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Beazley’s combined ratio deteriorates to 109% on COVID & ransomware

5th February 2021 - Author: Luke Gallin

Beazley has reported that its combined ratio deteriorated to 109% in 2020 on the back of first-party COVID-19 losses and elevated ransomware reserves, as the firm announces a loss before tax of $50.4 million for the year.

Beazley, insurance reinsuranceThe more than $50 million loss for the period compares with profit before tax of $267.7 million in 2019, a year in which Beazley’s combined ratio reached 100%.

The 2020 combined ratio is comprised of a 73% claims ratio and a 36% expense ratio, compared with a claims ratio of 62% and an expense ratio of 38% in 2019.

Throughout the year, Beazley’s contingency and property books were hit by a stream of event cancellation and business interruption losses as a result of the COVID-19 pandemic.

The specialist re/insurer notes that at $340 million, net of reinsurance, its first-party COVID-19 claims estimate is unchanged. Of this amount, some $82.5 million has been treated as an unexpired risk reserve in respect of events dated after Dec 31st, 2020.

The $340 million total is based on a return to some form of normality in the second-half of 2021, which, thanks to numerous vaccines, now seems plausible. However, should things go less smoothly than hoped for, then Beazley says there’s potential for an additional $50 million of claims, net of reinsurance, to the end of 2021.

Away from the pandemic, and Beazley states that it continues to see increases in attritional claims as a result of ransomware and social inflation. In fact, in 2020, all divisions except for Cyber & Executive Risk contributed to reserve releases of $93.1 million. Beazley explains that a rise in ransomware attacks led to reserve strengthening of $4.4 million in this line in 2020.

Turning to premiums, and the specialist re/insurer has reported 19% growth in gross premiums written to $3.56 billion for 2020, compared with $3 billion a year earlier. Net premiums written also increased, by 17%, to end 2020 at roughly $2.98 billion.

Net earned premiums jumped from $2.35 billion in 2019 to $2.7 billion in 2020, while net investment income actually fell by 29%, year-on-year, to $188.1 million. At $29.8 million, other income increased by 16% from the $25.8 million Beazley recorded in 2019.

“Beazley’s gross premiums written increased by 19% to $3,563.8m, supported by rate rises across most of our divisions. We also achieved a strong investment income in the face of volatile conditions.

“I am very positive about the year ahead. We have the capital strength to support our growth plans and look forward to a continued favourable rate environment and expansion of our specialist products globally. I am confident we can return to paying dividends during the course of 2021,” said Andrew Horton, Chief Executive Officer (CEO) at Beazley.

Turning to pricing, and Beazley notes that rates on renewal business on average increased by 15% across its portfolio, which suggests forward-looking profitability is up significantly for the firm.

Additionally, Beazley spent $646.8 million on reinsurance protection in 2020 against a cost of $500.4 million in 2019. The company explains that as a percentage of gross premiums written the cost of reinsurance increased from 17% in 2019 to 18% in 2020.

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