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Beazley confident of growth as rate momentum accelerates, say analysts

20th June 2019 - Author: Luke Gallin

Specialist insurer Beazley continues to experience improved rate momentum in 2019 with rates now up by 4% year-to-date, which analysts partly attribute to heightened claims activity across property lines and also some casualty classes of business.

Beazley logoDuring a Beazley analyst seminar, the specialist insurance company revealed accelerated, positive rate momentum in 2019, with rates on average now up by 4% for the portfolio compared with 3% in Q1 2019 and 1% in the firm’s 2019 business plan.

Analysts at J.P Morgan and Peel Hunt have said that the continued rate improvement, which is most notable in property and marine lines of business, is in part a response to an active claims environment. Beazley explained to analysts that claims activity remains elevated, and warned that it would take some time before rate increases positively contributed to the bottom line.

“We believe Beazley has proven to be more disciplined than most, albeit it has not been immune to some deterioration in the underwriting quality that a growth strategy inevitably brings. The reserve strengthening in the property book in H1 19 could lead to a decline in reserve releases this year. This should not be a surprise as the company has flagged a heightened level of claims activity for some time now,” said Peel Hunt.

Commenting on Beazley’s reserving practices, and J.P. Morgan analysts feel that it’s likely the excess reserve buffer will decline to the low end of the 5% – 10% range. However, a normal or low catastrophe season should provide the firm with an opportunity to start rebuilding its reserve buffer by the end of the year.

RMS

While a benign catastrophe year would provide some respite for Beazley and accelerate its reserve strengthening, the 2019 Atlantic hurricane season has only just started, and companies will be mindful of the impacts of 2017 and 2018 cat events.

Looking forward, and Beazley remains confident of achieving double-digit premium growth in 2019, and analysts said that it could increase its exposure in reinsurance in 2020.

“We continue to see Beazley as attractive as in our view both its growth prospects and underlying profitability have improved in recent years. This may not immediately be evidenced in the financial results, upon which a higher level of claims is reducing the level of reserve releases, but over time we expect this dynamic to reduce,” said J.P. Morgan.

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