Results for the six months ended 30 June 2016 Friday, 22 July 2016 - - PowerPoint PPT Presentation

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Cover

Results for the six months ended 30 June 2016

Friday, 22 July 2016

Disclaimer notice

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Certain statements made in this presentation, both oral and written, are or may constitute “forward looking statements” with respect to the operation, performance and financial condition of the Company and/or the

• Group. These forward looking statements are not based on historical facts but rather reflect current beliefs and

expectations regarding future events and results. Such forward looking statements can be identified from words such as “anticipates”, “may”, “will”, “believes”, “expects”, “intends”, “could”, “should”, “estimates”, “predict” and similar expressions in such statements or the negative thereof, or other variations thereof or comparable

• terminology. These forward looking statements appear in a number of places throughout this document and involve

significant inherent risks, uncertainties and other factors, known or unknown, 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 or implied by such forward looking statements. Given these uncertainties, such forward looking statements should not be read as guarantees of future performance or results and no undue reliance should be placed on such forward looking statements. A number of factors could cause actual results to differ materially from the results discussed in these forward looking statements. The information and opinions contained in this presentation, including any forward looking statements, are provided, and reflect knowledge and information available, 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 by the Company, the Group or the Directors to supplement, amend, update or revise any of the information, including any forward looking statements, contained in this presentation. All subsequent written and oral forward looking statements attributable to the Company and/or the Group or to persons acting on its behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this document.

Contents

Pages Overview 5 Business update 6 Financials 7 Performance 8 Investments 9-10 Reserves 11-12 Capital position 13-14 In Focus: Marine 15-20 The Outlook 21-25 Appendix 27-36

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Overview

Overview – good results despite continued competition

• Profit before income tax of $150.2m (2015: $154.5m)
• Gross premiums written increased by 2% to $1,124.1m (2015: $1,099.7m)
• Combined ratio 90% (2015: 86%)
• Rate change on renewal business -2% (2015: -2%)
• Prior year reserve releases of $77.4m (2015: $74.5m)
• Investment return of $62.7m (2015: $43.5m)
• Annualised return on equity of 19% (2015: 20%)
• Interim dividend up 6% to 3.5p

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• Attracting and retaining good people across all facets of our business
• 36 new underwriters joined Beazley in the first six months of 2016
• New and expanding teams have included:
• UK and international medical malpractice for SMEs
• Fine art and specie (London)
• Expanded environmental team (US)
• Demand for specialty lines products continues to drive strong US growth
• Partnered with Munich Re to offer expanded cyber cover of up to $100m/€100m
• Europe remains a key strategic focus
• Gerard Bloom joining as head of International FI team
• Growth strategy includes potential for EU insurance platform
• Rating environment remains challenging

Business update

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Financials

Six months financial performance

6 months ended 30 June 2016 6 months ended 30 June 2015 % increase/ decrease

Gross premiums written ($m) 1,124.1 1,099.7 2% Net premiums written ($m) 930.4 879.2 6% Net earned premiums ($m) 861.4 857.7

• Profit before income tax ($m)

150.2 154.5 (3%) Earnings per share (pence) 17.3 17.2 Dividend per share (pence) 3.5 3.3 Net assets per share (pence) 199.3 167.8 Net tangible assets per share (pence) 186.3 156.6

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Portfolio delivered 1.4% return

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36.1 46.8 43.5 62.7 46.5 43.3 36.2 14.1

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 2012 2013 2014 2015 2016 1st half 2nd half Return Investment Return ($m) Annualised Investment return

Portfolio mix – investment grade credit increased

10 30 June 2016 31 December 2015

Cash and Cash Equivalents 10.0% Government Quasi Government & Supranational 29.5% Investment Grade Credit 44.0% Other Credit 2.7% Senior Secured Loans 1.9% Equity Linked funds 2.3% Hedge Funds 6.7% Illiquid Credit Assets 2.9% Cash and Cash Equivalents 15.0% Government Quasi Government & Supranational 41.2% Investment Grade Credit 27.2% Other Credit, 1.5% Senior Secured Loans 2.5% Equity Linked funds, 3.3% Hedge Funds 7.3% Illiquid Credit Assets, 2.0%

Stable prior year reserve releases

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$m % of NEP

• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 22.0%

• 20

20 40 60 80 100 120 140 160 180 200 220 2011 2012 2013 2014 2015 2015 HY 2016 HY Specialty lines Political risks and contingency Life accident and health Marine Property Reinsurance % of NEP

Whole account reserve strength within our target range

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Preferred upper end

6.1% 6.7% 6.4% 6.7% 7.5% 7.4% 8.2% 7.9% 7.4% 6.9% 8.2% 7.1% 8.2% 6.7%

0.0% 5.0% 10.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (HY) Financial year

Surplus in net held reserves

% above actuarial estimate

Update on debt strategy

• Expect to call the £76.5m of outstanding 2006 20nc10 in October 2016
• An opportunity to deploy more underwriting capital would be the trigger for using more

debt leverage

• Considering making a new issuance of up to £250m in 2016

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Underwriting capital – a growth prospective

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Projected 31 Dec 2016 $m Period ended 30 June 2016 $m Year ended 31 December 2015 $m Lloyd’s economic capital requirement (ECR) 1,500.0 1,333.3 1,326.9 Capital for US insurance company 107.7 107.7 107.7 1,607.7 1,441.0 1,434.6 % increase 12%

• Group capital requirement:
• Expect to still be above the 15%-25% of ECR buffer at year end ignoring any increase in

debt financing

• Near double digit underwriting capital growth envisaged in our 5 year plan
• Capital discipline remains a board focus
• Strategy of growing regular dividend by 5%-10%
• Return excess capital beyond business needs

In Focus - Marine

Energy 35.8% Hull 31.7% War 16.1% Marine Liabilities 3.8% Cargo 12.6%

Diversification of the marine account

16 $265m

Energy 22.3% Hull 22.0% War 7.2% Marine Liabilities 13.4% Cargo 13.6% UK Marine 6.9% Aviation 10.2% Satellite 4.4%

$248m 2016 2009

Track record of navigating the cycle profitably

We expect the shipping and oil industry sectors will have improving profitability in 1-3 years and our income will once again grow Our margin can sustain rate reduction better then our competitors

17 Top KPIs ($m) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 GWP (GAAP) 253.7 279.6 275.1 265.0 261.7 274.2 311.2 315.9 325.2 269.3 Profit before tax and finance costs (GAAP) 50.4 74.6 33.5 74.2 75.4 69.3 83.4 83.0 71.1 66.9 Rate change 9% (7%) (6%) 8% (3%)

• (5%)

(6%) (8%)

Lloyd’s marine claims statistics

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0% 20% 40% 60% 80% 100% 120% 140% Beazley First quintile Second quintile Third quintile Fourth quintile Fifth quintile Lloyd’s marine syndicates Average claims ratio (2011-2015)

Investing across the rating cycle

• Hull and cargo underwriters in Singapore
• Two pleasure craft and yacht underwriters
• One additional UK small craft and fishing vessel underwriter
• The purchase of Leviathan
• Extensive analysis of French and US marine markets

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Looking forward

• Difficult trading conditions
• Well placed to take advantage of change in the market
• Enthusiastic about the diversity in our portfolio
• Continued focus on identifying areas for profitable growth
• People
• Locations

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The Outlook

Cumulative rate change since 2008

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75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 2008 2009 2010 2011 2012 2013 2014 2015 2016 Life, accident & health Marine Political risks & contingency Property Specialty Lines Reinsurance All divisions HY

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Group’s gross premium growth by division $m

• 500

1,000 1,500 2,000 2,500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Specialty Lines Reinsurance Property Political risk and contingency Marine Life accident and health

Group’s gross premium split by division

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Total GWP: $2,080.9m Total GWP: $1,895.9m LAH 6% Marine 13% PCG 6% Property 17% Reinsurance 9% Specialty lines 49%

2015

LAH 5% Marine 16% PCG 6% Property 20% Reinsurance 10% Specialty lines 43%

2012

• Competitive pressures remain strong:
• Returns should be expected to reduce
• Rate pressure, particularly on short tail catastrophe exposed lines
• Continued focus on strategy and strategic initiatives
• Growth in US remains strong
• Attracting and retaining talented people remains a priority
• Well placed to face current political and economic uncertainty
• We are expecting to achieve strong specialty lines growth in 2016 and 2017

Outlook

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Questions?

Any questions?

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Appendix

US interest rates

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0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% US 10 Year Index US 5 Year Index US 2 Year Index

Specialty lines incurred claims remain in line with expectations

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73% 113% 89% 61% 48% 45% 48% 52% 73% 77% 69% 67% 63% 50% 36% 21% 7% 0% 20% 40% 60% 80% 100% 120% 140% 1993- 1996 1997- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net incurred loss ratio at each development year

6 to Latest 6 5 4 3 2 ULR Net incurred loss ratio Net ultimate premium $m 77 106 52 91 262 314 334 346 421 455 419 437 428 451 486 519 557

Diversified portfolio achieves consistent combined ratio through market cycles

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Combined ratio (%) 40 60 80 100 120 140 160 2011 2012 2013 2014 2015 2016 HY Year

Life, accident & health

6 months ended 30 June 2016 2015 Gross premiums written ($m) 79.9 79.7 Net premiums written ($m) 71.8 67.1 Net earned premiums ($m) 56.5 56.3 Claims ratio 60% 60% Rate change on renewals (2%) (2%) Percentage of business led 59% 75%

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• Growth in US admitted business

to $17.7m (2015: $13.8m)

• Combined ratio increases to

105% (2015: 103%)

Marine

6 months ended 30 June 2016 2015 Gross premiums written ($m) 134.0 162.1 Net premiums written ($m) 107.9 131.4 Net earned premiums ($m) 110.7 144.2 Claims ratio 52% 38% Rate change on renewals (7%) (8%) Percentage of business led 52% 48%

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• Combined ratio increases to

97% (2015: 76%)

Political risks and contingency

• Combined ratio improves to 88%

(2015: 93%)

• Prior year reserve releases

increase to $6.5m (2015: $2.4m) 6 months ended 30 June 2016 2015 Gross premiums written ($m) 69.4 67.9 Net premiums written ($m) 57.0 55.4 Net earned premiums ($m) 46.7 50.7 Claims ratio 36% 46% Rate change on renewals (7%) (4%) Percentage of business led 70% 76%

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Property

• Prior year releases stable of

$17.6m (2015: $18.8m)

• Contribution to group
• perating profit of $26.0m

(2015: $33.8m)

• Combined ratio of 87%

(2015: 81%) 6 months ended 30 June 2016 2015 Gross premiums written ($m) 173.0 188.6 Net premiums written ($m) 142.1 151.2 Net earned premiums ($m) 144.1 147.0 Claims ratio 41% 38% Rate change on renewals (4%) (4%) Percentage of business led 66% 73%

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Reinsurance

• Increased spend on outward

reinsurance premium to $57.3m (2015: $50.2m)

• Prior year reserve releases
• f $17.5m (2015: $17.7m)
• Contribution to group
• perating profit of $29.8m

(2015: $35.1m) 6 months ended 30 June 2016 2015 Gross premiums written ($m) 150.2 159.5 Net premiums written ($m) 92.9 109.3 Net earned premiums ($m) 63.9 70.4 Claims ratio 27% 25% Rate change on renewals (4%) (8%) Percentage of business led 48% 46%

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Specialty lines

• 17% growth in gross

premiums written

• Increased prior year reserve

releases of $35.5m (2015: $16.9m)

• Contribution to group
• perating profit of $85.8m

(2015: $48.5m)

• Combined ratio of 91%

(2015: 95%) 6 months ended 30 June 2016 2015 Gross premiums written ($m) 517.6 441.9 Net premiums written ($m) 458.7 364.8 Net earned premiums ($m) 439.5 389.1 Claims ratio 57% 60% Rate change on renewals 1% 2% Percentage of business led 96% 97%

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