Results for the year ended 31 December 2019 Generic title white - - PowerPoint PPT Presentation

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Results for the year ended 31 December 2019

Thursday, 6th February 2020

Navigating Change

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 2019 4 Financials 9 Performance 10 Investments 11 Reserves 13 Capital 15 Underwriting review 16 Outlook for 2020 20 Appendix 22

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Pages

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Overview of 2019

Strong investment return and achieved $3bn of premium

• Profit before income tax of $267.7m (2018: $76.4m)
• Return on equity of 15% (2018: 5%)
• Gross premiums written increased by 15% to $3,003.9m (2018: $2,615.3m)
• Combined ratio of 100% (2018: 98%)
• Rate increase of 6% on renewal portfolio (2018: increase of 3%)
• Prior year reserve releases of $9.5m (2018: $115.0m)
• Net investment income of $263.7m (2018: $41.1m)
• Second interim dividend of 8.2p (2018: 7.8p) taking full year ordinary dividend to

12.3p (2018: 11.7p)

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Business update

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• $3bn of gross premiums written during 2019
• Management changes:
• Anthony Hobkinson succeeded by Beth Diamond as head of claims
• Mike Donovan to retire in June 2020
• Continental European growth of 17%; US growth of 13%
• Strategic initiatives:
• Beazley Digital
• E-trading platforms have quoted 75,000 risks from 1,000 broker offices in 2019
• Now building digital API connections with brokers
• Faster smarter underwriting
• Projects with four data analytic specialists
• 2019 tailwinds going into next year

Cover

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Premium growth and expense control

2,080.9 2,195.6 2,343.8 2,615.3 3,003.9 500 1,000 1,500 2,000 2,500 3,000 3,500 2015 2016 2017 2018 2019 Gross premiums written ($m) 39% 41% 41% 39% 38% 48% 48% 58% 59% 62% 0% 25% 50% 75% 100% 125% 2015 2016 2017 2018 2019 Combined ratio (%) Expense ratio Claims ratio 87% 89% 99% 98% 100% 9.9 10.5 11.1 11.7 12.3 18.4 10.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 2015 2016 2017 2018 2019 Dividends per share (p) Special Interim and second interim 19% 18% 9% 5% 15% 0% 5% 10% 15% 20% 2015 2016 2017 2018 2019 Return on equity (%)

0% 100% 200% 300% 400% 500% 600% 700% 800% 900% 1000% 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 31 December 2019 NAV target range (RFR +10% p.a. to RFR +15% p.a.) RF + 10% TSR growth (1 month average) NAV growth (Including dividends)

Excellent total shareholder return - TSR 23.3% per annum since 31.12.09

8 Shareholder return (%) * Average NAV growth (including dividends) over the past 10 years of 15.8%

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Financials

Strong growth and profit

Year ended 31 December 2019 Year ended 31 December 2018 % Increase Gross premiums written ($m) 3,003.9 2,615.3 15% Net premiums written ($m) 2,503.5 2,248.5 11% Net earned premiums ($m) 2,347.0 2,084.6 13% Profit before income tax ($m) 267.7 76.4 250% Claims ratio 62% 59% Expense ratio 38% 39% Combined ratio 100% 98% Earnings per share (pence) 35.0 9.7 Dividend per share (pence) 12.3 11.7 Net assets per share (pence) 235.0 219.6 Net tangible assets per share (pence) 217.3 200.7

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31 December 2019 31 December 2018

Strong return on stable investment portfolio

Cash and Cash Equivalents, 6.7% Government and Quasi Government 28.0% Investment Grade Credit 50.0% Other Credit, 0.6% Senior Secured Loans, 2.6% Equity Linked funds, 1.7% Hedge Funds , 6.7% Illiquid Credit Assets, 3.7% Cash and Cash Equivalents, 4.8% Government and Quasi Government 32.0% Investment Grade Credit 46.3% Other Credit, 4.0% Derivative Asset, 0.4% Equity Linked funds, 2.8% Hedge Funds, 6.0% Illiquid Credit Assets, 3.7%

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Portfolio delivered 4.8% return

46.8 43.5 62.7 79.4 8.0 170.3 36.2 14.1 30.4 58.9 33.1 93.4 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 0.0 50.0 100.0 150.0 200.0 250.0 300.0 2014 2015 2016 2017 2018 2019 Annualised Investment Return Investment Return ($m) 1st half 2nd half Return

Overall small reserve release

13 $9.5m $115.0m $203.9m $180.7m $176.3m $158.1m

• 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
• 50.0
• 40.0
• 30.0
• 20.0
• 10.0

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 140.0 150.0 160.0 170.0 180.0 190.0 200.0 210.0 220.0 2014 2015 2016 2017 2018 2019 % of NEP Reserve Releases $m Specialty lines CyEx PAC Marine Property Reinsurance % of NEP

Whole account reserve strength in the range

14 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% 0.0% 5.0% 10.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Financial year % above actuarial estimate

Surplus in net held reserves

Updated capital position remains strong

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Year ended 31 December 2019 $m Year ended 31 December 2018 $m Lloyd’s economic capital requirement (ECR) 1,828.4 1,594.5 Capital for US insurance companies 203.9 173.4 2,032.3 1,767.9

• Group capital requirement
• Our funding is made up of our own equity (on a Solvency II basis) plus $550.0m of debt

and an undrawn banking facility of $225.0m

• At 31 December 2019 surplus capital pre dividend of 22% of ECR, including Solvency II

adjustments

• Increase in BICI capital due to increasing volumes of admitted business
• New debt issuance of $300m in September 2019 following redemption of £75.0m retail

bond

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Underwriting review

Underwriting review – 2019 achievements

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• Combined ratio of 100% against backdrop of elevated claims environment
• Growth in gross premiums written of 15% to $3,003.9m
• Growth in 5 out of 6 divisions
• Double digit growth in specialty lines, cyber & executive risk and political, accident

& contingency

• Positive rating environment with increase of 6% across the portfolio as a whole
• We continue to reserve consistently, maintaining our surplus over actuarial estimate

between 5-10%

• Active underwriting management continues

Cumulative rate changes since 2015

18 Rate change (%) 80% 85% 90% 95% 100% 105% 110% 115% 120% 2015 2016 2017 2018 2019 Underwriting Year Marine Property Specialty Lines CyEx Reinsurance PAC All divisions

2020 underwriting outlook

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• Expect low double digit growth in 2020
• Expect continued lower than average reserve releases in 2020
• Expect rate increases to continue on average across portfolio
• Continue to see growth across all platforms

Outlook for 2020

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• Preparation complete for operating in post Brexit environment
• Continue to invest in and leverage digital technology through strategic initiatives
• Continue our organic growth and hiring of top talent
• Running yield on investments 2.1% at end of 2019
• Continue to support Lloyd’s and its Blueprint One
• Sustainability officer to join

Questions?

Any questions?

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Appendix

Cyber gross premiums written growth

23 GWP ($m) 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Vector InfoSec BBR Tech E&O

Cumulative rate changes since 2008

24 70% 75% 80% 85% 90% 95% 100% 105% 110% 115% 120% 125% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Marine Property Specialty Lines CyEx Reinsurance 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 2019 Year Lines of Business Diversified Portfolio

Performance by division

26 Cyber & executive risk Marine PAC Property Reinsurance Specialty lines

Gross premiums written ($m) 823.0 306.4 272.7 428.7 206.0 967.1 Net premiums written ($m) 712.2 222.1 245.8 365.6 123.0 834.8 Net earned premiums ($m) 644.5 222.2 237.4 361.8 123.0 758.1 Result from operating activities ($m) 126.6 8.4 41.2 43.3 (48.2) 124.1 Claims ratio 61% 57% 47% 57% 118% 62% Rate change on renewals 5% 11%

• 11%

5% 6% Percentage of business led 99% 61% 66% 75% 47% 86%

Year ended 31 December 2019