Solvency II may present acquisition opportunities

Lloyd’s insurer Beazley made a profit after tax of $62.7m (£43m) in 2011. The company is also hoping that Solvency II will present acquisition opportunities.

While Beazley’s profit is down 70% on the $217m profit it made in 2010, the result comes after the worst year on record for catastrophe losses.

Catastrophe events in 2011, including the Thailand floods, cost Beazley $215m, more than twice the cost in 2010.

Beazley posted a  profitable 2011 combined ratio of 99% (2010: 88%). This included reserve releases of $186.5m (2010: $144.6m).

Beazley has maintained its reserving position within its target range of between 5% and 10% above actuaries’ best estimates, at 7.4% for 2011 (2010: 7.9%).

Despite predictions that industry reserve releases are drying up, Beazley chief financial officer Martin Bride said of his own firm’s releases: “From my perspective the reserve release position is a sustainable one.”

Premium income for 2011 was almost flat, with gross written premiums at $1.71bn (2010: $1.74bn).

However, Beazley has planned for premium growth of between 5% and 10% in 2012. It expects this to come from catastrophe reinsurance rate rises, its life accident and health business and its data breach insurance product.

The company also sees potential acquisition opportunities from companies that are less well prepared for Solvency II than Beazley itself is.

“We are significantly advanced with the implementation of the revised risk management processes and corporate governance processes that Solvency II requires and the organisation is benefiting from that,” Bride said. “We are looking to see whether there are any growth opportunities driven by companies who are doing less well at Solvency II.”

The company continues to be interested in buying fellow Lloyd’s insurer Hardy, and says it has sufficient capital to fund a purchase from internal resources. The company has $202.1m of available surplus for underwriting and an unused bank facility of $225m.