Chief executive predicts rates for short-tail business will continue to fall

Growing gross written premium (GWP) and profit will be “challenging in the current environment”, according to Beazley chief executive Andrew Horton.

He predicted that rates for short-tail and catastrophe-exposed business lines would continue to fall.

Horton told journalists after the release of Beazley’s first-half results this morning: “We are expecting to achieve moderate [premium] growth in 2014 – ideally slightly greater than 1% by the end of the year if we can.”

Beazley reported GWP of $1.08bn (£631m) for the first half of 2014, up 1% on the $1.07bn it reported in the same period last year.

Profit before tax was up 61% to £132.9m, but most of the increase was caused by Beazley’s investment returns getting back to normal after interest rate rises almost wiped them out in the first half of 2013.

Rates across Beazley’s portfolio fell by 1%, driven by a 10% reduction in reinsurance rates and a 5% fall in marine rates.

Horton said: “Competition remains intense. There is plenty of capital entering the marketplace and competing in some of the lines we have historically been in.”

He added: “Rates in our short-tail lines of business are falling more quickly than we originally expected at the beginning of the year. Our expectation is that is going to continue for the foreseeable future.”

He added that the rate cuts are affecting larger risks more than smaller risks.

Beazley expects its US specialty business to be an antidote to the tough environment. Horton said that premiums in its US business, which has now been operating for 10 years, increased by 14% in the first half of 2014.

Horton said: “The strategy when we entered the US 10 years ago was to access the same business we do at Lloyd’s but for small and mid-sized [risks], where pricing is less volatile.”