Results for the year ended 31 December 2018 Generic title white - - PowerPoint PPT Presentation

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Results for the year ended 31 December 2018

Thursday, 7th February 2019

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

Overview of 2018 4-8 Financials Performance 10 Investments 11-12 Reserves 13-15 Capital 16 Underwriting review 17-21 Specialty lines/Cyber and Executive risk (CyEx) 22 Outlook for 2019 23 Appendix 25-31

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Pages

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Overview of 2018

Strong top line with growth across all divisions

• Profit before income tax of $76.4m (2017: $168.0m)
• Return on equity of 5% (2017: 9%)
• Gross premiums written increased by 12% to $2,615.3m (2017: $2,343.8m)
• Combined ratio of 98% (2017: 99%)
• Rate increase of 3% on renewal portfolio (2017: reduction of 1%)
• Prior year reserve releases of $115.0m (2017: $203.9m)
• Net investment income of $41.1m (2017: $138.3m)
• Second interim dividend of 7.8p (2017: 7.4p) taking full year ordinary dividend to

11.7p (2017: 11.1p)

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Business update

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• Passed the milestone of $1bn of premiums written in the US
• Growth opportunities outside the US
• 34 underwriters hired outside the US
• Key products on both Irish company and Lloyd’s Brussels paper in Europe
• Growth in Canada
• Management changes:
• Neil Maidment was succeeded by Adrian Cox as CUO
• Clive Washbourn was succeeded by Tim Turner as the head of marine
• Introduction of new strategic initiatives focused on:
• Leveraging technology for efficiency
• Improving customer experience
• Beazley smart tracker (syndicate 5623) proof of concept is successful

Cover

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Premium growth and expense control

2,021.8 2,080.9 2,195.6 2,343.8 2,615.3 500 1,000 1,500 2,000 2,500 3,000 2014 2015 2016 2017 2018 Gross premiums written ($m) 9.3 9.9 10.5 11.1 11.7 11.8 18.4 10.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 2014 2015 2016 2017 2018 Dividends per share (p) Special Interim and second interim 17% 19% 18% 9% 5% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2014 2015 2016 2017 2018 Return on equity (%) 40% 39% 41% 41% 39% 49% 48% 48% 58% 59% 89% 87% 89% 99% 98% 0% 25% 50% 75% 100% 125% 2014 2015 2016 2017 2018 Combined ratio (%) Claims ratio Expense ratio

Excellent total shareholder return - TSR 26.1% per annum since 31.12.09

8 Shareholder return (%) 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% 500% 550% 600% 650% 700% 750% 800% 850% 900% 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 31 December 2018 NAV target range (RFR +10% p.a. to RFR +15% p.a.) NAV growth (Including dividends) TSR growth (1 month average) * Average NAV growth (including dividends) over the past 9 years of 15.8%

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Financials

Growth and profit in challenging conditions

Year ended 31 December 2018 Year ended 31 December 2017 % Increase/ (decrease) Gross premiums written ($m) 2,615.3 2,343.8 12% Net premiums written ($m) 2,248.5 1,978.8 14% Net earned premiums ($m) 2,084.6 1,869.4 12% Profit before income tax ($m) 76.4 168.0 (55%) Earnings per share (pence) 9.7 19.5 Dividend per share (pence) 11.7 11.1 Net assets per share (pence) 219.6 215.3 Net tangible assets per share (pence) 200.7 196.2

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31 December 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% Cash and Cash Equivalents 6.7% Government Quasi Government Supranational 27.9% Investment Grade Credit 50.0% Other Credit, 0.7% Senior Secured Loans, 2.6% Equity Linked funds, 1.7% Hedge Funds, 6.7% Illiquid Credit Assets, 3.7%

Portfolio resilient in difficult investment conditions

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Portfolio delivered 0.8% return

46.8 43.5 62.7 79.4 8.0 43.3 36.2 14.1 30.4 58.9 33.1 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 2018 Annualised Investment Return Investment Return ($m) 1st half 2nd half Return

• 4.0%
• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0%

• 60.0
• 45.0
• 30.0
• 15.0

0.0 15.0 30.0 45.0 60.0 75.0 90.0 105.0 120.0 135.0 150.0 165.0 180.0 195.0 210.0 225.0 2013 2014 2015 2016 2017 2018 Reserve releases ($m) Specialty lines Political, accident and contingency Marine Property Reinsurance % of NEP

Below average releases in catastrophe classes – strengthening in property

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• 4.0%
• 3.0%
• 2.0%
• 1.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0%

• 60.0
• 45.0
• 30.0
• 15.0

0.0 15.0 30.0 45.0 60.0 75.0 90.0 105.0 120.0 135.0 150.0 165.0 180.0 195.0 210.0 225.0 2013 2014 2015 2016 2017 2018 Reserve releases ($m) Specialty lines Political, accident and contingency Marine Property Reinsurance % of NEP

Reserve releases excluding the 2017 catastrophes

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Whole account reserve strength in the range and increasing

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Updated capital position remains strong

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Year ended 31 December 2018 $m Year ended 31 December 2017 $m Lloyd’s economic capital requirement (ECR) 1,594.5 1,517.2 Capital for US insurance company 173.4 96.5 1,767.9 1,613.7

• Group capital requirement
• Our funding is made up of our own equity (on a Solvency II basis) plus $344.3m of debt

and an undrawn banking facility of $225.0m

• At 31 December 2018 surplus capital pre dividend of 26% of ECR, including Solvency II

adjustments

• Our medium term guidance remains for high single digit growth in underwriting capital

and premiums

• Expect new debt issuance in 2019 following the call of $18.0m subordinated debt in

2018 and the redemption of the £75.0m retail bond in September 2019

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Underwriting review

Underwriting review – 2018 achievements

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• Combined ratio of 98%
• Growth in gross premiums written of 12% to $2,615.3m
• All divisions grew, with 3 divisions achieving double digit growth
• 20% growth in locally underwritten US premium - surpassing $1bn in premium for

the year

• Property grew exposure by 4%
• Positive rating environment with increase of 3% across the portfolio as a whole
• We continue to reserve consistently, maintaining our surplus over actuarial estimate

between 5-10%

• Good usage of Placing Platform Limited platform
• PAC achieved 90% combined ratio

Underwriting review

Year ended 31 December 2018 Year ended 31 December 2017 % Increase Gross premiums written ($m) 2,615.3 2,343.8 12% Net premiums written ($m) 2,248.5 1,978.8 14% Net earned premiums ($m) 2,084.6 1,869.4 12% Expense ratio 39% 41% Claims ratio 59% 58% Combined ratio 98% 99% Rate change on renewals 3% (1%)

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Cumulative rate changes since 2008

20 70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Rate Change(%) Underwriting Year Marine Property Specialty Lines Reinsurance PAC All divisions

2019 underwriting outlook

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• We see good opportunities for high single digit growth in 2019
• Locally underwritten US premium across SL, property and marine
• Growth opportunities outside the US across core product suite
• Growth at Lloyd’s
• Specialty lines separated into two new divisions (cyber & executive risk and specialty

lines)

• Expect 2019 to repeat 2018 with low reserve releases from catastrophe lines
• Continue to build our tracker syndicate 5623

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• New SL will be 55-60% of the old SL division’s premiums
• Good growth prospects in both SL and CyEx in 2019
• CyEx has most of the short tail cyber business and so a lower combined ratio
• First figures at half year 2019

Specialty lines/cyber & executive risk (CyEx)

Outlook for 2019

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• Rate increases and higher investment yields are encouraging
• All Beazley’s pre-Brexit preparation is on track
• Pleased to welcome new executive committee members
• Sally Lake (finance director)
• Lou Ann Layton (head of broker relations)
• Jerry Sullivan (head of US management committee)
• Continue to invest in and leverage digital technology
• Continue our organic growth and hiring of top talent

Questions?

Any questions?

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Appendix

Specialty lines incurred claims remain in line with expectations

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US managed gross premium growth

27 0.0 200.0 400.0 600.0 800.0 1,000.0 1,200.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 US gross premiums ($m) Technology, Media and Business Services Architects and Engineers professional indemnity Professional Liability Healthcare and Lawyers Property Marine and PAC

TMB gross premium written growth

28 GWP ($m) 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Tech E&O BBR InfoSec Vector

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 2018 Underwriting Year Marine Property Reinsurance Specialty lines PAC All divisions

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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 2018 Year Lines of Business Diversified Portfolio

Performance by division

Year ended 31 December 2018

Marine PAC Property Reinsurance Specialty lines

Gross premiums written ($m)

284.8 238.7 415.4 207.4 1,469.0

Net premiums written ($m)

255.0 212.7 360.2 137.3 1,283.3

Net earned premiums ($m)

249.5 194.3 344.1 139.5 1,157.2

Result from operating activities ($m)

20.5 24.2 (80.4) (1.8) 136.3

Claims ratio

54% 46% 84% 70% 53%

Rate change on renewals

3% (1%) 10% 6% 1%

Percentage of business led

64% 56% 69% 44% 95%

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