Dollar reporting helps boost profits despite premium falls
Beazley announced half-year pre-tax profit had trebled from $30.1m in 2009 to $115.5m, helped by the switch to reporting in dollars, which boosted the figure by $33.7m.
But GWP was up 5% to $940.6m and net written premiums were up 21% to $621.1m. It’s combined ratio fell from 90% to 89%. Premium rates fell 2%.
Half year financial highlights $m (2009 in brackets)
- Gross written premiums 940.6 (894.6)
- Net earned premiums 678.2 (538.1)
- Profit before income tax 115.5 (30.1)
Andrew Horton, chief executive officer, said: "Beazley delivered a strong result for the first half of the year - a period marked by a series of catastrophe losses and continued intense competition in many lines of business.
“Current competitive market conditions are likely to continue. Investment yields remain low, which should place upward pressure on premium rates, but capacity in all but a few lines is plentiful.
"At Beazley, we will respond to this softening market as we have done in the past, concentrating on business that remains profitable and being prepared to reduce our book where this is not the case. We have a strong business that is in good shape for this challenging environment."
Beazley said rates on renewal business reduced by 2% - they were up 5% this time last year.
It said: “A significant contribution to our profits in the first half came once again from our marine division, in spite of the tragic events surrounding the Deepwater Horizon explosion.
“The office we opened in Oslo in January to access local energy business got off to a very positive start. More broadly, our marine underwriters continued to see profitable business, notwithstanding the pressures on global trade.
“Specialty Lines, our largest division, faced a challenging market, with competition intensifying in many of our core lines, including directors & officers insurance and professional liability for lawyers, architects and engineers, and technology companies.
“As in the past, our underwriters were well served by a tried and tested approach to cycle management, flexing our portfolio to concentrate on the more profitable classes and reducing the less profitable, while focusing on careful risk selection and the adjustment of terms and conditions to meet our profitability objectives.
“The rate reduction across our Specialty Lines portfolio was a modest 1%. Our new data breach solution, Beazley Breach Response, has been selling briskly.
“Property insurance, which accounted for 22% of our gross written premiums, saw rates decline on average by 3%. The team of highly experienced underwriters and claims professionals who joined us in the US through the First State acquisition are now fully integrated into our US property team under the name Beazley E&S Property.
“Our London-based construction and engineering team, which insures some of the largest projects in the world, continued to see weak demand for cover due to the sluggish global economy but in the US our builders risk team began to access a sizeable new market.
“For our reinsurance team, the Chile earthquake loss is expected to be contained within existing reserves. Despite some downward movement in risk adjusted pricing due to insurer recapitalisation and model changes, we believe that margins, especially on US business, remain robust.
“The special purpose syndicate we established at the end of 2009, supported by third party capital, is having its desired effect of enabling us to increase our share of existing underwriting portfolios. By the end of June it had written $13.8m.
“Our political risks and contingency team saw claims frequency fall, following an abnormal number of large loss notifications on trade credit risks in 2009.
“The contingency team, which focuses mainly on event cancellation insurance, recruited new underwriters in London and Australia. Beazley Access, our web-based trading platform for contingency risks, is bringing us access to smaller business than we would normally see at the box at Lloyd's.