain enhanced risk management criteria. However, our
Directors' & Officers' (D&O) book has started to reap the
benefits of our carefully executed strategic underwriting plan
where we have captured opportunitie s as they arise. The launch of
our tailored policy for carefully selected Special Purpose
Acquisition Companies (SPACs) demonstrated how we identify market
developments and pivot to meet client demand.
The Specialty Lines division also experienced strong rate
increases in 2021 with gross premium up 29% on the first half of
2020 at $610.7m (H1 2020 $472.0m) and an average rate increase of
13%. Our International Financial Institutions and Management
Liability portfolios particularly benefited both from a continued
hard market and the broadening distribution network across our
international offices. Our growing international footprint is
timely as demand for our specialist products builds in the face of
quite firm market conditions. Diverse in nature, our Specialty
Lines book has seen solid growth across multiple territories,
notably within mainland Europe and Asia. As we increase the
footprint of our Miscellaneous Medical and Life Sciences offerings,
growth continues to exceed expectations, particularly our digital
health solution, Virtual Care, as consumers become more comfortable
with accessing healthcare and wellness services remotely.
Our Market Facilities division, established 18 months ago, has
made good progress in the first half of this year through Beazley
Smart Tracker, Beazley's follow-only special purpose syndicate,
which aims to drive efficiency within the London market. The book
is on course to hit its plan this year with 12% rate increase and
half year gross premium at $88.8m (H1 2020: $60.7m), growing by
46%. A planned Economic, Social and Governance (ESG) Consortium
that aims to provide additional capacity to clients that perform
particularly well
against ESG metrics will sit within this division when it begins
underwriting in January 2022, subject to approvals.
Our Property book experienced good underlying growth with gross
premiums written increasing 18% to $276.6m (H1 2020: $233.5m) with
rate increases of around 10%. The positive result was dampened by
the storms which affected large parts of the South Central and
Western areas of the US in the first quarter, which added an
estimated $70m loss net of reinsurance to the book split between
our Property and Reinsurance portfolios. The team's consistent
focus on selective underwriting has resulted in improved
attritional claims performance. During the first half of 2021, we
concluded a loss portfolio transfer arrangement for the
Construction and Engineering book which we exited in 2018. This
transaction has reduced our net earned premium and resulted in a
one-off inflationary effect on the claims and expense ratio for the
division.
Significant rate increases in the first quarter within our
Reinsurance book ebbed slightly in the second quarter as soft
conditions within the primary admitted market meant reduced demand
at the Florida renewal season compared to 2020.Overall, rates were
up 12%. Both gross premium growth of 7% to $161.5m (H1 2020:
$151.0m) and attritional loss activity are improving in line with
expectations as we rebalance the portfolio away from higher
frequency primary excess catastrophe exposed risk towards our core
offering of higher excess reinsurance.
The following table shows the cumulative rate changes (%) since
2016 by business division.
2016 2017 2018 2019 2020 2021
HY
Cyber and executive
risk 100 100 99 104 118 170
Marine 100 97 100 111 128 141
Market Facilities - - 100 103 117 131
Political, accident
& contingency 100 96 95 95 97 102
Property 100 100 110 122 141 155
Reinsurance 100 98 104 109 119 133
Specialty Lines 100 101 102 106 115 130
All divisions 100 99 102 108 120 144
Building resilience
As many countries and industries open up and we continue to
assess what lasting impacts the pandemic will have, we have been
acutely reminded that prevention is far better than cure. As an
insurer we have redoubled our efforts to build risk management and
prevention services into our offerings where it makes sense to do
so. Where threats evolve so too do our products, and in the first
half of the year we have enhanced the risk mitigation services
within our cyber offering and our reputational risk policy by
incorporating AI and scanning tools to identify threats before they
cause havoc. Additionally we have widened the scope of the risk
management support and consultancy available within our Safeguard
(sexual molestation liability) product suite in North America.
As insurers we have a vital role in de-risking society. This
includes playing our part beyond transactional risk transfer
through better cover, risk prevention and contributing positively
to building a better society. In April we published our first
annual Responsible Business strategy, outlining how we are building
a more sustainable, responsible company, embedding ESG principles
firmly into the infrastructure of our business. This includes our
investment and underwriting strategies, an early demonstration of
which is through the ESG Consortium we intend to launch in January
2022, subject to regulatory approval. This Consortium, supported by
Beazley and third-party capital, will provide additional capacity
to responsible risks that perform well against ESG metrics.
We continue to invest in our people, our products and innovative
ideas as we believe they will propel us forward as a business,
enabling us to develop solutions that demonstrate the unique value
we bring to managing risks in our fields of expertise.
Additionally, tailoring our specialist products to new territories
and markets remains a core part of our long-term strategy, a key
tenet of which has been designing streamlined, digital products to
serve the needs of smaller business risks.
We have delivered e-traded specialist insurance cover for small
businesses across North America, Asia and Europe via a combination
of channels most notably our myBeazley online broker portal. In
February we announced the formation of a new Digital business team
led by Ian Fantozzi to bring together multiple business areas and
multi-skilled teams to build a cohesive, transformative etrading
strategy that will provide brokers and clients with deeper
functionality and efficiency in their interactions with
Beazley.
Claims
During 2020 we estimated losses relating to COVID-19 first party
claims to be $340m net of reinsurance, with this estimate assuming
a resumption to some form of normality in the second half of 2021.
Were this not to be the case, we also estimated a potential further
$50m of claims net of reinsurance to the end of 2021. Given the
experience we have had on first party COVID-19 claims to date,
along with the continued easing of lockdown restrictions globally,
we remain comfortable with our estimates, and in particular the
additional $50m net of reinsurance has not been incurred to
date.
We have been executing a set of underwriting actions for a
number of years now, and it is pleasing to see that all
underwriting divisions have released reserves during the first six
months of the year. The total reserve releases are $95.7m in the
first half of 2021 (H1 2020: $58.6m).
However, as previously disclosed, despite the subdued
environment of the last 12 months we do anticipate the return of
social inflation across parts of our US liability book and our
underwriting strategy continues to reflect that.
Looking back to 2019, Beazley began recession planning early and
therefore we are confident that we are not significantly exposed to
recession-related losses. In areas we have increased appetite, we
are well capitalised and have done so against a favourable rating
environment and carefully considered underwriting strategy.
Investments
Our investments returned $83.6m, or 1.2% in the first half of
the year (H1 2020: $83.2m, 1.4%). Bond yields in this period were
low, but rising for much of the period, creating difficult
conditions for our fixed income investments. As a result, the
return from this part of our portfolio, which includes more than
87% of our investments, was close to zero. However, the capital
growth investments which form the remainder of our portfolio have
performed strongly, led by equities, which returned nearly 14%, and
hedge funds, with a return of over 6% in this six month period. We
were also able to add value through our tactical adjustments to the
portfolio, including higher exposure to equities for selected
periods and extended use of inflation-protected securities as
markets discounted higher inflation expectations. Overall we
believe this is a good investment outcome in the context of market
conditions, and our appetite for investment risk, and the return is
ahead of our earlier expectations. However, this is still a modest
outcome by historic standards and the current low level of yields
means that the outlook for investment returns remains
challenging.
Dividend
The board remains committed to a dividend payment at year end
after taking into account the 2021 results as a whole.
Investment performance
30 June 30 June 30 June 30 June
2021 2021 2020 2020
$m % $m %
Cash and cash equivalents 451.3 6.4 359.7 5.8
Fixed and floating rate debt securities
- Government 3,374.5 48.1 2,335.7 37.4
- Corporate bonds
- Investment grade 1,960.8 27.9 2,720.3 43.5
- High yield 310.6 4.4 169.1 2.7
Syndicate loans 41.9 0.6 16.7 0.3
Derivative financial assets 1.2 0.1 10.2 0.1
Core portfolio 6,140.3 87.5 5,611.7 89.8
----------------------------------------- -------- -------- -------- --------
Equity funds 186.6 2.7 86.9 1.4
Hedge funds 455.6 6.5 340.1 5.4
Illiquid credit assets 230.2 3.3 211.3 3.4
----------------------------------------- -------- -------- -------- --------
Capital growth assets 872.4 12.5 638.3 10.2
----------------------------------------- -------- -------- -------- --------
Investment portfolio total 7,012.7 100.0 6,250.0 100.0
----------------------------------------- -------- -------- -------- --------
Investment return by asset type
30 June
30 June 2021 30 June 30 June 2020
2021 annualised 2020 annualised
return return
$m % $m %
---------------------- ------- ----------- ------- ------------
Core portfolio 14.2 0.5 102.1 3.8
Capital growth assets 69.4 15.9 (18.9) (5.5)
---------------------- ------- ----------- ------- ------------
Overall return 83.6 2.4 83.2 2.8
---------------------- ------- ----------- ------- ------------
Capital position
We remain well capitalised and strongly positioned to deploy our
capital in areas where we can make the most of hard market
opportunities. We estimate our capital surplus to be 23% at 31
December 2021 (31 December 2020: 23%). The Lloyd's capital
requirements shown are based on the initial view of the 2022
business plan, and thus already take into account the additional
growth expected during the next year. The surplus capital ratio
also takes into account adjustments made under Solvency II. We
continue to utilise $225m of the $450m banking facility as a letter
of credit to support our Funds at Lloyd's (FAL).
30 June 30 June
2021 2020
$m $m
-------------------------------- -------- -------
Shareholders' funds 1,957.7 1,827.6
Tier 2 subordinated debt (2029) 298.3 298.1
Tier 2 subordinated debt (2026) 249.1 248.9
Utilisation of letter of credit 225.0 225.0
-------------------------------- -------- -------
Total 2,730.1 2,599.6
-------------------------------- -------- -------
The following table sets out the group's capital requirements of
our Lloyd's and US businesses.
Projected
31 December 31 December
2021 2020
$m $m
------------------------------------------- ------------ -----------
Lloyd's economic capital requirement (ECR) 2,221.0 2,116.5
Capital for US insurance company 259.7 246.3
------------------------------------------- ------------ -----------
Total 2,480.7 2,362.8
------------------------------------------- ------------ -----------
Executive management change
In a world of accelerated change, we had some of our own
developments to convey to the market. On a personal level it was a
great honour to succeed Andrew Horton as Chief Executive Officer
(CEO) in April following his decision to depart for pastures new
after 18 years at Beazley. Having had the pleasure of working
closely with Andrew as a member of the executive team for 13 years,
I've been closely involved with the shaping of our strategic
direction for some time and look forward to successfully executing
against those plans.
I am also delighted my new role has created new opportunities,
not least the appointment of a new Chief Underwriting Officer(s). I
want to thank Bethany Greenwood and Tim Turner who, in addition to
their day jobs, agreed to become co-interim Chief Underwriting
Officers until a permanent appointment is made.
Following the formation of Beazley Digital under our
longstanding Chief Operating Officer (COO), Ian Fantozzi, we have
appointed Troy Dehmann as our new COO. We are thrilled to have Troy
on board, who brings a wealth of experience to the COO role. And
finally, Rob Anarfi was appointed as Chief Risk Officer following
Andrew Pryde's departure in May. Our new leadership team combines
long-term Beazley leadership experience with fresh approaches and
expertise to build and enhance our strategy and business.
Outlook
That the easing of some pandemic-related restrictions seems to
be in sight across the globe is cause for great optimism and those
of us still working remotely look forward to reconnecting and a
further return to greater normality. However, the economic, social
and environmental impacts are still unfolding. In this fragile risk
environment it is essential we make good on our commitments to our
clients and partners to support them through these times. This
means paying their claims efficiently, beating their expectations
when it comes to service delivery and doing the right thing by
society as a responsible business.
In the midst of another turbulent year, we are positive that
through the hard work and diligence of our colleagues we can
deliver on our ambitions to build profitable growth in markets
where we demonstrate value, instigate constructive change and build
long-term collaborative relationships with our clients and
partners. That premium exposure growth accelerated in the second
quarter against consistently good rate is a sign of the strength in
our strategy. Our current expectations of percentage growth for the
full year is in the mid-20s gross of reinsurance and mid-teen
digits net of reinsurance. We maintain our previous guidance of a
full year combined ratio percentage in the low nineties, assuming
average claims in the second part of 2021.
As the pandemic recovery beds in, we confidently anticipate more
growth against our selective, specialist and carefully executed
strategy supported by a strong capital base and a diversified
investment portfolio. Our capital surplus remains within our
preferred range after allowing for our initial view of the business
plan for 2022, and the board remains committed to a dividend
payment at year end after taking into account the 2021 results as a
whole.
Adrian Cox
Chief Executive Officer
22 July 2021
Condensed consolidated statement of profit or loss for the six
months ended 30 June 2021
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
$m $m $m
Gross premiums written 2,035.3 1,663.9 3,563.8
Written premiums ceded to reinsurers (593.2) (346.1) (646.8)
--------------------------------------------- -------- -------- ------------
Net premiums written 1,442.1 1,317.8 2,917.0
Change in gross provision for unearned
premiums (202.9) (202.6) (331.7)
Reinsurer's share of change in the provision
for unearned premiums 151.0 118.6 108.1
--------------------------------------------- -------- -------- ------------
Change in net provision for unearned
premiums (51.9) (84.0) (223.6)
Net earned premiums 1,390.2 1,233.8 2,693.4
Net investment income 83.6 83.2 188.1
Other income 10.9 12.2 29.8
--------------------------------------------- -------- -------- ------------
94.5 95.4 217.9
Revenue 1,484.7 1,329.2 2,911.3
Insurance claims 1,094.3 1,195.8 2,589.3
Insurance claims recovered from reinsurers (297.3) (326.7) (631.0)
--------------------------------------------- -------- -------- ------------
Net insurance claims 797.0 869.1 1,958.3
Expenses for the acquisition of insurance
contracts 376.8 327.9 738.9
Administrative expenses 132.2 121.8 235.5
Foreign exchange (gain)/loss (9.6) 5.5 (11.2)
--------------------------------------------- -------- -------- ------------
Operating expenses 499.4 455.2 963.2
Expenses 1,296.4 1,324.3 2,921.5
Results of operating activities 188.3 4.9 (10.2)
Finance costs (21.0) (18.7) (40.2)
Profit/(loss) before income tax 167.3 (13.8) (50.4)
--------------------------------------------- -------- -------- ------------
Income tax (expense)/credit (27.8) 1.1 4.3
Profit/(loss) after income tax - all
attributable to equity shareholders 139.5 (12.7) (46.1)
--------------------------------------------- -------- -------- ------------
Earnings/(loss) per share (cents per
share):
Basic 23.0 (2.2) (8.0)
Diluted 22.8 (2.2) (8.0)
Earnings/(loss) per share (pence per
share):
Basic 16.7 (1.7) (6.3)
Diluted 16.6 (1.7) (6.3)
--------------------------------------------- -------- -------- ------------
Condensed consolidated statement of comprehensive income for the
six months ended 30 June 2021
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
$m $m $m
--------------------------------------------------- -------- -------- ------------
Profit/(loss) after income tax 139.5 (12.7) (46.1)
Other comprehensive income
Items that will never be reclassified to profit
or loss:
Gain/(loss) on remeasurement of retirement benefit
obligations 8.5 (9.3) (2.0)
Income tax (charge)/credit on defined benefit
obligation (1.7) 0.8 (0.5)
Items that may be reclassified subsequently
to profit or loss:
Foreign currency translation differences 1.5 (2.1) 2.8
--------------------------------------------------- -------- -------- ------------
Total other comprehensive income/(expense) 8.3 (10.6) 0.3
--------------------------------------------------- -------- -------- ------------
Total comprehensive income recognised/(expense) 147.8 (23.3) (45.8)
--------------------------------------------------- -------- -------- ------------
Condensed consolidated statement of changes in equity for the
six months ended 30 June 2021
Foreign
Share Share currency Other Retained Total
capital premium translation reserves earnings $m
$m $m reserve $m $m
$m
-------------------------------- --------- --------- ------------- ---------- ---------- --------
Balance as at 1 January 2020 38.1 3.2 (94.1) 3.6 1,674.5 1,625.3
Total comprehensive income
recognised - - (2.1) - (21.2) (23.3)
Issue of shares - 0.1 - - - 0.1
Dividends paid - - - - (50.2) (50.2)
Equity settled share-based
payments - - - 1.2 - 1.2
Equity raise(1) 4.8 - - - 287.8 292.6
Acquisition of own shares
held in trust - - - (13.6) - (13.6)
Tax on share option vestings - - - - (5.5) (5.5)
Transfer of shares to employees - - - 4.9 (3.9) 1.0
-------------------------------- --------- --------- ------------- ---------- ---------- --------
Balance as at 30 June 2020 42.9 3.3 (96.2) (3.9) 1,881.5 1,827.6
-------------------------------- --------- --------- ------------- ---------- ---------- --------
Total comprehensive expense
recognised - - 4.9 - (27.4) (22.5)
Issue of shares - 2.0 - - - 2.0
Equity settled share-based
payments - - - 1.6 - 1.6
Tax on share option vestings - - - (5.4) 6.7 1.3
Transfer of shares to employees - - - (1.7) 1.2 (0.5)
Balance as at 31 December
2020 42.9 5.3 (91.3) (9.4) 1,862.0 1,809.5
-------------------------------- --------- --------- ------------- ---------- ---------- --------
Total comprehensive expense
recognised - - 1.5 - 146.3 147.8
Equity settled share-based
payments - - - 4.2 - 4.2
Tax on share option vestings - - - - (3.9) (3.9)
Transfer of shares to employees - - - (1.9) 2.0 0.1
Balance as at 30 June 2021 42.9 5.3 (89.8) (7.1) 2,006.4 1,957.7
-------------------------------- --------- --------- ------------- ---------- ---------- --------
1 During the six months to 30 June 2020, the group raised
$292.6m through a share issuance via a cash box structure. Merger
relief under the Companies Act 2006, section 612 was available, and
thus no share premium was recognised. As the redemption of the cash
box entity's shares was in the form of cash, the transaction was
treated as qualifying consideration and the premium is therefore
considered to be immediately distributable and can be recognised
within retained earnings. The funds raised are net of issuance
costs.
Condensed consolidated statement of financial position as at 30
June 2021
30 June 30 June 31 December
2021 2020 2020
$m $m $m
------------------------------------- --------- ------- -----------
Assets
Intangible assets 126.7 123.3 126.3
Plant and equipment 22.4 12.9 19.7
Right of use assets 83.6 52.0 86.4
Deferred tax asset 18.8 41.5 26.8
Investments in associates 0.3 - 0.3
Deferred acquisition costs 431.2 391.7 384.9
Reinsurance assets 2,033.4 1,649.4 1,684.7
Retirement benefit asset 15.4 - 4.8
Current income tax asset 19.1 - 27.9
Financial assets at fair value 6,561.4 5,890.3 6,362.0
Insurance receivables 1,587.2 1,258.6 1,467.9
Other receivables 131.8 86.9 86.5
Cash and cash equivalents 451.3 359.7 309.5
------------------------------------- --------- ------- -----------
Total assets 11,482.6 9,866.3 10,587.7
------------------------------------- --------- ------- -----------
Equity
Share capital 42.9 42.9 42.9
Share premium 5.3 3.3 5.3
Foreign currency translation reserve (89.8) (96.2) (91.3)
Other reserves (7.1) (3.9) (9.4)
Retained earnings 2,006.4 1,881.5 1,862.0
------------------------------------- --------- ------- -----------
Total equity 1,957.7 1,827.6 1,809.5
------------------------------------- --------- ------- -----------
Liabilities
Insurance liabilities 7,890.6 6,697.9 7,378.4
Financial liabilities 552.2 554.9 558.5
Lease liabilities 88.8 55.7 90.1
Retirement benefit liability - 2.8 -
Deferred tax liabilities - 20.3 0.6
Current income tax liabilities 23.2 3.6 16.7
Other payables 970.1 703.5 733.9
------------------------------------- --------- ------- -----------
Total liabilities 9,524.9 8,038.7 8,778.2
------------------------------------- --------- ------- -----------
Total equity and liabilities 11,482.6 9,866.3 10,587.7
------------------------------------- --------- ------- -----------
A P Cox
Chief Executive Officer
S M Lake
Group Finance Director
22 July 2021
Condensed consolidated statement of cash flows for the six
months ended 30 June 2021
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
$m $m $m
----------------------------------------------------- ---------- --------- ------------
Cash flow from operating activities
Profit/(loss) before income tax 167.3 (13.8) (50.4)
Adjustments for:
Amortisation of intangibles 9.9 8.2 16.7
Equity settled share based compensation 4.3 2.3 2.8
Net fair value gain on financial investments (45.8) (25.5) (83.0)
Depreciation of plant and equipment 2.5 1.6 3.2
Depreciation of right of use assets 7.4 5.2 13.0
Impairment of reinsurance assets recognised/(written
back) 4.3 (1.7) 1.1
Increase in insurance and other liabilities 748.4 768.9 1,486.9
Increase in insurance, reinsurance and other
receivables (517.7) (531.5) (782.1)
Increase in deferred acquisition costs (46.3) (41.0) (34.2)
Financial income (41.1) (60.5) (110.9)
Finance expense 21.0 18.7 40.2
Income tax paid (1.5) (1.1) (26.5)
Net cash from operating activities 312.7 129.8 476.8
Cash flow from investing activities
Purchase of plant and equipment (3.9) (4.0) (12.9)
Expenditure on software development (9.7) (10.0) (20.5)
Purchase of investments (4,731.0) (3,355.0) (6,126.6)
Proceeds from sale of investments 4,555.3 3,063.0 5,443.8
Interest and dividends received 41.1 57.0 104.3
----------------------------------------------------- ---------- --------- ------------
Net cash used in investing activities (148.2) (249.0) (611.9)
Cash flow from financing activities
Acquisition of own shares in trust - (13.6) (13.6)
Finance costs (19.2) (17.6) (37.8)
Payment of lease liabilities (6.7) (6.8) (15.3)
Equity raise - 292.6 292.6
Issuance of shares - - 2.1
Dividends paid - (50.2) (50.2)
----------------------------------------------------- ---------- --------- ------------
Net cash (used in)/from financing activities (25.9) 204.4 177.8
----------------------------------------------------- ---------- --------- ------------
Net increase in cash and cash equivalents 138.6 85.2 42.7
Cash and cash equivalents at beginning of period 309.5 278.5 278.5
Effect of exchange rate changes on cash and cash
equivalents 3.2 (4.0) (11.7)
----------------------------------------------------- ---------- --------- ------------
Cash and cash equivalents at end of period 451.3 359 .7 309.5
----------------------------------------------------- ---------- --------- ------------
1 Statement of accounting policies
Beazley plc is a company incorporated in England and Wales and
is resident for tax purposes in the United Kingdom. The condensed
consolidated interim financial statements of the group for the six
months ended 30 June 2021 comprise the parent company, its
subsidiaries and the group's interest in associates.
The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates. The
significant judgements made by management in applying the group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements as at, and for, the year ended 31 December 2020.
The 2020 annual financial statements of the group were prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the EU. The 2021 annual financial statements
will be prepared in accordance with UK adopted IFRSs. As required
by the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority, the condensed set of financial statements
have:
- been prepared applying the accounting policies and
presentation that were applied in the preparation of the company's
published consolidated financial statements for the year ended 31
December 2020; and
- been prepared and approved by the directors in accordance with
UK adopted International Accounting Standard 34, "Interim Financial
Reporting".
In the current year, the group have applied amendments to IFRS
issued by the IASB and UKEB that are mandatorily effective for an
accounting period that begins on or after 1 January 2021. None of
the amendments issued by the IASB and UKEB have had an impact to
the group.
The group's principal risks and uncertainties are outlined on
pages 56 to 62 of the 31 December 2020 Annual Report and Accounts
and have not changed since the last reporting date. The principal
risks are:
-- Insurance risk;
-- Strategic risk;
-- Financial risk;
-- Climate change risk; and
-- Other risks including Market, Operational, Credit, Regulatory
and Legal and Liquidity Risks.
The information in these interim condensed consolidated
financial statements is unaudited and does not constitute annual
accounts within the meaning of Section 434 of the Companies Act
2006 ('the Act').
The independent auditor's report on the group accounts for the
year ended 31 December 2020 is unqualified, does not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and does not
include a statement under s.498(2) or (3) of the Companies Act
2006.
Going concern
The group's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the interim results statement. This should be read
in conjunction with the strategic report which can be found in the
group's 2020 Annual Report and Accounts. In addition, the risk
report contained in the 2020 Annual Report and Accounts includes
the group's risk management objectives. The group's objectives,
policies and processes for managing capital can be found in the
risk management section of this report.
The directors have a reasonable expectation that the group has
adequate resources to continue in operational existence for the
foreseeable future and that the group is well placed to manage its
business risks successfully. Accordingly, they continue to adopt
the going concern basis in preparing these interim condensed
consolidated financial statements. In reaching this assessment, the
directors have considered a wide range of information relating to
present and future conditions. These include the implications of
the COVID-19 pandemic, as well as potential impacts from other top
and emerging risks, and the related impact on profitability,
capital and liquidity.
2 Segmental analysis
Segment information is presented in respect of reportable
segments. This is based on the group's management and internal
reporting structures and represents the level at which financial
information is reported to the executive committee, being the chief
operating decision maker as defined in IFRS 8.
Finance costs and taxation have not been allocated to operating
segments as these items are determined by group level factors and
do not relate to operating performance.
Cyber & Political,
Executive Market Accident Specialty
Risk Marine Facilities & Contingency Property Reinsurance Lines Total
30 June 2021 $m $m $m $m $m $m $m $m
-------------------- ---------- ------- ----------- -------------- --------- ----------- --------- ---------
Gross premiums
written 548.8 194.1 88.8 154.8 276.6 161.5 610.7 2,035.3
Net premiums written 405.3 162.9 23.1 126.8 151.2 94.9 477.9 1,442.1
Net earned premiums 409.1 148.7 18.8 114.7 147.7 68.9 482.3 1,390.2
Net investment
income 20.8 6.4 0.3 6.4 11.7 5.9 32.1 83.6
Other income 2.4 0.5 - 0.4 2.2 0.4 5.0 10.9
-------------------- ---------- ------- ----------- -------------- --------- ----------- --------- ---------
Revenue 432.3 155.6 19.1 121.5 161.6 75.2 519.4 1,484.7
Net insurance claims 277.1 50.5 4.3 56.6 75.3 42.4 290.8 797.0
Expenses for the
acquisition
of insurance
contracts 91.6 47.0 14.3 41.5 55.3 14.8 112.3 376.8
Administrative
expenses 30.6 15.7 0.4 11.8 23.4 6.9 43.4 132.2
Foreign exchange
(gain) (2.4) (0.7) (0.1) (0.7) (1.3) (0.7) (3.7) (9.6)
-------------------- ---------- ------- ----------- -------------- --------- ----------- --------- ---------
Expenses 396.9 112.5 18.9 109.2 152.7 63.4 442.8 1,296.4
Segment result 35.4 43.1 0.2 12.3 8.9 11.8 76.6 188.3
Finance costs (21.0)
-------------------- ---------- ------- ----------- -------------- --------- ----------- --------- ---------
Profit before income
tax 167.3
Income tax expense (27.8)
Profit after income
tax 139.5
-------------------- ---------- ------- ----------- -------------- --------- ----------- --------- ---------
Claims ratio 68% 34% 23% 50% 51% 62% 61% 57%
Expense ratio 30% 42% 78% 46% 53% 31% 32% 37%
Combined ratio 98% 76% 101% 96% 104% 93% 93% 94%
Segment assets and
liabilities
Segment assets 3,163.6 750.5 605.1 718.6 1,324.1 789.2 4,131.5 11,482.6
Segment liabilities (2,611.7) (647.1) (403.4) (610.9) (1,051.8) (641.9) (3,558.1) (9,524.9)
-------------------- ---------- ------- ----------- -------------- --------- ----------- --------- ---------
Net assets 551.9 103.4 201.7 107.7 272.3 147.3 573.4 1,957.7
-------------------- ---------- ------- ----------- -------------- --------- ----------- --------- ---------
Cyber & Political,
Executive Market Accident Specialty
Risk Marine Facilities & Contingency Property Reinsurance Lines Total
30 June 2020 $m $m $m $m $m $m $m $m
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Gross premiums
written 419.6 176.3 60.7 150.8 233.5 151.0 472.0 1,663.9
Net premiums written 360.7 153.8 17.5 110.8 183.8 92.1 399.1 1,317.8
Net earned premiums 367.9 141.3 12.1 97.0 177.5 50.8 387.2 1,233.8
Net investment income 24.1 5.4 0.4 5.4 8.5 5.1 34.3 83.2
Other income 2.8 0.5 - 0.6 2.2 1.0 5.1 12.2
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Revenue 394.8 147.2 12.5 103.0 188.2 56.9 426.6 1,329.2
Net insurance claims 217.3 87.9 3.5 116.7 194.8 27.8 221.1 869.1
Expenses for the
acquisition
of insurance
contracts 79.1 39.1 8.1 36.5 48.4 15.1 101.6 327.9
Administrative
expenses 31.1 11.4 2.2 12.1 17.3 5.2 42.5 121.8
Foreign exchange loss 1.6 0.7 0.1 0.5 0.8 0.2 1.6 5.5
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Expenses 329.1 139.1 13.9 165.8 261.3 48.3 366.8 1,324.3
Segment result 65.7 8.1 (1.4) (62.8) (73.1) 8.6 59.8 4.9
Finance costs (18.7)
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Loss before income
tax (13.8)
Income tax credit 1.1
Loss after income
tax (12.7)
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Claims ratio 59% 62% 29% 120% 110% 55% 57% 71%
Expense ratio 30% 36% 85% 50% 37% 40% 37% 36%
Combined ratio 89% 98% 114% 170% 147% 95% 94% 107%
Segment assets and
liabilities
Segment assets 2,624.0 681.8 174.3 747.5 1,147.2 824.2 3,667.3 9,866.3
Segment liabilities (2,061.0) (600.3) (166.1) (641.8) (917.5) (670.0) (2,982.0) (8,038.7)
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Net assets 563.0 81.5 8.2 105.7 229.7 154.2 685.3 1,827.6
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Cyber & Political,
Executive Market Accident Specialty
Risk Marine Facilities & Contingency Property Reinsurance Lines Total
31 December 2020 $m $m $m $m $m $m $m $m
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Gross premiums
written 1,020.1 337.4 133.4 273.0 470.5 194.5 1,134.9 3,563.8
Net premiums written 864.6 309.4 37.3 227.1 389.9 126.9 961.8 2,917.0
Net earned premiums 787.2 297.1 27.9 213.8 360.7 124.3 882.4 2,693.4
Net investment income 53.6 12.8 0.5 10.6 21.4 11.9 77.3 188.1
Other income 2.8 1.7 0.1 4.1 5.1 1.7 14.3 29.8
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Revenue 843.6 311.6 28.5 228.5 387.2 137.9 974.0 2,911.3
Net insurance claims 557.7 160.5 8.3 354.1 291.3 86.8 499.6 1,958.3
Expenses for the
acquisition
of insurance
contracts 180.0 82.2 19.3 75.9 105.4 32.0 244.1 738.9
Administrative
expenses 54.4 25.1 1.9 23.1 36.4 12.2 82.4 235.5
Foreign exchange
(gain) (3.3) (1.2) (0.1) (0.9) (1.5) (0.5) (3.7) (11.2)
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Expenses 788.8 266.6 29.4 452.2 431.6 130.5 822.4 2,921.5
Segment result 54.8 45.0 (0.9) (223.7) (44.4) 7.4 151.6 (10.2)
Finance costs (40.2)
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Loss before income
tax (50.4)
Income tax credit 4.3
Loss after income
tax (46.1)
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Claims ratio 71% 54% 30% 116% 81% 70% 57% 73%
Expense ratio 30% 36% 76% 46% 39% 35% 37% 36%
Combined ratio 101% 90% 106% 212% 120% 105% 94% 109%
Segment assets and
liabilities
Segment assets 2,909.9 707.4 182.5 786.3 1216.7 734.1 4,050.8 10,587.7
Segment liabilities (2,389.8) (612.2) (170.7) (678.4) (966.0) (591.2) (3,369.9) (8,778.2)
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
Net assets 520.1 95.2 11.8 107.9 250.7 142.9 680.9 1,809.5
--------------------- ---------- ------- ----------- -------------- -------- ----------- --------- ---------
3 Net investment income
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
$m $m $m
----------------------------------------------------- -------- -------- ------------
Interest and dividends on financial investments
at fair value through profit or loss 41.1 60.4 110.7
Interest on cash and cash equivalents - 0.2 0.2
Net realised gains/(losses) on financial investments
at fair value through profit or loss 60.9 (0.1) 46.3
Net unrealised fair value (losses)/gains on
financial investments at fair value through
profit or loss (15.0) 25.6 36.7
Investment income from financial investments 87.0 86.1 193.9
Investment management expenses (3.4) (2.9) (5.8)
----------------------------------------------------- -------- -------- ------------
83.6 83.2 188.1
----------------------------------------------------- -------- -------- ------------
4 Other income
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
$m $m $m
------------------- -------- -------- ------------
Commission income 7.9 11.6 23.6
Profit commissions 1.1 (1.0) (0.5)
Agency fees 1.9 1.5 3.0
Other income - 0.1 3.7
------------------- -------- -------- ------------
10.9 12.2 29.8
------------------- -------- -------- ------------
As at 30 June 2021 there is $1.1m (30 June 2020: nil; 31
December 2020: nil) accrued profit commission at risk of being
reversed if there were to be an adverse impact on syndicate 623's
profit.
5 Finance costs
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
$m $m $m
------------------------------------------ -------- -------- ------------
Interest expense on financial liabilities 19.1 17.6 37.8
Interest expense on lease liabilities 1.9 1.1 2.4
------------------------------------------ -------- -------- ------------
21.0 18.7 40.2
------------------------------------------ -------- -------- ------------
6 Earnings/(loss) per share
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
---------------- -------- -------- ------------
Basic (cents) 23.0 (2.2) (8.0)
Diluted (cents) 22.8 (2.2) (8.0)
Basic (pence) 16.7 (1.7) (6.3)
Diluted (pence) 16.6 (1.7) (6.3)
---------------- -------- -------- ------------
Basic
Basic earnings per share are calculated by dividing profit after
income tax of $139.5m (30 June 2020: loss of $12.7m; 31 December
2020: loss of $46.1m) by the weighted average number of shares in
issue during the six months of 606.0m (30 June 2020: 573.6m; 31
December 2020: 573.8m). The shares held in the Employee Share
Options Plan (ESOP) of 3.2m (30 June 2020: 3.9 m; 31 December 2020:
3.8m) have been excluded from the calculation until such time as
they vest unconditionally with the employees.
Diluted
Diluted earnings per share are calculated by dividing profit
after income tax of $139.5m (30 June 2020: loss of $12.7m; 31
December 2020: loss of $46.1m) by the adjusted weighted average
number of shares of 611.1m (30 June 2020: 579.0m; 31 December 2020:
582.6m). The adjusted weighted average number of shares assumes
conversion of dilutive potential ordinary shares, being shares from
the SAYE (Save As You Earn), retention and deferred share schemes.
The shares held in the ESOP of 3.2m (30 June 2020: 3.9m; 31
December 2020: 3.8m) have been excluded from the calculation until
such time as they vest unconditionally with the employees.
7 Dividends
The board has taken the decision not to declare a first interim
dividend in respect of the six months to 30 June 2021 (2020: nil).
No dividend was declared in respect of the six months ended 31
December 2020.
8 Income tax expense/(credit)
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
$m $m $m
-------------------------------------------------- -------- -------- ------------
Current tax expense
Current year 25.9 9.2 12.9
Prior year adjustments 0.1 (4.8) (6.5)
-------------------------------------------------- -------- -------- ------------
26.0 4.4 6.4
Deferred tax expense
Origination and reversal of temporary differences 4.2 (5.7) (12.1)
Impact of change in UK tax rates (1.3) (0.7) (0.4)
Prior year adjustments (1.1) 0.9 1.8
-------------------------------------------------- -------- -------- ------------
1.8 (5.5) (10.7)
-------------------------------------------------- -------- -------- ------------
Income tax expense/(credit) 27.8 (1.1) (4.3)
-------------------------------------------------- -------- -------- ------------
Reconciliation of tax expense
The weighted average of statutory tax rates applied to the
profits/(losses) earned in each country in which the group operates
is 17.0% (30 June 2020: 23.9%), whereas the tax charged for the
period ending 30 June 2021 as a percentage of profit/(loss) before
tax is 16.6% (30 June 2020: 8.0%). The reasons for the difference
are explained below:
6 months 6 months 6 months 6 months
ended ended ended ended Year to Year to
30 June 30 June 30 June 30 June 31 December 31 December
2021 2021 2020 2020 2020 2020
$m % $m % $m %
------------------------------- -------- -------- -------- -------- ------------ ------------
Profit/(loss) before tax 167.3 (13.8) (50.4) -
Tax calculated at the weighted
average
of statutory tax rates 28.4 17.0 3.3 (23.9) (1.0) 2.0
Effects of:
Non-deductible expenses 1.8 1.0 0.2 (1.4) 2.1 (4.2)
Tax relief on remuneration (0.1) (0.1) - - (0.4) 0.8
Over provided in prior years (1.0) (0.6) (3.9) 28.3 (4.6) 9.1
Change in UK tax rates (1) (1.3) (0.7) (0.7) 5.0 (0.4) 0.8
------------------------------- -------- -------- -------- -------- ------------ ------------
Charge/(credit) for the
period 27.8 16.6 (1.1) 8.0 (4.3) 8.5
------------------------------- -------- -------- -------- -------- ------------ ------------
1 The Finance Act 2021, which provides for an increase in the UK
corporation tax rate from 19% to 25% effective from 1 April 2023
received Royal Assent on 10 June 2021. This tax rate change to 25%
will increase the group's future current tax charge. It has also
been reflected in the calculation of the deferred tax balances as
at 30 June 2021 for temporary differences expected to reverse on or
after 1 April 2023.
The Tax Act (the Tax Cuts and Jobs Act) was signed into law in
the US in December 2017. The Tax Act includes base erosion
anti-avoidance tax provisions (the 'BEAT'). We have performed an
assessment for our intra-group transactions potentially in scope of
BEAT. The application of this new BEAT legislation is still
uncertain for some types of transaction and we are keeping
developments under review. With support from external advisors, we
believe that the BEAT impact on the group is not significant. As at
30 June 2021, no amount was provided in the group accounts for BEAT
liabilities (for the year ended 31 December 2020 the group provided
$1.1m for BEAT tax). The ultimate outcome may differ and if any
additional amounts did fall within the scope of the BEAT,
incremental tax at 10% might arise on some or all of those
amounts.
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting
period and not recognised in net profits or loss or other
comprehensive income but directly debited or credited to
equity:
30 June 30 June 31 December
2021 2020 2020
$m $m $m
----------------------------------- ------- ------- -----------
Current tax: share based payments - (1.3) (1.2)
Deferred tax: share based payments 3.9 6.8 5.4
----------------------------------- ------- ------- -----------
3.9 5.5 4.2
----------------------------------- ------- ------- -----------
9 Financial assets and liabilities
30 June 30 June 31 December
2021 2020 2020
$m $m $m
-------------------------------------------------- -------- ------- -----------
Financial assets at fair value
Government issued 3,374.5 2,335.7 2,723.7
Corporate bonds
- Investment grade 1,960.8 2,720.3 2,444.9
- High yield 310.6 169.1 251.1
Syndicate loans 41.9 16.7 40.6
-------------------------------------------------- -------- ------- -----------
Total fixed and floating rate debt securities
and syndicate loans 5,687.8 5,241.8 5,460.3
-------------------------------------------------- -------- ------- -----------
Equity funds 186.6 86.9 203.2
Hedge funds 455.6 340.1 442.1
Illiquid credit assets 230.2 211.3 227.9
-------------------------------------------------- -------- ------- -----------
Total capital growth 872.4 638.3 873.2
-------------------------------------------------- -------- ------- -----------
Total financial investments at fair value through
statement of profit or loss 6,560.2 5,880.1 6,333.5
Derivative financial assets 1.2 10.2 28.5
-------------------------------------------------- -------- ------- -----------
Total financial assets at fair value 6,561.4 5,890.3 6,362.0
-------------------------------------------------- -------- ------- -----------
Investment grade corporate bonds are rated BBB-/Baa3 or higher
by at least one major rating agency, while high yield corporate
bonds have lower credit ratings. Hedge funds are investment
vehicles pursuing alternative investment strategies, structured to
have minimal correlation to traditional asset classes. Equity funds
are investment vehicles which invest in equity securities and
provide diversified exposure to global equity markets. Illiquid
credit assets are investment vehicles that predominantly target
private lending opportunities, often with longer investment
horizons. The fair value of these assets at 30 June 2021 excludes
an unfunded commitment of $46.6m (30 June 2020: $67.3m). Syndicate
loans have been introduced and collected by Lloyd's of London to
support underwriting at Lloyd's Brussels on the 2019 and 2020 years
of account.
30 June 30 June 31 December
2021 2020 2020
The amount expected to mature before and after
one year are: $m $m $m
----------------------------------------------- -------- ------- -----------
Within one year 1,244.3 1,383.9 1,407.1
After one year 4,444.7 3,868.1 4,081.7
----------------------------------------------- -------- ------- -----------
Total 5,689.0 5,252.0 5,488.8
----------------------------------------------- -------- ------- -----------
Our capital growth assets have no defined maturity dates and
have thus been excluded from the above maturity table. However,
$186.6m (30 June 2020: $86.9m) of equity funds could be liquidated
within two weeks, $356.6m (30 June 2020: $277.5m) of hedge fund
assets within six months and the remaining $99.0m (30 June 2020:
$62.6m) of hedge fund assets within 18 months, in normal market
conditions. Illiquid credit assets are not readily realisable and
principal will be returned over the life of these assets, which may
be up to 12 years.
30 June 30 June 31 December
2021 2020 2020
Financial liabilities $m $m $m
------------------------------------------------ ------- ------- -----------
Tier 2 subordinated debt (2029) 298.3 298.1 298.1
Tier 2 subordinated debt (2026) 249.1 248.9 249.0
Derivative financial liabilities 4.8 7.9 11.4
------------------------------------------------ ------- ------- -----------
Total financial liabilities 552.2 554.9 558.5
------------------------------------------------ ------- ------- -----------
30 June 30 June 31 December
2021 2020 2020
The amounts expected to mature before and after
one year are: $m $m $m
------------------------------------------------ ------- ------- -----------
Within one year 4.8 7.9 11.4
After one year 547.4 547.0 547.1
------------------------------------------------ ------- ------- -----------
Total 552.2 554.9 558.5
------------------------------------------------ ------- ------- -----------
Valuation hierarchy
The table below summarises financial assets carried at fair
value using a valuation hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value
hierarchy has the following levels:
Level 1 - Valuations based on quoted prices in active markets
for identical instruments. An active market is a market in which
transactions for the instrument occur with sufficient frequency and
volume on an ongoing basis such that quoted prices reflect prices
at which an orderly transaction would take place between market
participants at the measurement date. Included within level 1 are
bonds, treasury bills of government and government agencies,
corporate bonds and equity funds which are measured based on quoted
prices in active markets.
Level 2 - Valuations based on quoted prices in markets that are
not active, or based on pricing models for which significant inputs
can be corroborated by observable market data (e.g. interest rates
and exchange rates). Included within level 2 are government bonds
and treasury bills, equity funds and corporate bonds, which are not
actively traded, hedge funds and senior secured loans.
Level 3 - Valuations based on inputs that are unobservable or
for which there is limited market activity against which to measure
fair value.
The availability of financial data can vary for different
financial assets and is affected by a wide variety of factors,
including the type of financial instrument, whether it is new and
not yet established in the marketplace, and other characteristics
specific to each transaction. To the extent that valuation is based
on models or inputs that are unobservable in the market, the
determination of fair value requires more judgement. Accordingly
the degree of judgement exercised by management in determining fair
value is greatest for instruments classified in level 3. The group
uses prices and inputs that are current as of the measurement date
for valuation of these instruments.
If the inputs used to measure the fair value of an asset or a
liability could be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The group has an established control framework and valuation
policy with respect to the measurement of fair values.
Level 2 investments
For the group's level 2 debt securities our fund administrator
obtains the prices used in the valuation from independent pricing
vendors such as Bloomberg, Standard & Poor's, Reuters, Markit
and International Data Corporation. The independent pricing vendors
derive an evaluated price from observable market inputs. The market
inputs include trade data, two-sided markets, institutional bids,
comparable trades, dealer quotes, news media, and other relevant
market data. These inputs are verified in their pricing engines and
calibrated with the pricing models to calculate spread to
benchmarks, as well as other pricing assumptions such as Weighted
Average life (WM), Discount Margins (DM), Default rates, and
recovery and prepayments assumptions for mortgage securities. While
such valuations are sensitive to estimates, it is believed that
changing one or
more of the assumptions to reasonably possible alternative
assumptions would not change the fair value significantly.
The group records the unadjusted price provided and validates
the price through various tolerance checks, such as comparison with
prices provided by investment custodians and investment managers,
to assess the reasonableness and accuracy of the price to be used
to value each security. In the rare case that a price fails the
tolerance test, it is escalated and discussed internally.
We would not normally override a price retrospectively, but we
would work with the administrator and pricing vendor to investigate
the difference. This generally results in the vendor updating their
inputs. We also review our valuation policy on a regular basis to
ensure it is fit for purpose. For the half year ended 30 June 2021,
no adjustments have been made to the prices obtained from the
independent sources.
For our hedge funds and equity funds, the pricing and valuation
of each fund is undertaken by administrators in accordance with
each underlying fund's valuation policy. For the equity funds, the
individual fund prices are published on a daily, weekly or monthly
basis via Bloomberg and other market data providers such as
Reuters. For the hedge funds, the individual fund prices are
communicated by the administrators to all investors via the monthly
investor statements. The fair value of the hedge fund and equity
fund portfolios are calculated by reference to the underlying net
asset values of each of the individual funds.
Additional information is obtained from fund managers relating
to the underlying assets within individual hedge funds. We
identified that 76% (30 June 2020: 82%) of these underlying assets
were level 1 and the remainder level 2. This enables us to
categorise our hedge fund as level 2. Prior to any new hedge fund
investment, extensive due diligence is undertaken on each fund to
ensure that pricing and valuation is undertaken by an independent
administrator and that each fund's valuation policy is appropriate
for the financial instruments the manager will be employing to
execute the investment strategy. Fund liquidity terms are reviewed
prior to the execution of any investment to ensure that there is no
mismatch between the liquidity of the underlying fund assets and
the liquidity terms offered to fund investors. As part of the
monitoring process, underlying fund subscriptions
and redemptions are assessed by reconciling the increase or
decrease in fund assets with the investment performance in any
given period.
Level 3 investments
The group's level 3 investments consist of illiquid credit
assets and Lloyd's syndicate loans.
(i) Illiquid credit assets
Within the group's level 3 investments we have a diversified
portfolio of illiquid credit fund investments managed by third
party managers (generally closed ended limited partnerships or open
ended funds). While the funds provide full transparency on their
underlying investments, the investments themselves are
predominantly in private and unquoted instruments and are therefore
classified as level 3 investments. Closed-ended funds that are
still in their investment period continue to draw down capital,
whilst funds that are in their harvest period distribute capital as
the underlying investments are realized.
The valuation techniques used by the fund managers to establish
the fair value of the underlying private/unquoted investments may
incorporate discounted cash flow models or a more market based
approach, whilst the main inputs might include discount rates,
fundamental pricing multiples, recent transaction prices, or
comparable market information to create a benchmark multiple. We
take the following steps to ensure accurate valuation of these
level 3 assets. A substantial part of the pre-investment due
diligence process is dedicated to a comprehensive review of each
fund's valuation policy and the internal controls of the manager.
In addition to this, confirmation that the investment reaches a
minimum set of standards relating to the independence of service
providers, corporate governance, and transparency is sought prior
to approval. Post investment, quarterly capital statements are
reviewed to ensure consistency between audited and unaudited
valuations and compare the updated values to the estimated figures
used in previous valuations in order to highlight and explain any
discrepancies. Particular emphasis is placed on identifying assets
that have been either marked up or down, as well as whether any
specific assets are at particular risk due to prevailing
economic/market conditions. The review also involves regular
conversations with the managers and industry sources, particularly
in times of market stress. Audited financial statements are
received and reviewed on an annual basis, with the valuation of
each transaction being confirmed. For the group's annual and
interim accounts, we use the latest fund valuation statements,
which are typically as at the previous quarter or month end.
To ensure that values are materially correct at the reporting
date, all fund managers are contacted to confirm whether there has
been a material impairment to the fund valuations since the most
recent valuation date. In the event that a manager confirms a
material impairment since the latest valuation date, we would make
a downwards revision to the value of our fund holding based on the
manager's assessment. Furthermore, during major stress events in
public financial markets (defined as >10% fall in leveraged loan
market indices during a calendar quarter), such as the
macroeconomic uncertainty caused by COVID-19 in Q1 2020, we would
consider adjusting the valuations of all level 3 fund holdings to
account for material impairment in the valuation between the latest
valuation date and the reporting date. The magnitude and breadth of
any broader portfolio impairment would be dependent on the specific
situation.
(ii) Syndicate loans
These are loans provided by our group syndicates to the Central
Fund at Lloyd's in respect of the 2019 and 2020 underwriting years.
These instruments are not tradeable and are valued using discounted
cash flow models, designed to appropriately reflect the credit and
illiquidity risk of the instruments. The syndicate loans have been
classified as Level 3 investments because the valuation approach
includes significant unobservable inputs and an element of
subjectivity in determining appropriate credit and illiquidity
spreads.
The following table shows the fair values of financial assets
and financial liabilities, including their levels in the fair value
hierarchy.
Level
Level 1 Level 2 3 Total
30 June 2021 $m $m $m $m
----------------------------------------- -------- -------- ------ --------
Financial assets measured at fair value
Government issued 2,652.4 722.1 - 3,374.5
Corporate bonds
- Investment grade 1,436.1 524.7 - 1,960.8
- High yield 119.7 190.9 - 310.6
Syndicate loans - - 41.9 41.9
Equity funds 186.6 - - 186.6
Hedge funds - 455.6 - 455.6
Illiquid credit assets - - 230.2 230.2
Derivative financial assets 1.2 - - 1.2
----------------------------------------- -------- -------- ------ --------
Total financial assets measured at fair
value 4,396.0 1,893.3 272.1 6,561.4
----------------------------------------- -------- -------- ------ --------
Financial liabilities measured at fair
value
----------------------------------------- -------- -------- ------ --------
Derivative financial liabilities 4.8 - - 4.8
----------------------------------------- -------- -------- ------ --------
Financial liabilities not measured at
fair value
Tier 2 subordinated debt (2029) - 331.9 - 331.9
Tier 2 subordinated debt (2026) - 278.1 - 278.1
----------------------------------------- -------- -------- ------ --------
Total financial liabilities not measured
at fair value - 610.0 - 610.0
----------------------------------------- -------- -------- ------ --------
Level
Level 1 Level 2 3 Total
30 June 2020 $m $m $m $m
----------------------------------------- ------- ------- ----- -------
Financial assets measured at fair value
Government issued 2,263.1 72.6 - 2,335.7
Corporate bonds
- Investment grade 1,647.8 1,072.5 - 2,720.3
- High yield 164.6 4.5 - 169.1
Syndicate loans - - 16.7 16.7
Equity funds 82.0 4.9 - 86.9
Hedge funds - 340.1 - 340.1
Illiquid credit assets - - 211.3 211.3
Derivative financial assets 10.2 - - 10.2
----------------------------------------- ------- ------- ----- -------
Total financial assets measured at fair
value 4,167.7 1,494.6 228.0 5,890.3
----------------------------------------- ------- ------- ----- -------
Financial liabilities measured at fair
value
----------------------------------------- ------- ------- ----- -------
Derivative financial liabilities 7.9 - - 7.9
----------------------------------------- ------- ------- ----- -------
Financial liabilities not measured at
fair value
Tier 2 subordinated debt (2029) - 310.9 - 310.9
Tier 2 subordinated debt (2026) - 262.5 - 262.5
----------------------------------------- ------- ------- ----- -------
Total financial liabilities not measured
at fair value - 573.4 - 573.4
----------------------------------------- ------- ------- ----- -------
Level
Level 1 Level 2 3 Total
31 December 2020 $m $m $m $m
----------------------------------------- ------- ------- ----- -------
Financial assets measured at fair value
Government issued 2,637.8 85.9 - 2,723.7
Corporate bonds
- Investment grade 1,148.3 1,296.6 - 2,444.9
- High yield 103.0 148.1 - 251.1
Syndicate loans - - 40.6 40.6
Equity funds 203.2 - - 203.2
Hedge funds - 442.1 - 442.1
Illiquid credit assets - - 227.9 227.9
Derivative financial assets 28.5 - - 28.5
----------------------------------------- ------- ------- ----- -------
Total financial assets measured at fair
value 4,120.8 1,972.7 268.5 6,362.0
----------------------------------------- ------- ------- ----- -------
Financial liabilities measured at fair
value
----------------------------------------- ------- ------- ----- -------
Derivative financial liabilities 11.4 - - 11.4
----------------------------------------- ------- ------- ----- -------
Financial liabilities not measured at
fair value
Tier 2 subordinated debt (2029) - 320.5 - 320.5
Tier 2 subordinated debt (2026) - 271.0 - 271.0
----------------------------------------- ------- ------- ----- -------
Total financial liabilities not measured
at fair value - 591.5 - 591.5
----------------------------------------- ------- ------- ----- -------
The table above does not include financial assets and
liabilities that are, in accordance with the group's accounting
policies, recorded at amortised cost, if the carrying amount of
these financial assets and liabilities approximates their fair
values at the reporting date. Cash and cash equivalents have not
been included in the table above; however, the full amount of cash
and cash equivalents would be classified under level 2 in both the
current and prior year.
Transfers
The group determines whether transfers have occurred between
levels in the fair value hierarchy by assessing categorisation at
the end of the reporting period.
The following transfers between levels 1 & 2 for the period
ended 30 June 2021 reflect the level of trading activities
including frequency and volume derived from market data obtained
from an independent external valuation tool:
Level Level
1 2
30 June 2021 vs 30 June 2020 transfer from level 1
to level 2 $m $m
--------------------------------------------------- ------- -----
- Investment grade (251.1) 251.1
- Government issued (91.0) 91.0
--------------------------------------------------- ------- -----
Level Level
1 2
30 June 2021 vs 30 June 2020 transfer from level 2
to level 1 $m $m
--------------------------------------------------- ----- -------
- Investment grade 315.0 (315.0)
--------------------------------------------------- ----- -------
The values shown in the transfer tables above are translated at
foreign exchange rate as at 30 June 2021.
Level Level
1 2
30 June 2021 vs 31 December 2020 transfer from level
1 to level 2 $m $m
----------------------------------------------------- ------- -----
- Investment grade (111.4) 111.4
----------------------------------------------------- ------- -----
- Government issued (119.1) 119.1
----------------------------------------------------- ------- -----
Level Level
1 2
30 June 2021 vs 31 December 2020 transfer from level
2 to level 1 $m $m
----------------------------------------------------- ----- -------
- Investment grade 513.7 (513.7)
----------------------------------------------------- ----- -------
The values shown in the transfer tables above are translated at
foreign exchange rate as at 30 June 2021.
Level 3 investment reconciliations
The table below shows a reconciliation from the opening balances
to the closing balances of level 3 fair values. The total net
unrealised gains recognised in the profit or loss of $13.2m (30
June 2020: gain of $4.7 m) is included in the net investment income
number of $83.6m (30 June 2020: $83.2m) shown in the condensed
consolidated statement of profit or loss.
30 June 30 June 31 December
2021 2020 2020
$m $m $m
----------------------------------------------- ------- ------- -----------
As at 1 January 268.5 216.6 216.6
Purchases 21.3 28.7 94.4
Sales (30.9) (20.2) (56.9)
Transfer from level 2 - 7.6 8.2
Total net unrealised gains/(losses) recognised
in profit or loss 13.2 (4.7) 6.2
----------------------------------------------- ------- ------- -----------
As at period end 272.1 228.0 268.5
----------------------------------------------- ------- ------- -----------
Unconsolidated structured entities
A structured entity is defined as an entity that has been
designed so that voting or similar rights are not the dominant
factor in deciding who controls the entity, such as when any voting
rights relate to administrative tasks only, or when the relevant
activities are directed by means of contractual arrangements. As
part of its standard investment activities the group holds
investments in high yield bond funds, equity funds, hedge funds and
illiquid credit assets which in accordance with IFRS 12 are
classified as unconsolidated structured entities. The group does
not sponsor any of the unconsolidated structured entities. The
assets classified as unconsolidated structured entities are held at
fair value on the statement of financial position.
The investments comprising the group's unconsolidated structured
entities are as follows:
30 June 30 June 31 December
2021 2020 2020
$m $m $m
---------------------------------------------- ------- ------- -----------
High yield 310.6 169.1 251.1
Equity funds 186.6 86.9 203.2
Hedge funds 455.6 340.1 442.1
Illiquid credit assets 230.2 211.3 227.9
---------------------------------------------- ------- ------- -----------
Investments through unconsolidated structured
entities 1,183.0 807.4 1,124.3
---------------------------------------------- ------- ------- -----------
Currency exposures
The currency exposures of our financial assets held at fair
value are detailed below:
UK GBP CAD $ EURO EUR Subtotal US $ Total
30 June 2021 $m $m $m $m $m $m
----------------------------- ------ ------ -------- -------- -------- --------
Financial assets at fair
value
Fixed and floating rate debt
securities 434.4 321.0 - 755.4 4,890.5 5,645.9
Syndicate loans 41.9 - - 41.9 - 41.9
Equity funds - - - - 186.6 186.6
Hedge funds - - - - 455.6 455.6
Illiquid credit assets 1.8 - 37.3 39.1 191.1 230.2
Derivative financial assets - - - - 1.2 1.2
----------------------------- ------ ------ -------- -------- -------- --------
Total 478.1 321.0 37.3 836.4 5,725.0 6,561.4
----------------------------- ------ ------ -------- -------- -------- --------
UK GBP CAD $ EURO EUR Subtotal US $ Total
30 June 2020 $m $m $m $m $m $m
----------------------------- ------ ----- -------- -------- ------- -------
Financial assets at fair
value
Fixed and floating rate debt
securities 12.4 211.1 - 223.5 5,001.6 5,225.1
Syndicate loans 16.7 - - 16.7 - 16.7
Equity funds - - - - 86.9 86.9
Hedge funds - - - - 340.1 340.1
Illiquid credit assets 5.3 - 27.4 32.7 178.6 211.3
Derivative financial assets - - - - 10.2 10.2
----------------------------- ------ ----- -------- -------- ------- -------
Total 34.4 211.1 27.4 272.9 5,617.4 5,890.3
----------------------------- ------ ----- -------- -------- ------- -------
UK GBP CAD $ EURO EUR Subtotal US $ Total
31 December 2020 $m $m $m $m $m $m
----------------------------- ------ ----- -------- -------- ------- -------
Financial assets at fair
value
Fixed and floating rate debt
securities 15.1 248.6 - 263.7 5,156.0 5,419.7
Syndicate loans 40.6 - - 40.6 - 40.6
Equity funds - - - - 203.2 203.2
Hedge funds - - - - 442.1 442.1
Illiquid credit assets 3.2 - 34.6 37.8 190.1 227.9
Derivative financial assets - - - - 28.5 28.5
----------------------------- ------ ----- -------- -------- ------- -------
Total 58.9 248.6 34.6 342.1 6,019.9 6,362.0
----------------------------- ------ ----- -------- -------- ------- -------
The above qualitative and quantitative disclosures along with
the risk management disclosure included in note 2 of the annual
report for the year ending 31 December 2020, enables more
comprehensive evaluation of Beazley's exposure to risks arising
from financial instruments.
10 Cash and cash equivalents
30 June 30 June 31 December
2021 2020 2020
$m $m $m
-------------------------------------------------- ------- ------- -----------
Cash at bank and in hand 451.3 312.0 309.5
Short-term deposits and highly liquid investments - 47.7 -
-------------------------------------------------- ------- ------- -----------
451.3 359.7 309.5
-------------------------------------------------- ------- ------- -----------
Total cash and cash equivalents include $26.6m (30 June 2020:
$9.4m, 31 December 2020: $15.7m) held in Lloyd's Singapore trust
accounts. These funds are only available for use by the group to
meet local claim and expense obligations.
11 Insurance claims
The processes undertaken by management in estimating insurance
liabilities are consistent with the processes applied for the year
ended 31 December 2020 and further detail is available in note 24
of the group's 2020 Annual Report and Accounts. These processes
include performing liability adequacy tests at each reporting date.
As at 30 June 2021, management identified a deficiency in claims
liabilities net of deferred acquisition costs and unearned premium
reserves and has recognised an unexpired risk reserve. This reserve
has been recognised as a result of the unprecedented impact of
COVID-19 particularly on the group's Contingency business which was
affected by claims arising due to widespread event cancellations as
a result of government restrictions.
Gross insurance liabilities as at 30 June 2021 of $7,890.6m (30
June 2020: $6,697.9m; 31 December 2020: $7,378.4m) include an
unexpired risk reserve of $12.8m (30 June 2020: nil; 31 December
2020: $91.5m). Reinsurance assets as at 30 June 2021 of $2,033.4m
(30 June 2020: $1,649.4m; 31 December 2020: $1,684.7m) also include
reinsurers' shares of the unexpired risk reserve of $1.6m (30 June
2020: nil; 31 December 2020: $9.0m).
The loss development tables below provide information about
historical claims development by the seven segments - Cyber &
Executive Risk, Market Facilities, Marine, Political, Accident
& Contingency, Property, Reinsurance and Specialty Lines. The
tables are by underwriting year which in our view provides the most
transparent reserving basis. We have supplied tables for both
ultimate gross claims ratios and ultimate net claims ratios.
The top part of the table illustrates how the group's estimated
claims ratio for each underwriting year has changed at successive
year ends.
While the information in the tables provide a historical
perspective on the adequacy of the claims liabilities established
in previous years, users of these financial statements are
cautioned against extrapolating past redundancies or deficiencies
on current claims liabilities. The group believes that the
estimates of total claims liabilities as at 30 June 2021 are
adequate. However, due to inherent uncertainties in the reserving
process, it cannot be assured that such balances will ultimately
prove to be adequate.
Gross ultimate
claims 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
2011ae % % % % % % % % % % Total
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Cyber & Executive Risk
12 months 71.6 71.0 66.0 64.3 61.9 59.5 61.1 61.8 73.5
24 months 71.8 71.3 66.2 64.4 61.9 61.5 62.3 72.0
36 months 69.1 71.1 63.6 59.0 58.5 56.8 61.4
48 months 65.5 69.0 65.0 54.1 58.2 56.5
60 months 63.6 66.3 69.7 55.9 59.4
72 months 61.3 62.9 68.3 57.4
84 months 60.7 62.9 69.0
96 months 59.5 63.4
108 months 59.7
Position
at 30 June
2021 59.6 63.5 70.3 57.5 58.4 56.6 62.7 72.1 77.7
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Marine
12 months 56.1 56.8 57.7 56.7 59.5 68.0 61.9 60.1 57.8
24 months 46.3 52.1 47.0 53.9 70.2 62.3 68.1 56.8
36 months 34.6 44.6 47.2 47.3 65.4 61.6 66.2
48 months 32.1 42.9 46.8 45.4 63.9 57.9
60 months 31.3 42.3 55.9 43.3 62.5
72 months 30.5 41.7 53.6 42.7
84 months 29.8 40.5 52.4
96 months 29.6 39.4
108 months 29.7
Position
at 30 June
2021 29.9 39.3 52.3 42.6 61.9 57.3 64.2 52.4 59.7
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Market
Facilities
12 months - - - - - - 66.3 72.9 76.6
24 months - - - - - - 66.3 72.8
36 months - - - - - - 55.1
48 months - - - - - -
60 months - - - - -
72 months - - - -
84 months - - -
96 months - -
108 months -
Position
at
30 June
2021 - - - - - - 52.4 72.4 76.6
-------- -------- -------- --------- --------- -------- -------- --------- ----------
Political, Accident & Contingency
12 months 60.0 59.5 59.6 60.3 61.7 57.9 59.3 56.9 111.2
24 months 56.0 51.0 52.3 59.7 55.5 49.8 55.2 143.6
36 months 53.1 46.6 48.3 58.2 50.7 46.5 92.3
48 months 50.6 45.6 51.3 59.0 49.3 49.7
60 months 47.5 47.4 52.5 55.4 47.8
72 months 46.6 47.2 53.5 54.4
84 months 45.7 47.0 54.4
96 months 45.8 46.6
108 months 45.6
Position
at 30 June
2021 45.5 46.2 54.4 54.5 47.1 48.1 99.8 141.1 109.2
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Property
12 months 56.1 54.9 53.2 55.0 59.0 72.3 63.4 53.2 67.9
24 months 47.4 49.0 47.7 49.1 68.4 88.4 63.5 63.4
36 months 39.6 45.6 41.4 46.0 71.3 91.2 65.4
48 months 36.6 45.6 40.6 44.8 71.8 91.3
60 months 36.0 45.6 39.7 43.7 71.8
72 months 35.4 47.3 40.2 46.0
84 months 35.3 46.6 39.8
96 months 36.6 47.1
108 months 37.6
Position
at
30 June
2021 37.6 47.0 40.1 46.3 71.7 91.6 64.7 58.6 72.1
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Reinsurance
12 months 62.8 59.4 61.3 65.8 68.7 121.4 98.9 100.8 79.4
24 months 37.0 45.6 33.3 33.7 41.8 116.7 124.8 69.5
36 months 31.5 43.0 30.7 25.7 40.6 128.5 123.3
48 months 30.4 41.7 27.6 25.4 41.4 131.2
60 months 30.7 38.8 27.4 25.3 40.7
72 months 30.4 38.5 27.0 25.0
84 months 30.5 37.6 26.9
96 months 30.1 37.5
108 months 30.1
Position
at
30 June
2021 30.1 37.5 27.0 24.6 40.1 130.3 120.8 71.6 83.8
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Specialty
Lines
12 months 74.9 74.6 69.8 69.3 67.6 66.0 68.5 67.0 68.4
24 months 75.0 74.2 69.5 69.9 67.5 66.1 69.0 68.6
36 months 73.6 73.9 65.8 68.3 65.4 65.9 65.9
48 months 73.9 69.4 61.7 67.4 64.1 62.1
60 months 70.2 64.2 58.0 69.3 60.8
72 months 69.1 62.1 55.7 78.2
84 months 68.7 61.4 53.9
96 months 71.0 60.0
108 months 72.3
Position
at
30 June
2021 73.1 58.7 53.8 80.2 60.1 63.1 62.5 66.4 68.7
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Total
12 months 64.6 63.8 62.1 62.5 63.3 70.0 66.7 64.8 73.1
24 months 58.3 59.4 55.8 58.4 62.8 71.1 69.6 74.2
36 months 53.3 56.6 52.6 54.4 60.7 70.9 71.3
48 months 51.4 54.6 51.7 52.6 60.1 69.7
60 months 49.5 52.6 53.2 52.7 59.1
72 months 48.4 51.7 52.1 55.6
84 months 48.0 51.1 51.7
96 months 48.5 50.7
108 months 49.1
Position
at
30 June
2021 49.3 50.3 52.0 56.1 58.5 69.7 70.6 72.3 75.1
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Estimated
total ultimate
losses
($m) 7,952.9 871.5 924.8 1,001.2 1,138.0 1,261.6 1,712.6 1,895.8 2,253.7 2,688.9 2,619.6 24,320.6
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Less paid
claims
($m) (7,739.9) (785.3) (847.8) (923.9) (935.4) (989.0) (1,193.7) (1,121.7) (831.7) (469.9) (10.4) (15,848.7)
Less unearned
portion
of ultimate
losses ($m) (68.8) (403.8) (2,240.4) (2,713.0)
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
Gross claims
liabilities
($m) 213.0 86.2 77.0 77.3 202.6 272.6 518.9 774.1 1,353.2 1,815.2 368.8 5,758.9
--------------- --------- ------- ------- -------- -------- -------- --------- --------- -------- -------- --------- ----------
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Net ultimate
claims 2011ae % % % % % % % % % % Total
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
Cyber &
Executive
Risk
12 months 68.2 66.5 63.2 60.4 59.2 57.9 58.3 59.9 72.3
24 months 68.5 66.8 63.8 60.4 59.2 59.0 60.6 68.1
36 months 65.6 65.1 62.3 56.0 56.2 55.5 62.4
48 months 60.2 62.2 61.3 50.3 56.3 55.8
60 months 60.2 59.5 65.9 51.5 55.2
72 months 57.6 56.8 64.9 49.7
84 months 57.1 56.3 65.5
96 months 55.9 56.3
108 months 56.4
Position
at
30 June
2021 56.4 56.2 66.7 49.6 54.0 55.7 64.8 67.2 71.6
Marine
12 months 55.2 56.3 56.6 56.6 56.6 57.4 59.3 56.6 54.2
24 months 45.8 53.2 48.6 52.3 62.3 61.2 67.7 55.1
36 months 37.0 47.5 46.6 47.0 61.4 61.7 68.6
48 months 34.6 45.9 45.7 46.5 61.9 59.4
60 months 33.5 45.4 47.0 45.2 60.5
72 months 32.8 44.8 45.2 44.7
84 months 32.4 42.7 44.5
96 months 32.2 42.5
108 months 32.3
Position
at
30 June
2021 32.6 42.4 44.4 44.5 60.0 59.2 65.5 50.8 56.2
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
Market
Facilities
12 months - - - - - - 36.5 24.6 28.3
24 months - - - - - - 36.5 24.2
36 months - - - - - - 30.4
48 months - - - - - -
60 months - - - - -
72 months - - - -
84 months - - -
96 months - -
108 months -
Position
at
30 June
2021 - - - - - - 20.8 24.6 28.2
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
Political, Accident & Contingency
12 months 58.7 59.0 57.3 57.8 60.5 57.0 58.6 56.1 91.1
24 months 53.7 52.4 50.7 56.7 54.4 49.3 54.4 111.9
36 months 51.4 49.1 46.3 55.9 50.9 45.8 82.0
48 months 47.9 46.7 50.6 55.3 48.6 46.4
60 months 44.9 46.7 50.9 52.6 47.4
72 months 43.9 46.9 51.8 52.0
84 months 43.4 47.0 52.2
96 months 43.9 46.9
108 months 43.7
Position
at
30 June
2021 43.8 46.6 52.3 51.2 47.1 45.4 86.8 110.8 88.0
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
Property
12 months 59.4 56.2 54.6 55.0 57.6 76.0 64.4 56.4 67.8
24 months 53.0 56.1 51.5 50.7 69.5 93.4 66.9 66.2
36 months 46.4 52.2 44.8 47.3 71.3 95.4 68.1
48 months 41.5 50.4 43.4 45.1 70.8 93.4
60 months 40.9 50.3 42.4 44.9 69.9
72 months 40.4 51.9 43.5 46.6
84 months 40.1 52.1 43.0
96 months 41.7 52.4
108 months 42.6
Position
at
30 June
2021 41.6 52.0 42.7 45.4 70.0 94.9 66.7 61.7 75.6
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
Reinsurance
12 months 66.6 57.1 58.7 61.7 62.1 104.0 87.1 86.9 85.7
24 months 44.4 52.4 37.8 34.7 39.5 93.1 100.5 70.4
36 months 38.0 48.5 34.0 25.0 39.0 104.0 98.4
48 months 36.3 47.3 31.4 24.6 40.6 107.4
60 months 36.6 43.7 31.2 24.8 41.6
72 months 36.2 43.4 30.7 25.1
84 months 36.3 42.5 30.6
96 months 35.8 42.4
108 months 35.8
Position
at
30 June
2021 35.8 42.3 30.7 24.5 41.0 106.9 93.5 73.6 90.9
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
Specialty lines
12 months 71.3 70.4 67.0 65.0 65.0 63.8 66.0 64.8 65.3
24 months 71.4 69.9 66.6 65.8 65.0 63.7 67.1 64.9
36 months 70.0 70.0 64.1 63.2 61.2 63.4 64.1
48 months 68.4 64.1 59.1 58.5 56.9 58.2
60 months 65.9 59.2 55.8 58.8 52.1
72 months 66.1 57.6 54.5 62.7
84 months 66.0 57.5 52.8
96 months 67.1 56.3
108 months 67.9
Position
at
30 June
2021 68.7 55.3 53.0 64.8 51.6 59.7 59.6 62.7 65.2
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------------
Total
12 months 63.8 62.0 60.4 59.8 60.6 65.7 63.4 61.6 69.1 63.8
24 months 58.3 60.2 56.1 56.6 60.9 67.6 66.1 69.0 58.3
36 months 53.8 57.3 52.8 52.8 58.8 67.5 68.1 53.8
48 months 50.7 54.4 51.2 49.7 57.5 65.6 50.7
60 months 49.4 52.2 51.4 49.6 55.5 49.4
72 months 48.6 51.6 50.8 50.4 48.6
84 months 48.4 51.0 50.4 48.4
96 months 48.8 50.7 48.8
108 months 49.2 49.2
Position
at
30 June
2021 49.3 50.3 50.6 50.6 54.8 66.0 67.0 66.9 70.1 49.3
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ----------- ----------
Total
ultimate
losses ($m) 5,843.6 719.9 787.9 836.6 865.4 998.3 1,360.0 1,505.6 1,756.4 2,032.6 1,950.6 18,656.9
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ----------- ----------
Less paid
claims ($m) (5,658.4) (663.0) (728.9) (775.3) (759.8) (829.8) (951.4) (893.9) (635.7) (330.3) (8.2) (12,234.7)
Less unearned
portion of
ultimate
losses ($m) (50.5) (311.4) (1,804.1) (2,166.0)
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ----------- ----------
Net claims
liabilities
(100% level)
($m) 185.2 56.9 59.0 61.3 105.6 168.5 408.6 611.7 1,070.2 1,390.9 138.3 4,256.2
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ----------- ----------
Analysis of movements in loss development tables
We have updated our loss development tables to show the interim
ultimate loss ratios as at 30 June 2021 for each underwriting year.
As such, care should be taken when comparing these half year
movements to the full year movements shown within the body of the
table.
Cyber & Executive Risk
Whilst the majority of years remain at similar levels to the end
of 2020, the 2020 underwriting year has strengthened gross of
reinsurance in response to cyber ransomware activity. However, this
year is recovering under aggregate excess of loss reinsurance
programmes, so the impact is not seen net of reinsurance.
Marine
The 2020 underwriting year strengthened slightly due to the
storms which affected large parts of the South Central and Western
areas of the US. Releases continue on mature underwriting years as
the risks expire.
Market Facilities
The loss development tables are presented gross of acquisition
costs. Due to the Market Facilities division being significantly
reinsured and this reinsurance being ceded net of acquisition
costs, the net of reinsurance loss development values are much
lower than the gross of reinsurance. The release on the 2018
underwriting year arises as the risk expires.
Political, Accident & Contingency
The contingency, accident and life classes within this division
were significantly impacted by COVID-19 claims across the 2018 to
2020 underwriting years. Whilst the overall reserves have not
changed, there has been a partial reallocation of these COVID-19
claims to the 2018 underwriting year from the 2019 and 2020
years.
Property
The 2020 underwriting year has been impacted by the storms which
affected large parts of the South Central and Western areas of the
US. Favourable developments across established catastrophe events
have led to releases on the 2019 underwriting year.
Reinsurance
The recent storms which affected large parts of the South
Central and Western areas of the US have impacted the 2020
underwriting year. The 2019 underwriting year has strengthened due
to adverse attritional claims development. Favourable developments
on attritional claims and established catastrophe events have led
to releases on the 2018 underwriting year.
Specialty Lines
The 2020 underwriting year has strengthened in response to cyber
ransomware activity and the 2015 underwriting year continues to see
claims development in excess of expectations. Both these years are
recovering under aggregate excess of loss reinsurance programmes,
so the impact is lower net of reinsurance. The 2018 underwriting
year continues to see favourable development resulting in
releases.
Claims releases
The table below analyses our net insurance claims between
current year claims and adjustments to prior year net claims
reserves. These have been broken down by segment and period.
The net of reinsurance claims release on 2020 and prior
underwriting years totalled $95.7m (2020: $58.6m).We saw releases
come through from all divisions for the first time since 2017. As a
division, Speciality Lines released the most with releases of
$13.8m and $19.0m on the 2019 and the 2018 underwriting years
respectively driven primarily by better than expected attritional
experience. Marine saw releases of $13.4m and $9.2m on the 2019 and
the 2018 underwriting years respectively with benign attritional
experience again being the primary driver particularly within
Aviation and Cargo. Property benefited from a reduction on open
market COVID-19 claims which contributed to the $14.9m release in
the 2019 underwriting year. Our Political, Accident and Contingency
division saw releases of $8.5m in the 2019 underwriting year as a
result of favourable attritional experience, particularly in
terrorism.
Historically our reserves have been within the range of 5-10%
above our actuarial estimates, which themselves include some margin
for uncertainty. The margin held above actuarial estimate was 6.6%
at 30 June 2021 (30 June 2020: 7.0%).
The movements shown on 2018 and earlier are absolute claim
movements and are not impacted by any current year movements on
premium on those underwriting years.
Cyber Political,
& Accident
Executive Market & Specialty
6 months ended 30 Risk Marine Facilities Contingency Property Reinsurance Lines Total
June 2021 $m $m $m $m $m $m $m $m
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Current year 286.0 72.6 4.6 63.2 93.0 47.7 325.6 892.7
Prior year
- 2018 and earlier 1.4 (9.2) (0.3) 2.3 (3.0) (5.6) (19.0) (33.4)
- 2019 underwriting
year (4.9) (13.4) 0.2 (8.5) (14.9) 1.7 (13.8) (53.6)
- 2020 underwriting
year (5.4) 0.5 (0.2) (0.4) 0.2 (1.4) (2.0) (8.7)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
(8.9) (22.1) (0.3) (6.6) (17.7) (5.3) (34.8) (95.7)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Net insurance claims 277.1 50.5 4.3 56.6 75.3 42.4 290.8 797.0
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Cyber Political,
& Accident
Executive Market & Specialty
6 months ended 30 Risk Marine Facilities Contingency Property Reinsurance Lines Total
June 2020 $m $m $m $m $m $m $m $m
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Current year 230.0 88.1 3.8 109.0 188.5 45.9 262.4 927.7
Prior year
- 2017 and earlier (13.6) (5.8) - (0.4) 6.9 2.1 (39.6) (50.4)
- 2018 underwriting
year 3.9 5.3 (0.3) 2.2 3.6 (4.0) (1.0) 9.7
- 2019 underwriting
year (3.0) 0.3 - 5.9 (4.2) (16.2) (0.7) (17.9)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
(12.7) (0.2) (0.3) 7.7 6.3 (18.1) (41.3) (58.6)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Net insurance claims 217.3 87.9 3.5 116.7 194.8 27.8 221.1 869.1
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Cyber Political,
& Accident
Executive Market & Specialty
Year to 31 December Risk Marine Facilities Contingency Property Reinsurance Lines Total
2020 $m $m $m $m $m $m $m $m
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
Current year 553.3 169.4 9.2 358.7 295.7 107.5 557.6 2,051.4
Prior year
- 2017 and earlier (25.4) (8.8) - (2.0) 1.9 2.2 (42.6) (74.7)
- 2018 underwriting
year 23.8 0.9 (0.6) (2.1) 3.9 (2.8) (25.4) (2.3)
- 2019 underwriting
year 6.0 (1.0) (0.3) (0.5) (10.2) (20.1) 10.0 (16.1)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
4.4 (8.9) (0.9) (4.6) (4.4) (20.7) (58.0) (93.1)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
Net insurance claims 557.7 160.5 8.3 354.1 291.3 86.8 499.6 1,958.3
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
12 Related party transactions
The related party transactions of the group are consistent in
nature and scope with those disclosed in note 30 of the group's
consolidated financial statements for the year ended 31 December
2020.
13 Foreign exchange rates
The group used the following exchange rates to translate foreign
currency assets, liabilities, income and expenses into US dollars,
being the group's presentation currency:
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2021 2020 2020
---------------- -------- -------- ------------
Average
Pound sterling 0.73 0.79 0.79
Canadian dollar 1.23 1.36 1.33
Euro 0.83 0.91 0.89
---------------- -------- -------- ------------
Spot
Pound sterling 0.71 0.79 0.76
Canadian dollar 1.22 1.35 1.32
Euro 0.82 0.88 0.90
---------------- -------- -------- ------------
14 Subsequent events
There are no events that are material to the operations of the
group that have occurred since the reporting date.
Glossary
Aggregates/aggregations: Accumulations of insurance loss
exposures which result from underwriting multiple risks that are
exposed to common causes of loss.
Aggregate excess of loss: The reinsurer indemnifies an insurance
company (the reinsured) for an aggregate (or cumulative) amount of
losses in excess of a specified aggregate amount.
Alternative performance measures (APMs): The group uses APMs to
help explain its financial performance and position. These
measures, such as combined ratio, expense ratio, claims ratio,
investment return and underwriting profit, are not defined under
IFRS. The group is of the view that the use of these measures
enhances the usefulness of the financial statements. Definitions of
key APMs are included within the glossary.
A.M. Best: A.M. Best is a worldwide insurance-rating and
information agency whose ratings are recognised as an ideal
benchmark for assessing the financial strength of insurance related
organisations, following a rigorous quantitative and qualitative
analysis of a company's statement of financial position strength,
operating performance and business profile.
Binding authority: A contracted agreement between a managing
agent and a coverholder under which the coverholder is authorised
to enter into contracts of insurance for the account of
the members of the syndicate concerned, subject to specified
terms and conditions.
Capacity: This is the maximum amount of premiums that can be
accepted by a syndicate. Capacity also refers to the amount of
insurance coverage allocated to a particular policyholder or in the
marketplace in general.
Capital growth assets: These are assets that do not pay a
regular income and target an increase in value over the long term.
They will typically have a higher risk and volatility than that of
the core portfolio. Currently these are the hedge funds, equity
funds and illiquid credit assets.
Catastrophe reinsurance: A form of excess of loss reinsurance
which, subject to a specified limit, indemnifies the reinsured
company for the amount of loss in excess of a specified retention
with respect to an accumulation of losses resulting from a
catastrophic event or series of events.
Claims: Demand by an insured for indemnity under an insurance
contract.
Claims ratio: Ratio, in percentage terms, of net insurance
claims to net earned premiums. The calculation is performed
excluding the impact of foreign exchange. In 2021, this ratio was
57% (30 June 2020: 71%; 31 December 2020: 73%). This represented
total claims of $797.0m (30 June 2020: $869.1m; 31 December 2020:
$1,958.3m) divided by net earned premiums of $1,390.2m (30 June
2020: $1,233.8m; 31 December 2020: $2,693.4m).
Combined ratio: Ratio, in percentage terms, of the sum of net
insurance claims, expenses for acquisition of insurance contracts
and administrative expenses to net earned premiums. This is also
the sum of the expense ratio and the claims ratio. The calculation
is performed excluding the impact of foreign exchange. In 2021,
this ratio was 94% (30 June 2020: 107%; 31 December 2020: 109%).
This represents the sum of net insurance claims of $797.0m (30 June
2020: $869.1m; 31 December 2020: $1,958.3m), expenses for
acquisition of insurance contracts of $376.8m (30 June 2020:
$327.9m; 31 December 2020: $738.9m) and administrative expenses of
$132.2m (30 June 2020: $121.8m; 31 December 2020: $235.5m) to net
earned premiums of $1,390.2m (30 June 2020: $1,233.8m; 31 December
2020: $2,693.4m). This is also the sum of the expense ratio 37% (30
June 2020: 36%; 31 December 2020: 36%) and the claims ratio 57% (30
June 2020:71%; 31 December 2020: 73%).
Coverholder: A firm either in the United Kingdom or overseas
authorised by a managing agent under the terms of a binding
authority to enter into contracts of insurance in the name of the
members of the syndicate concerned, subject to certain written
terms and conditions. A Lloyd's broker can act as a
coverholder.
Deferred acquisition costs (DAC): Costs incurred for the
acquisition or the renewal of insurance policies (e.g. brokerage,
premium levy and staff related costs) which are capitalised and
amortised over the term of the contracts.
Earnings per share (EPS) - basic/diluted: Ratio, in pence and
cents, calculated by dividing the consolidated profit or loss after
tax by the weighted average number of ordinary shares issued,
excluding shares owned by the group. For calculating diluted
earnings per share the number of shares and profit or loss for the
year is adjusted for certain dilutive potential ordinary shares
such as share options granted to employees.
Economic Capital Requirement (ECR): The capital required by a
syndicate's members to support their underwriting. Calculated as
the uSCR 'uplifted' by 35% to ensure capital is in place to support
Lloyd's ratings and financial strength.
Excess per risk reinsurance : A form of excess of loss
reinsurance which, subject to a specified limit, indemnifies the
reinsured company against the amount of loss in excess of a
specified retention with respect to each risk involved in each
loss.
Expense ratio: Ratio, in percentage terms, of the sum of
expenses for acquisition of insurance contracts and administrative
expenses to net earned premiums. The calculation is performed
excluding the impact of foreign exchange on non-monetary items. In
2021, the expense ratio was 37% (30 June 2020: 36%; 31 December
2020: 36%). This represents the sum of expenses for acquisition of
insurance contracts of $376.8m (30 June 2020: $327.9m; 31 December
2020: $738.9m) and administrative expenses of $132.2m (30 June
2020: $121.8m; 31 December 2020: $235.5m) to net earned premiums of
$1,390.2m (30 June 2020: $1,233.8m; 31 December 2020:
$2,693.4m).
Facultative reinsurance: A reinsurance risk that is placed by
means of a separately negotiated contract as opposed to one that is
ceded under a reinsurance treaty.
Gross premiums written: Amounts payable by the insured,
excluding any taxes or duties levied on the premium,
but including any brokerage and commission deducted by
intermediaries.
Hard market: An insurance market where prevalent prices are
high, with restrictive terms and conditions offered by
insurers.
Horizontal limits: Reinsurance coverage limits for multiple
events.
Incurred but not reported (IBNR): These are anticipated or
likely claims that may result from an insured event but which have
not yet been reported.
International Accounting Standards Board (IASB): An independent
accounting body responsible for developing IFRS (see below).
International Accounting Standards (IAS)/International Financial
Reporting Standards (IFRS): Standards formulated by the IASB with
the intention of achieving internationally comparable financial
statements. Since 2002, the standards adopted by the IASB have been
referred to as International Financial Reporting Standards (IFRS).
Until existing standards are renamed, they continue to be referred
to as International Accounting Standards (IAS).
Investment return: Ratio, in percentage terms, calculated by
dividing the net investment income by the average financial assets
at fair value, including cash. In 2021, this was calculated as net
investment income of $83.6m (30 June 2020: $83.2m; 31 December
2020: $188.1m) divided by average financial assets at fair value,
including cash, of $6,842.1m (30 June 2020: $6,050.7m; 31 December
2020: $6,261.4m).
Lead underwriter: The underwriter of a syndicate who is
responsible for setting the terms of an insurance or reinsurance
contract that is subscribed by more than one syndicate and who
generally has primary responsibility for handling any claims
arising under such a contract.
Line: The proportion of an insurance or reinsurance risk that is
accepted by an underwriter or which an underwriter is willing to
accept.
Managing agent: A company that is permitted by Lloyd's to manage
the underwriting of a syndicate.
Managing general agent (MGA): An insurance intermediary acting
as an agent on behalf of an insurer.
Managed premiums: Managed premium refers to all gross premiums
written by Beazley's underwriters. In addition to gross premiums
written on behalf of the group managed premium includes gross
premiums written in syndicate 623 by Beazley's underwriters on
behalf
of third party capital providers.
Medium tail: A type of insurance where the claims may be made a
few years after the period of insurance has expired.
Net assets per share: Ratio, in pence and cents, calculated by
dividing the net assets (total equity) by the number of shares
issued.
Net premiums written: Net premiums written is equal to gross
premiums written less outward reinsurance premiums written.
Private enterprise: The private enterprise team offers
specialised professional and general liability coverage supported
by a high service proposition, focusing on meeting the needs of
small businesses with assets up to $35.0m and up to 500
employees.
Provision for outstanding claims: Provision for claims that have
already been incurred at the reporting date but have either not yet
been reported or not yet been fully settled.
Rate: The premium expressed as a percentage of the sum insured
or limit of indemnity.
Rate change: The percentage change in premium income charged
relative to the level of risk on renewals.
Reinsurance special purpose syndicate: A special purpose
syndicate (SPS) created to operate as a reinsurance 'sidecar' to
Beazley's treaty account, capitalising on Beazley's position in the
treaty reinsurance market.
Reinsurance to close (RITC): A reinsurance which closes a year
of account at Lloyd's by transferring the responsibility for
discharging all the liabilities that attach to that year of account
(and any year of account closed into that year), plus the right to
buy any income due to the closing year of account, into an open
year of account in return for a premium.
Retention limits : Limits imposed upon underwriters for
retention of exposures by the group after the application of
reinsurance programmes.
Retrocessional reinsurance: The reinsurance of the reinsurance
account. It serves to 'lay off' risk.
Return on equity (ROE): Ratio, in percentage terms, calculated
by dividing the consolidated profit or loss after tax by the
average daily total equity. In 2021, this was calculated as profit
after tax of $139.5m (30 June 2020: loss of $12.7m; 31 December
2020: loss of $46.1m) divided by average equity of $1,920.9m (30
June 2020: $1,726.5m; 31 December 2020: $1,792.7m).
Risk: This term may refer to:
a) the possibility of some event occurring which causes injury
or loss;
b) the subject matter of an insurance or reinsurance contract;
or
c) an insured peril.
Short tail : A type of insurance where claims are usually made
during the term of the policy or shortly after the policy has
expired. Property insurance is an example of short tail
business.
Sidecar special purpose syndicate: Specialty reinsurance company
designed to provide additional capacity to a specific insurance
company. It operates by purchasing a portion or all of a group of
insurance policies, typically catastrophe exposures. These
companies have become quite prominent in the aftermath of Hurricane
Katrina as a vehicle to add risk-bearing capacity, and for
investors to participate in the potential profits resulting from
sharp price increases.
Soft market: An insurance market where prevalent prices are low,
and terms and conditions offered by insurers are less
restrictive.
Solvency Capital Requirement on an ultimate basis (uSCR): The
capital requirement under Solvency II calculated by Beazley's
internal model which captures the risk in respect of the planned
underwriting for the prospective year of account in full, covering
ultimate adverse development and all exposures.
Surplus lines insurer: An insurer that underwrites surplus lines
insurance in the US. Lloyd's underwriters are surplus lines
insurers in all jurisdictions of the US except Kentucky and the US
Virgin Islands.
Total shareholder return (TSR): The increase in the share price
plus the value of any first and second dividends paid and proposed
during the year.
Treaty reinsurance: A reinsurance contract under which the
reinsurer agrees to offer and to accept all risks of a certain size
within a defined class.
Unearned premiums reserve: The portion of premium income in the
business year that is attributable to periods after the reporting
date in the underwriting provisions.
Underwriting profit: This is calculated as net earned premiums,
less net insurance claims, acquisition costs and administrative
expenses.
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END
IR EAEXSAEAFEAA
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