Results for the six months ended 30 June 2020 Thursday, 23 July - - PowerPoint PPT Presentation

Results for the six months ended 30 June 2020

Thursday, 23 July 2020

2

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.

Disclaimer notice

• Overview

4-6

• Business update

6

• Financials

7-15

• Performance

8

• Investments

9-10

• Reserves

11-14

• Capital position

15

• In focus: Property

16-20

• The outlook

21-22

• Questions

23

• Appendix

24-35

Contents

3

4

5

• Gross premiums written increased

by 12% to $1,663.9m

(30 June 2019: $1,483.6m)

• Rate change on renewal business 11%

(30 June 2019: 5%)

• Loss before income tax of $13.8m

(30 June 2019: Profit of $166.4m)

• Combined ratio of 107%

(30 June 2019: 100%)

• Prior year reserve releases of $58.6m

(30 June 2019: $3.4m)

• Investment return of $83.2m

(30 June 2019: $170.3m)

• Annualised return on equity of (1%)

(30 June 2019: 19%)

• No interim dividend declared

(30 June 2019: 4.1p)

Overview – strong premium growth

6

• Growth achieved across six of our seven divisions
• Market facilities split out from specialty lines
• Equity raise of $292.6m to fund planned

growth opportunities

• Bethany Greenwood succeeds Mike Donovan

as head of cyber & executive risk division

Business update

COVID-19:

• Company has been successfully operating

remotely for past four months

• Continued to deliver product launches including

virtual care and product recall

• Impact expected to be $170m net of reinsurance
• PAC division ($70m); property, marine,

and reinsurance divisions ($100m)

• Underwriting action taken to ensure exposure to

potential claims on future business minimised

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Six months financial performance

6 months ended 30 June 2020 6 months ended 30 June 2019 % increase Gross premiums written ($m) 1,663.9 1,483.6 12% Net premiums written ($m) 1,317.8 1,225.5 8% Net earned premiums ($m) 1,233.8 1,118.0 10% (Loss) / Profit before income tax ($m) (13.8) 166.4 (Loss) / Earnings per share (pence) (1.7) 20.4 Dividend per share (pence)

• 4.1

Net assets per share (pence) 239.0 232.3 Net tangible assets per share (pence) 222.9 214.2

9

Strong investment return in volatile market

43.5 62.7 79.4 8.0 170.3 83.2 14.1 30.4 58.9 33.1 93.4

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 0.0 50.0 100.0 150.0 200.0 250.0 300.0 2015 2016 2017 2018 2019 2020HY 1st half 2nd half Annualised return

Q1 2020 ($55.0m) Q2 2020 $138.2m

$m Investment Return Annualised investment return

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Cash and Cash Equivalents, 5.8% Government and Quasi Government 37.4% Investment Grade Credit, 43.5% Syndicate Loans, 0.3% Other Credit, 2.7% Derivative Asset, 0.1% Equity Linked funds, 1.4% Hedge Funds, 5.4% Illiquid Credit Assets, 3.4%

30 June 2020

Cash and Cash Equivalents, 4.8% Government and Quasi Government 32.0% Investment Grade Credit, 46.2% Syndicate Loans, 0.1% Other Credit,4.0% Derivative Asset, 0.4% Equity Linked funds, 2.8% Hedge Funds 6.0% Illiquid Credit Assets, 3.7%

31 December 2019

Active portfolio management in uncertain markets

Core Portfolio 30 June 2020: 89.8% Core Portfolio 31 December 2019: 87.5%

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Claims releases more in line with historic levels

• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14%

• 60
• 40
• 20

20 40 60 80 100 120 140 160 180 200 220 2014 2015 2016 2017 2018 2019 2019HY 2020HY

$m

CyEx Marine Market facilities PAC Property Reinsurance Specialty lines % of NEP

$203.9m $176.3m $180.7m $115.0m $158.1m $9.5m $3.4m $58.6m

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Consistent reserving strategy leads to improving surplus position

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% 6.6% 5.0% 5.6% 6.8% 7.0% 0.0% 5.0% 10.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 % above actuarial estimate Financial year

Surplus in net held reserves

1y 2y 3y 4y 5y 6y 7y 8y 9y 10y 88% 90% 92% 94% 96% 98% 100% 102%

Claims ratio progress in last recession

2008 u/w year 2009 u/w year 2010 u/w year

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Our initial claims ratios were robust in last recession

Initial claims ratio position Lower claims ratio at a mature position

• Our claims made liability business has always been exposed to systemic issues and we have also been

preparing for a recession for a number of years

• During 2020 we have focused on amending our underwriting to reduce the potential impact of claims

arising from COVID-19 and recession

• Since 2014 we have purchased reinsurance cover which attaches just above our opening held position

(in 2020 claims would need to increase by $10m to attach to this reinsurance)

• The same cover is already purchased for 2021

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Reinsurance protection of significant underwriting action in SL and CyEx

Underwriting capital – in a strong position for market conditions

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Projected 31 Dec 2020 $m Year ended 31 Dec 2019 $m Lloyd’s economic capital requirement (ECR) 1,996.5 1,828.4 Capital for US insurance company 301.4 203.9 2,297.9 2,032.3

• Group capital requirement:
• Expect to be at 22% of Lloyd’s ECR, which is within our target range of 15% - 25%
• Surplus allows for growth into 2021 as well as SII adjustments
• Incorporates changing view of growth expectations for 2021 reflecting market conditions
• Banking facility now stands at $450m (of which $225m has been utilised)
• Equity raise of $292.6m to help facilitate planned growth opportunities

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Key performance indicators

• 15%+ return on capital
• Continued double-digit growth
• Above “Beazley average” broker survey result
• Top quartile engagement survey result

Vision & Strategy To become, and be recognised as, the highest performing specialist property insurer

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Our structure & products

Beazley Property Group ($429m*)

London Underwriting Platforms US Underwriting Platforms Singapore Underwriting Platforms Latin America Miami Platform Canada Underwriting Platform Lloyd’s China Platform Worldwide book of jewellers, fine arts & specie, Swiss and UK homeowners, majority written on delegated authorities.

15% ($65m*)

Jewellers, Fine Arts and Specie & UK Home & Swiss (11) Worldwide book of small commercial, personal lines business written on delegated authorities

16% ($67m*)

Delegated & Package (3) US Surplus lines & Mid Market - focusing on small to medium commercial property risks, primarily on a full value basis & US High Value Homeowners

31% ($132m*)

Small, Mid Market & US Homeowners (35) Worldwide book of primary and excess layer - Large commercial property business. 65% of the portfolio is US business

38% ($165m*)

Large Property (13) *Premium as at 31 December 2019

19

• Tailored and optimised portfolio
• Active distribution management
• Empowered underwriting
• Investment in technology and processes
• Efficient use of capital

Key areas of focus

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• Expected premium growth +15% YOY
• Continued rate increases across portfolio
• Large Commercial +22% YTD
• Small & Mid Market +18% YTD
• US Homeowners +14% YTD
• High retention on core business
• Favorable terms & conditions
• Ongoing improvement on attritional loss ratios

2020 Property outlook and beyond

22

• Maintain double digit top line growth
• Continue to mitigate impact of COVID-19
• Taking underwriting action on liability classes
• Expect combined ratio around 100% for 2020
• Expect lower investment return in second half of 2020 as fixed income assets yield just 0.8%.
• Expect rate momentum to continue
• Agile, nimble approach to meet post-COVID environment. Focus remains on:
• People: Health & wellbeing; appointments e.g. sustainability and innovation
• Product: Pivoting to meet demand - virtual events
• Service: Flexible and scalable model - claims

Outlook

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Cumulative rate change since 2015

80% 90% 100% 110% 120% 130% 140% 2015 2016 2017 2018 2019 2020HY CyEx Marine PAC Property Reinsurance Speciality lines Market facilities All divisions

Rate change (%)

26

US interest rates

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

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Cyber gross premiums written growth

0.0 100.0 200.0 300.0 400.0 500.0 600.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 projected GWP ($m)

Tech E&O BBR InfoSec Vector

28

Portfolio management achieves consistent combined ratio through market cycles

40 60 80 100 120 140 160 180 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020HY

Lines of business Diversified portfolio

Combined ratio (%)

29

Cyber & executive risk

6 months ended 30 June 2020 2019 Gross premiums written ($m) 419.6 348.1 Net premiums written ($m) 360.7 303.9 Net earned premiums ($m) 367.9 296.1 Claims ratio 59% 63% Rate change on renewals 13% 4% Percentage of business led 98% 100%

• 21% growth in gross

premiums written

• Expense ratio at 30%

(June 2019: 32%)

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Marine

6 months ended 30 June 2020 2019 Gross premiums written ($m) 176.3 165.1 Net premiums written ($m) 153.8 138.4 Net earned premiums ($m) 141.3 134.2 Claims ratio 62% 68% Rate change on renewals 15% 7% Percentage of business led 54% 60%

• Gross premiums written

growth of 7%

• Improved combined ratio

to 98% (June 2019: 108%)

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Market facilities

6 months ended 30 June 2020 2019 Gross premiums written ($m) 60.7 22.2 Net premiums written ($m) 17.5 9.5 Net earned premiums ($m) 12.1 5.6 Claims ratio 29% 43% Rate change on renewals 13% 1% Percentage of business led 6% 6%

• Gross premiums written

growth of 173%

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Political, accident & contingency

6 months ended 30 June 2020 2019 Gross premiums written ($m) 150.8 145.9 Net premiums written ($m) 110.8 126.0 Net earned premiums ($m) 97.0 109.4 Claims ratio 120% 51% Rate change on renewals 2% (1%) Percentage of business led 68% 71%

• Gross premiums written

growth of 3%

• Combined ratio 170%

(June 2019: 94%)

• Large impact from COVID-19

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Property

6 months ended 30 June 2020 2019 Gross premiums written ($m) 233.5 230.9 Net premiums written ($m) 183.8 180.7 Net earned premiums ($m) 177.5 176.8 Claims ratio 110% 51% Rate change on renewals 15% 9% Percentage of business led 79% 79%

• 1% increase in gross premiums
• written. Strong growth in

second quarter

• Combined ratio increased to

147% (June 2019:92%), largely due to impact of COVID-19

• Expense ratio improved

34

Reinsurance

6 months ended 30 June 2020 2019 Gross premiums written ($m) 151.0 161.4 Net premiums written ($m) 92.1 97.8 Net earned premiums ($m) 50.8 57.2 Claims ratio 55% 97% Rate change on renewals 9% 4% Percentage of business led 64% 49%

• Combined ratio decreased to

95% (June 2019: 140%)

• Improved expense ratio of

40% (June 2019: 43%)

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Specialty lines

6 months ended 30 June 2020 2019 Gross premiums written ($m) 472.0 410.0 Net premiums written ($m) 399.1 369.2 Net earned premiums ($m) 387.2 338.7 Claims ratio 57% 62% Rate change on renewals 9% 4% Percentage of business led 92% 93%

• 15% growth in gross

premiums written

• Improved expense ratio

at 37% (June 2019: 39%)