Results for the year ended 31 December 2017 Generic title white - - PowerPoint PPT Presentation

Generic title white

Results for the year ended 31 December 2017

Thursday, 8th February 2018

Moments of truth

Disclaimer notice

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.

Contents

Overview of 2017 4-8 Financials Performance 10 Investments 11-12 Reserves 13-14 Capital 15-16 Underwriting review 17-21 Data and analytics strategic initiative (DASI) 22 Outlook for 2018 23 Appendix 25-31

3

Pages

Generic title white

Overview of 2017

Growth and underwriting profits despite the natural catastrophes

• Profit before income tax of $168.0m (2016: $293.2m)
• Return on equity of 9% (2016: 18%)
• Gross premiums written increased by 7% to $2,343.8m (2016: $2,195.6m)
• Combined ratio of 99% (2016: 89%)
• Rate reduction of 1% on renewal portfolio (2016: reduction of 2%)
• Prior year reserve releases of $203.9m (2016: $180.7m)
• Net investment income of $138.3m (2016: $93.1m)
• Second interim dividend of 7.4p (2016: 7.0p) taking full year ordinary dividend to

11.1p (2016: Full year ordinary dividend 10.5p, special dividend 10.0p).

5

• Continued strong growth in our US business
• SL International started underwriting:
• Licencing of Beazley Insurance dac
• Acquisition of Creechurch Underwriters
• 28 underwriters hired in Europe, Canada, Latin America and Asia
• Launched syndicate 5623
• Our Environmental, Social and Governance (ESG) developments:
• Beazley has signed up to the Women in Finance charter and joined the 30% club
• Raised the profile of both responsible business and diversity and inclusion again

during 2017

• David Roberts to succeed Dennis Holt as chairman

Business update

6

Cover

7

Consistent high performance

1,970.2 2,021.8 2,080.9 2,195.6 2,343.8 500 1,000 1,500 2,000 2,500 2013 2014 2015 2016 2017 Gross premiums written ($m) 45% 49% 48% 48% 58% 39% 40% 39% 41% 41% 84% 89% 87% 89% 99% 0% 25% 50% 75% 100% 125% 2013 2014 2015 2016 2017 Combined ratio (%) Expense ratio Claims ratio 8.8 9.3 9.9 10.5 11.1 16.1 11.8 18.4 10.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 2013 2014 2015 2016 2017 Dividends per share (p) Special Interim and second interim 21% 17% 19% 18% 9% 0% 5% 10% 15% 20% 25% 2013 2014 2015 2016 2017 Return on equity (%)

0% 25% 50% 75% 100% 125% 150% 175% 200% 225% 250% 275% 300% 325% 350% 375% 400% 425% 450% 475% 500% 31 December 2009 31 December 2010 31 December 2011 31 December 2012 31 December 2013 31 December 2014 31 December 2015 31 December 2016 31 December 2017 NAV target range NAV growth (Including dividends) TSR growth (1 month average)

Excellent total shareholder return - TSR 24.1% per annum since 31.12.09

8

Shareholder return (%) * Average NAV growth (including dividends) over the past 8 years of 16.8%

Generic title white

Financials

Growth and profit in challenging conditions

Year ended 31 December 2017* Year ended 31 December 2016 % Increase Gross premiums written ($m) 2,343.8 2,195.6 7% Net premiums written ($m) 1,978.8 1,854.0 7% Net earned premiums ($m) 1,869.4 1,768.2 6% Profit before income tax ($m) 168.0 293.2 Earnings per share (pence) 19.5 35.5 Dividend per share (pence) 11.1 10.5 Special dividend (pence)

• 10.0

Net assets per share (pence) 215.3 225.9 Net tangible assets per share (pence) 196.2 211.2

10

* One-off $5m negative movement to deferred tax assets resulting from the US Tax Cuts and Jobs Act

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%

Minor changes to portfolio mix

11 31 December 2017 31 December 2016

Cash and Cash Equivalents 10.8% Government Quasi Government Supranational 26.8% Investment Grade Credit 45.9% Other Credit, 2.5% Senior Secured Loans , 2.0% Equity Linked funds, 2.5% Hedge Funds, 6.7% Illiquid Credit Assets , 2.8%

Portfolio delivered an excellent 2.9% return

12

46.8 43.5 62.7 79.4 43.3 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 2013 2014 2015 2016 2017 Annualised Investment Return Investment Return ($m) 1st half 2nd half Return

• 1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%

• 15

15 30 45 60 75 90 105 120 135 150 165 180 195 210 225 2012 2013 2014 2015 2016 2017 Reserve releases ($m) Specialty lines Politial, accident and contingency Marine Property Reinsurance % of NEP

Overall prior year reserve releases remain stable

13

Whole account reserve strength in range but at the bottom

14

Above actuarial estimate (%)

Capital management discipline continues

• We have returned capital of £775.6m in the past 9 years
• This represents 188% of our 2009 post rights-issue market capitalisation

15

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200% 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 2009 2010 2011 2012 2013 2014 2015 2016 2017 Percentage of market capitalisation at 2009 rights issue Funds returned to shareholders (£m) Interim and final dividends Special dividend Share buybacks (£) % of market capital

Updated capital position remains strong

16

Year ended 31 December 2017 $m Year ended 31 December 2016 $m Lloyd’s economic capital requirement (ECR) 1,517.2 1,489.2 Capital for US insurance company* 96.5 107.7 1,613.7 1,596.9

• Group capital requirement
• Our funding is made up of our own equity (on a Solvency II basis) plus $366.0m of debt

and an undrawn banking facility of $225.0m

• At 31 December 2017 surplus capital post dividend of 35% of ECR, including Solvency II

adjustments

• Our medium term guidance remains to expect mid to high single digit growth in

underwriting capital and premiums

*The A.M. Best rating of our US insurance company Beazley Insurance Company Inc. (BICI) is now maintained via a group support mechanism rather than

• n a stand alone basis. As a result the capital requirement for BICI is now taken as a minimum realistic risk based capital (RBC) level as opposed to the

capital level required to achieve a stand alone A.M. Best rating.

Generic title white

Underwriting review

Underwriting review – 2017 achievements

18

• Combined ratio of 99% due to balanced portfolio
• Growth in gross premiums written of 7% to $2,343.8m
• Specialty lines, our largest division, achieved growth of 11%
• 12% growth in locally underwritten US premium
• Rating environment remained challenging with reductions of 1% across portfolio as a

whole

• High incidence of insured natural catastrophe events
• We continue to reserve consistently, maintaining our surplus over actuarial estimate

between 5-10%

Underwriting review

Year ended 31 December 2017 Year ended 31 December 2016 % Increase Gross premiums written ($m) 2,343.8 2,195.6 7% Net premiums written ($m) 1,978.8 1,854.0 7% Net earned premiums ($m) 1,869.4 1,768.2 6% Expense ratio 41% 41% Claims ratio 58% 48% Combined ratio 99% 89% Rate change on renewals (1%) (2%)

19

Cumulative rate changes since 2008

Rate change (%)

20

70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Underwriting Year Marine Property Specialty Lines Reinsurance PAC All divisions

2018 underwriting outlook

21

• More positive market conditions expected
• We see good opportunities for continued growth in 2018
• Locally underwritten US premium across SL, property and marine
• Cyber demand continues to increase and GDPR comes to Europe
• SL international business
• Rate increases in short tail catastrophe exposed lines

• Focused on operational efficiency and smarter, faster underwriting
• ‘Beazley Insight’ system live – building our systems around our customer data,

augmenting this data with external sources, and bringing more automation to risk submission process

• Robotic process automation (RPA) – ‘live’ robots now running business processes
• Natural language processing (NLP) – being used to extract unstructured data from

submissions to speed up response times to broker/insureds

• Re-organised our operations teams to focus on digital transformation
• Strengthened our technology and data research capability, called Beazley Labs

Data and analytics strategic initiative (DASI)

22

Outlook for 2018

• Interest rate and economic outlook better than recent years
• Premium rates expected to increase across short tail catastrophe exposed lines
• Opportunities for double digit growth led by our specialty lines and catastrophe

related businesses

• SL International expected to grow significantly on both Lloyd’s and company paper
• Continue to invest in and leverage digital technology

23

Questions?

Any questions?

Generic title white

Appendix

Specialty lines incurred claims remain in line with expectations

26

Please note that this graph is gross of internal commissions Net incurred loss ratio (%)

US gross premium growth

27

US gross premiums ($m) 100 200 300 400 500 600 700 800 900 1,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Architects and Engineers professional indemnity Technology, Media and Business Services Other specialty lines Property Marine and PAC

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 Tech E&O BBR Info Sec Vector

TMB gross premium growth

28

GWP ($m)

Cumulative rate changes since 2001

29

Cumulative rate change (%) 50% 100% 150% 200% 250% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Underwriting Year Marine Property Reinsurance Specialty lines PAC All divisions

30

Portfolio management achieves consistent combined ratio through market cycles

Combined ratio (%) 40 60 80 100 120 140 160 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year Lines of Business Diversified Portfolio

Performance by division

Year ended 31 December 2017

Marine PAC Property Reinsurance Specialty lines

Gross premiums written ($m) 267.6 214.3 362.9 206.8 1,292.2 Net premiums written ($m) 233.2 190.8 300.0 134.6 1,120.2 Net earned premiums ($m) 227.9 188.7 293.8 136.9 1,022.1 Result from operating activities ($m) 19.3 7.9 (68.3) 3.8 227.4 Claims ratio 55% 51% 86% 71% 50% Rate change on renewals (3%) (4%)

• (2%)
• Percentage of business led

60% 60% 71% 45% 97%

31