Results for the six months ended 30 June 2018 Friday, 20 July 2018 - - PowerPoint PPT Presentation

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Results for the six months ended 30 June 2018 Friday, 20 July 2018 - - PowerPoint PPT Presentation

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Cover Results for the six months ended 30 June 2018 Friday, 20 July 2018 1 Disclaimer notice Certain statements made in this presentation, both oral and written, are or may constitute forward looking statements with respect to the

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Cover

Results for the six months ended 30 June 2018

Friday, 20 July 2018

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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.

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Contents

Pages Overview 4-5 Business update 6 Financials 7 Performance 8 Investments 9-10 Reserves 11-12 Capital position 13 In Focus: Operations and digital at Beazley 14-20 The Outlook 21-23 Appendix 25-34

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Overview

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Overview – strong premium growth

  • Profit before income tax of $57.5m (2017: $158.7m)
  • Gross premiums written increased by 15% to $1,323.8m (2017: $1,149.3m)
  • Combined ratio 95% (2017: 90%)
  • Rate change on renewal business 3% (2017: -2%)
  • Prior year reserve releases of $48.1m (2017: $83.4m)
  • Investment return of $8.0m (2017: $79.4m)
  • Annualised return on equity of 6% (2017: 18%)
  • Interim dividend up 5% to 3.9p (2017: 3.7p)

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  • Top line growth across all of our divisions
  • Syndicate 5623 started - facilities business premiums written of $13m
  • Management liability & TMB to form a new division from 2019 separate from specialty

lines

  • Neil Maidment will be succeeded as chief underwriting officer by Adrian Cox
  • Martin Bride will retire during 2019 and his successor will be appointed in due course
  • Refreshed strategic initiatives:

– Beazley Digital – Faster, smarter underwriting – Closer to client – London Market

Business update

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Financials

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Six months financial performance

6 months ended 30 June 2018 6 months ended 30 June 2017 % increase/ (decrease)

Gross premiums written ($m)

1,323.8 1,149.3 15%

Net premiums written ($m)

1,105.3 936.4 18%

Net earned premiums ($m)

990.2 886.7 12%

Profit before income tax ($m)

57.5 158.7 (64%)

Earnings per share (pence)

6.6 20.2

Dividend per share (pence)

3.9 3.7

Net assets per share (pence)

210.4 226.0

Net tangible assets per share (pence)

191.6 206.9

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Rising US rates reduced return for the first half of 2018

9 $m Investment Return 46.8 43.5 62.7 79.4 8.0 36.2 14.1 30.4 58.9 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 2014 2015 2016 2017 2018HY 1st half 2nd half Return Annualised investment return

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Cash and Cash Equivalents 8.9% Government Quasi Government Supranational 27.8% Investment Grade Credit 44.7% Other Credit, 1.4% Senior Secured Loans, 2.8% Equity Linked funds, 2.1% Hedge Funds, 8.6% Illiquid Credit Assets, 3.7%

Minor changes to optimise portfolio

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30 June 2018 31 December 2017

Cash and Cash Equivalents 9.0% Government Quasi Government Supranational 28.4% Investment Grade Credit 44.6% Other Credit, 1.4% Senior Secured Loans, 1.8% Equity Linked funds, 3.4% Hedge Funds , 7.7% Illiquid Credit Assets, 3.7%

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Lower than average releases – strengthening in property

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  • 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

  • 50

50 100 150 200 250 2013 2014 2015 2016 2017 2017HY 2018HY Specialty lines PAC Marine Property Reinsurance % of NEP $m % of NEP

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Whole account reserve strength maintained in our target range

12 Preferred upper end

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Underwriting capital – remains in a strong position

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Projected 31 Dec 2018 $m Year ended 31 Dec 2017 $m Lloyd’s economic capital requirement (ECR) 1,563.0 1,517.2 Capital for US insurance company 175.0 96.5 1,738.0 1,613.7

  • Group capital requirement:
  • Expect to be above of our target range of 15%-25% of Lloyd’s ECR
  • Year end 2018 Lloyd’s ECR reflects strong growth continuing into 2019
  • Retaining more risk in the US with $80m capital increase (net $30m group increase)
  • Capital discipline remains a board focus
  • Strategy of annualised growth in ordinary dividend by 5%-10%
  • Return excess capital beyond business needs
  • $225m LOC facility remains unutilised
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In focus Operations and digital at Beazley

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  • Technology and data
  • Projects and change
  • Underwriting and claims operations
  • Commercial management & real estate
  • Information security

Role of the Group COO and management team

Ben Spencer Chief Information Officer 13 years at Beazley Douglas Colosky Head of Operations 12 years at Beazley Munira Hirji Head of Commercial Management 9 years at Beazley

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Our digital strategy - what we’re seeing, what we’re doing

Significant opportunity from technology and data 1) Focusing investment via two new strategic initiatives Changing customer buying patterns Not necessary for people to work at fixed locations 2) Digitising transactions around the customer 3) Creating a digital work environment

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1) Focusing digital investments via two new strategic initiatives

Simple risk Automated processes Complex risk Bionic processes High volume Low volume Beazley Digital Smarter Faster Underwriting

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2a) Digitising our transactions around the customer

Beazley single customer view

Smarter Faster Underwriting Predictive analytics E-trading (myBeazley.com) Auto pricing email submissions Automating cross sell Beazley Digital Integrating to broker systems Using external data sources Robotics

What are we doing?

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  • Changing the way we underwrite
  • More informed decision making, pricing and cross sell
  • Changing the way we communicate with brokers
  • Responding via more digital channels
  • Quicker response times
  • Increasing staff productivity

2b) Digitising our transactions around the customer

Why are we doing it?

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Implementing activity based working environments

  • Attracting next generation of talent
  • Aligning to broker placement behaviour
  • Re-thinking our office space

3) Creating a digital work environment

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The Outlook

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Cumulative rate change since 2008

22 70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018HY Marine Property Specialty Lines Reinsurance PAC All divisions Rate change (%)

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  • Continued double digit growth
  • Expect combined ratio in the low to mid nineties barring any major claim events
  • Should capture higher investment return (circa 3%) going forward
  • Continue to invest in technology via our strategic initiatives
  • Closing in on $1bn of locally underwritten US premiums
  • Promoting London through the LMG chair

Outlook

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Questions?

Any questions?

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Appendix

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US interest rates

26 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% US 10 Year Index US 5 Year Index US 2 Year Index

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Specialty lines incurred claims remain in line with expectations

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TMB gross premium growth

28 GWP ($m) 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 projected Tech E&O BBR Info Sec Vector

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Portfolio management achieves consistent combined ratio through market cycles

29 40 60 80 100 120 140 160 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018HY Combined ratio (%)

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Marine

6 months ended 30 June 2018 2017 Gross premiums written ($m) 158.0 145.6 Net premiums written ($m) 133.6 118.9 Net earned premiums ($m) 125.0 114.0 Claims ratio 59% 53% Rate change on renewals 2% (4%) Percentage of business led 68% 61%

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  • Combined ratio at 99%

(2017: 96%)

  • Improved expense ratio of

40% (2017: 43%)

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Political, accident & contingency

  • Gross premiums written

growth of 11%

  • Break even result for the

2018HY (2017: loss of $0.6m) 6 months ended 30 June 2018 2017 Gross premiums written ($m) 120.0 108.4 Net premiums written ($m) 101.8 94.9 Net earned premiums ($m) 86.2 91.5 Claims ratio 55% 53% Rate change on renewals (2%) (5%) Percentage of business led 56% 60%

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Property

  • 25% growth in gross

premiums written

  • Increase in claims ratio to

76% (2017: 51%) due to high level of attritional claims 6 months ended 30 June 2018 2017 Gross premiums written ($m) 243.4 194.1 Net premiums written ($m) 198.0 149.6 Net earned premiums ($m) 163.9 147.6 Claims ratio 76% 51% Rate change on renewals 10% (1%) Percentage of business led 64% 65%

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Reinsurance

  • Contribution to group
  • perating profit of $19.8m

(2017: $19.6m)

  • Combined ratio improved to

68% (2017: 75%) 6 months ended 30 June 2018 2017 Gross premiums written ($m) 152.5 140.8 Net premiums written ($m) 95.5 82.9 Net earned premiums ($m) 59.1 55.6 Claims ratio 30% 38% Rate change on renewals 7% (2%) Percentage of business led 44% 46%

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Specialty lines

  • 16% growth in gross

premiums written

  • Consistent expense ratio at

38% (2017: 38%) 6 months ended 30 June 2018 2017 Gross premiums written ($m) 649.9 560.4 Net premiums written ($m) 576.4 490.1 Net earned premiums ($m) 556.0 478.0 Claims ratio 51% 49% Rate change on renewals (1%) (1%) Percentage of business led 95% 94%

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