Reinsurance News

Beazley’s H1 profit falls on investment losses as underwriting performance improves

22nd July 2022 - Author: Luke Gallin

Specialist re/insurer Beazley has reported a combined ratio of 87% for the first half of 2022, the best at a half year since 2015, although investment losses suffered in the period pushed down its pre-tax profit by 87%.

Beazley, insurance reinsuranceBeazley’s profit has declined from $167.3 million in H1 2021 to $22.3 million in H1 2022, driven by an investment loss of $193 million, compared with a gain of almost $84 million last year.

The insurer attributes the large investment loss to Russia’s ongoing invasion of Ukraine, which it says has fuelled “an unusual combination of excess demand and supply constraints,” which ultimately led to an unusual trading environment.

On the liability side of the business, the company has reported an underwriting profit of $232.4 million in H1 2022, compared with a profit of $84.2 million a year earlier.

Gross premiums written increased, year-on-year, by 26% to $2.6 billion, as net premiums written (NPW) spiked 25% to $1.8 billion.

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The growth witnessed in the first half of 2022 has been supported by “a buoyant rating environment,” notes Beazley, with premium rate change of 18% seen on average across the business.

By segment, Beazley reports that its Cyber Risks division took advantage of the favourable rate environment in H1 2022, nearly doubling its premium to $472.7 million, which aided the delivery of a profit before tax of almost $65 million, with a combined ratio of 74%.

In Property Risks, Beazley notes that a relatively low frequency of natural catastrophes so far in 2022 in this segment has led to a combined ratio of 77%, compared with 101% in H1 2021, which helped the unit produce a profit of $44.1 million, up from $20.8 million last year.

Within Specialty Risks, the carrier reports premium growth of 19% buoyed by a rate change of 4%. However, the unit made a loss before tax of $53.6 million as a result of investment losses, despite recording a combined ratio of 94%.

Digital has also made a good start to the year, says Beazley, producing GPW of $98 million and a combined ratio of 85%, with profit before tax of $3.6 million.

Adrian Cox, Chief Executive Officer (CEO) at Beazley, commented: “We have maintained the momentum of the second half of 2021 with gross premiums increasing by 26% alongside better than expected claims experience. A challenging investment environment has impacted profit; however I’m delighted that we have achieved our best combined ratio at a half year since 2015.

We continue to manage actively for inflation and recession and our estimate for the war in Ukraine remains unchanged. Given the positive experience in the first half of this year we are in a position to update our combined ratio guidance to high 80s for 2022 assuming average claims experience for the second half of the year.”

“As we reflect on the first half of 2022, no one can be in any doubt that we are in the middle of an uncertain and complex risk environment, where unpredictability is a dominant feature. In these circumstances it is our responsibility to do the right thing, supporting our clients to navigate through, offering them relevant insurance protection and capacity, matched by first-rate risk management and loss prevention strategies. Beazley will continue to deliver in line with our vision for the remainder of 2022 and beyond and I look forward to reporting a successful set of full year results to you in February 2023 where our current expectation is a combined ratio in the high 80s assuming an average claims experience for the second half of the year,” he added.

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