Reinsurance News

Beazley improves UW result as profits dip on investments

2nd March 2023 - Author: Matt Sheehan

Specialist insurer and reinsurer Beazley has reported a 48% dip in profits for 2022 as a poor investment performance offset improvements in its underwriting result.

Beazley logoBeazley’s profit before tax for the year came to $191.0 million, compared with $369.2 million for 2021.

This was due to a net investment loss of $179.7 million that the company booked for the period, versus positive income of $116.4 million previously, which CEO Adrian Cox attributed to a “volatile interest rate environment.”

However, on a more positive note, Beazley posted underwriting profit of $402.0 million and increased its gross written premiums by 14% to $5,268.7 million over 2022 on a combined ratio of 89%, compared with 93% previously.

“We achieved a very strong underwriting result in 2022,” said Cox, noting the “challenging geopolitical environment” and volatile investment market it had to contend with during the period.

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Notably, the company recently undertook a capital raise to obtain some £350 million to support organic growth and fund attractive underwriting opportunities.

“Our diversified book of business enables us to redeploy capital to areas where we see the most attractive growth prospects,” Cox continued. “After raising equity in November, along with a solid January renewal season, we continue to lean into the opportunity we are seeing in the Property market whilst executing on our Cyber growth plans.”

Non-catastrophe exposed property business performed well for Beazley last year contributing to an increase in gross premiums written from $812.6 million to $859.8 million, but the overall property result was dampened by Hurricane Ian, from which the company expects to see an eventual claims burden of $120 million.

Nevertheless, the property combined ratio still improved substantially from 105% in 2021 to 98% last year, with Beazley attributing the improvement to recent efforts to address the impact of climate events on its book and refine its risk selection.

“With market conditions reaching a pivot point during 2022, we are now in a great position to reap the rewards,” said Cox. “These focused efforts have put us firmly on the front foot to strongly build our Property premium base through 2023 – not just as we respond to an immediate and much needed improvement in the rating environment, but for the long term.”

Beazley’s reinsurance spend did also increase significantly, with the total spent rising from $1,106.5 million in 2021 to $1,392.5 million last year, and now accounting for 26% of gross premiums written, versus 24% previously.

“As a buyer of reinsurance we are seeing an increase in costs; but balanced against the overall benefit of more effective market pricing and our dual role as a Property reinsurer, we believe this environment creates excellent opportunities for Beazley as a leading specialist Property insurer,” Cox noted.

On cyber, which was flagged as the other ongoing area of opportunity for Beazley, the company continued to see strong rate increases of 40% last year, leading to an increase in gross premiums written from $814.3 million to $1,156.1 million.

However, while still high, the level of rate increases was down from 88% in 2021 and, looking ahead, it’s anticipated that this flattening will continue throughout 2023, although with strong new business demand still expected, particularly outside the US.

For specialty risks more generally, Beazley achieved slightly higher gross premiums written of $1,940.1 million with rate increases of 2% and a combined ratio of 93%, representing an improvement of two percentage points on the previous year.

“I am proud of Beazley’s progress throughout 2022,” Cox concluded. “We delivered a strong underwriting result, raised capital that will enable us to make the most of a structural change in the Property insurance and reinsurance markets, realigned our underwriting teams to better deliver for clients and launched Lloyd’s first ESG syndicate. All against a backdrop of high inflation, an energy price crunch and the overhang of war in Europe.”

“For 2023 our growth expectations are for higher net premium growth than gross premium growth, with net growing in the mid 20s while gross is at mid teens. The difference is caused by us no longer writing portfolio underwriting through the Group in 2023 … alongside our reduction in purchased reinsurance on both Cyber Risks and Specialty Risks. These changes have the impact of increasing the net premium growth compared to the gross premium growth,” Cox continued.

“Taking the above into account, we expect to deliver a high-80s combined ratio for 2023 assuming average claims experience. Although significant geopolitical headwinds remain, I believe we are in an excellent position to sustainably grow our company and I am looking forward to all we will achieve together in 2023.”

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