1 Cover Results for the six months ended 30 June 2012 Friday, 20 - - PowerPoint PPT Presentation

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Cover

Results for the six months ended 30 June 2012

Friday, 20 July 2012

Disclaimer notice

Certain statements in the presentation, are or may constitute “forward looking statements”. Such forward looking statements involve risks, uncertainties and

• ther factors which may cause the actual results,

performance or achievements of the company, or industry results, to be materially different from any future results, performance or achievements expressed by such forward looking statements. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. There is no intention, nor is any duty or obligation assumed to supplement, amend, update or revise any of the information contained in this presentation.

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Contents

Page No. Overview 4-5 Business update 6 Financials Performance 8 Investments 9-10 Reserves 11-12 Capital position 13 In Focus Broker Relations 14-20 Underwriting review and outlook 21-23 Appendix 24-34

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Overview

Overview – a successful half year

• Profit before income tax of $112.9m (2011 loss: $24.2m)
• Gross written premiums increased 10% to $1,013.1m (2011: $924.8m)
• Combined ratio 91% (2011: 108%)
• Rate change on renewal business 3% (2011: 0%)
• Prior year reserve releases of $47.6m (2011: $88.6m)
• Investment income increased to $36.1m (2011: $22.5m)
• Annualised return on equity of 18% (2011: loss 3%)
• Interim dividend up 8% to 2.7p

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• Continued to expand Specialty lines product range and geographical scope
• Announced plans to extend capabilities of Marine division into aviation and kidnap &

ransom insurance

• Began underwriting Accident and health business in the US through our admitted

carrier

• Launched a number of new products into the French market, which were well received

by local brokers

• We are well prepared for the implementation of the Solvency II regulatory regime
• Bought in £30.0m ($46.9m) of our subordinated debt

Business update

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Financials

Six months financial performance

6 months ended 30 June 2012 6 months ended 30 June 2011 % increase

Gross written premiums ($m) 1,013.1 924.8 10% Net written premiums ($m) 650.8 635.5 2% Net earned premiums ($m) 703.3 670.5 5% Profit/(loss) before tax ($m) 112.9 (24.2) Earnings/(loss) per share 12.5p (1.7p) Dividend per share 2.7p 2.5p Net assets per share (pence) 142.9p 123.8p Net tangible assets per share (pence) 126.7p 107.5p

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Improved investment returns

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52.5 21.3 43.5 8.5 22.5 36.1 52.0

• 62.8

46.9 29.0 16.8

• 5.0%
• 4.0%
• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%

• 80.0
• 60.0
• 40.0
• 20.0

0.0 20.0 40.0 60.0 80.0 100.0 120.0 2007 2008 2009 2010 2011 2012

Investment Return

2nd half 1st half Return

Annualised Investment Return US$

HY

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Cash and Cash Equivalents, 14.9% Fixed Income: Sovereign and Supranational, 47.8% Investment Grade Credit, 24.5% Other Credit, 2.1% Capital Growth Assets, 10.7%

Jun-12

Cash and Cash Equivalents, 16.2% Fixed Income Sovereign and Supranational, 65.5% Investment Grade Credit, 6.0% Other Credit, 2.0% Capital Growth Assets, 10.3%

Dec-11

Conservative portfolio but with increased credit and duration

Prior year reserve releases derived mainly from non-cat classes

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0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

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10 30 50 70 90 110 130 150 170 190 210 2007 2008 2009 2010 2011 2011 HY 2012 HY

Specialty lines Political risks and contingency Life accident and health Marine Property Reinsurance % of NEP

Whole account reserve surplus remains in our corridor

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6.1% 6.7% 6.4% 6.7% 7.5% 7.4% 8.2% 7.9% 7.4% 7.7% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (HY) Financial year Surplus in net held reserves 10 5 % above actuarial estimate

Strong capital position and active management

Sources of funds 2012 HY 2011 FY Shareholders funds 1,129.2 1,071.0 Debt 206.4 249.0 1,335.6 1,320.0 Uses of funds Lloyd’s underwriting 757.3 742.9 US Insurance Company 107.7 107.7 865.0 850.6 Surplus 470.6 469.4 Unavailable surplus (293.0) (267.3) Available for underwriting surplus 177.6 202.1 Un-utilised banking facility 225.0 225.0

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In Focus – Broker Relations

• Beazley sells 100% of its products through brokers
• We reach brokers through three coordinated channels:
• Personal relationships maintained by underwriters
• For small U.S. Professional Liability business, regional Territory Managers
• The corporate Broker Relationships (BR) team, working across all products and

teams

• Our marketing department, with team members in London, Chicago and Farmington, also

promotes our products and expertise to brokers through advertising, PR, events and social media

Beazley’s approach to broker relationships

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Broker Relations locations

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• 6 Relationship Managers plus support team of 4

• We recognised an opportunity to drive additional revenue through regular interaction

and mutually agreed objectives with key brokers

• Our largest producing brokers are significantly changing their business model, and we

have needed to adapt in response

• Communicating our products’ unique selling points (USP) is critical to growth
• There is an opportunity in the U.S. to increase efficiency by eliminating some

unproductive broker relationships and pushing for greater efficiencies in others

• As our product suite grows, cross-selling is an efficient source for additional revenue

growth

Why Broker Relations are important

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Beazley’s 2011 GWP by broker segment

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The BR team “manages” producer relationships on 59% of our business

Global brokers (Aon/Marsh/ Willis) 43% Managed London independents 11% Managed US independents 5% Small brokers/ Consolidators 41%

• Driving growth initiatives agreed with brokers’ senior management
• Coordinate/host meetings
• Track results
• Broker office visits
• Maintain Beazley visibility/profile
• Educate brokers on Beazley product USPs, especially new products
• Uncover new areas of opportunity
• Follow up with underwriters on opportunities

Broker Relations: key objectives

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• Broker appointment management
• Keep pressure on appointed intermediaries to produce acceptable submission

volumes within our underwriting appetite

• Communicate and monitor key metrics such as submission-to-bind ratio
• Screen new broker appointees and coordinate rescinding appointments
• Driving company use of automation tools
• Customer Relationship Management (CRM) system
• Broker “pipeline renewal” tools
• Monitor financial performance
• Trends by broker
• Progress in specific initiative areas

Broker Relations: key objectives (contd.)

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Underwriting review and outlook

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Cumulative rate change since 2001

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80% 100% 120% 140% 160% 180% 200% 220% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 HY Rate Change Underwriting Year

Life, Accident & Health Marine Political Risk & Contingency Property Reinsurance Specialty Lines All Depts.

Continued growth

• Economic outlook is uncertain, but our past investment in the business – including

new products – should continue to drive premium growth in the second half

Premium rates rising

• In the first half, rates rose across our Specialty lines (management and professional

liability) portfolio for the first time since 2006. We expect rates to continue to rise modestly in the second half of the year

• We also expect rates in our catastrophe exposed classes to remain strong

Strong underwriting profitability

• Barring exceptional losses in the second half of the kind we saw last year, we expect
• ur full year combined ratio to be at pre 2011 levels (≈90%)

Outlook

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Questions?

Any questions?

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Appendix

Life, accident & health

6 months ended 30 June 2012 2011 Gross premiums written ($m) 49.7 39.6 Net premiums written ($m) 45.3 34.9 Net earned premiums ($m) 43.7 34.1 Claims ratio 60% 52% Rate change on renewals (1%) 1% Percentage of business led 79% 72%

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• Growth in premiums due to our

Australian business

• Beazley is now open for business in

the Life, accident & health US admitted market

Marine

6 months ended 30 June 2012 2011 Gross premiums written ($m) 184.6 154.1 Net premiums written ($m) 156.8 127.3 Net earned premiums ($m) 135.9 110.8 Claims ratio 47% 43% Rate change on renewals

• 1%

Percentage of business led 46% 50%

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• Strong growth in energy and war

account

• Secured underwriters for aviation and

kidnap & ransom insurance expansion

• Excellent profitability continues

Political risks and contingency

• Significant growth in political book
• Positive prior year developments on

political claims, with no deterioration in Libya loss estimates

• Underwriting expanded to Paris in H1

2012 6 months ended 30 June 2012 2011 Gross premiums written ($m) 71.9 48.8 Net premiums written ($m) 58.2 34.4 Net earned premiums ($m) 49.8 38.5 Claims ratio 22% 98% Rate change on renewals (1%) (2%) Percentage of business led 70% 69%

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Property

• Achieving positive rating in line with

expectations

• Benign claims experience in H1 2012

6 months ended 30 June 2012 2011 Gross premiums written ($m) 201.5 195.4 Net premiums written ($m) 98.7 111.2 Net earned premiums ($m) 130.2 140.4 Claims ratio 50% 54% Rate change on renewals 7% 2% Percentage of business led 68% 63%

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Reinsurance

• No adverse deterioration in large loss

estimates

• Return to normal levels of loss activity
• Rates reaching the highest levels for a

number of years 6 months ended 30 June 2012 2011 Gross premiums written ($m) 139.8 135.6 Net premiums written ($m) 96.7 89.2 Net earned premiums ($m) 59.6 55.1 Claims ratio 51% 217% Rate change on renewals 5% 1% Percentage of business led 39% 37%

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Specialty lines

• Prior years continue to develop in line

with expectations

• Continue to expand Specialty lines

product range

• We have purchased additional

Reinsurance. 6 months ended 30 June 2012 2011 Gross premiums written ($m) 365.6 351.3 Net premiums written ($m) 195.1 238.5 Net earned premiums ($m) 284.1 291.6 Claims ratio 63% 61% Rate change on renewals 3% (1%) Percentage of business led 94% 95%

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74% 114% 84% 57% 41% 42% 41% 45% 56% 51% 38% 26% 8% 80 111 54 95 270 324 342 355 433 468 429 431 406 0% 20% 40% 60% 80% 100% 120% 140% 1993- 1996 1997- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net incurred loss ratio Underwriting Year Net incurred loss ratio at each development year 2 3 4 5 6 ULR

Specialty lines incurred claims remain encouraging

Net ultimate premium $m * Ratio is incurred claims as a percentage of premiums net of brokerage and reinsurance costs

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Development Year

US originated business $179m for HY 2012

GWP by Product

$m

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10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 2007 2008 2009 2010 2011 2012 HY Architects and Engineers Technology and Media Management Liability Healthcare and Lawyers High Value Homeowners Other Property Commercial Property Political risk Marine

Diversified portfolio achieves consistent combined ratio through market cycles

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40 60 80 100 120 140 160 2006 2007 2008 2009 2010 2011 2012 Year

% % % % % % %

HY