Beazley results 31.12.2017
Lloyd’s listed Insurer Beazley plc has today released its results for the year ended 31 December 2017. In spite of the fact that 2017 is set to become one of the worst catastrophe years on record following hurricanes Harvey, Irma and Maria, the Mexican Earthquakes and the Californian wildfires, Beazley has announced pre-tax profits of $168.0mn.
Financial highlights:-
- -Profit before tax of $168.0m (2016: $293.2m)
- -Gross premiums written increased by c.7% to $2,343.8m (2016: $2,195.6m)
- -Combined ratio of 99% (2016: 89%)
- -Rate reduction on renewal portfolio of 1% (2016: reduction of 2%)
- -Prior year reserve releases of $203.9m (2016: $180.7m)
- -Investment return 2.9% (2016: 2.0%)
In his statement, Andrew Horton, Beazley’s CEO, explains that the claims from the catastrophes in 2017 added roughly 10 percentage points to the company’s combined ratio and directly affected all of its five divisions. However, in a year where the aggregate estimated industry losses are expected to exceed $100bn, he says that the claims paid by Beazley were well within the scenarios for which its underwriting teams routinely plan.
He goes on to say that Beazley’s relatively strong performance can be attributed to the resilience of their business model where prudent risk selection and effective cycle management are integral to the way in which the insurer operates.
Specialty lines, the insurers largest division, is highlighted as being one of the insurers most profitable lines of business as it increased its profit by 69.8 percent in 2017. However, this was offset by declines in every other class.
Following the events of 2017, material price rises are cited as having been achieved by the classes of business directly affected. In particular, reinsurance experienced increases of 8% on US renewal business, whilst rates were up 6% overall on property insurance that is predominantly written out of London and for cargo business – the Marine class most affected by the Atlantic storms – there were increases of between 2.5% - 5.0% in the last quarter of 2017.
On account of the improved rating environment, the company is anticipating growth across all divisions in 2018, the first time this has been the case for over 10 years according to the report. Whilst Andrew Horton notes that Beazley’s approach to growth will not come at the expense of profitability, he states three other sources of growth that will be targeted by the company, namely: increasing the flow of profitable business through brokers; designing new products to cater for clients’ changing needs; and expanding geographically into new markets.
Taking into account the events of the past 12 months and looking ahead to the future, Andrew Horton concludes:
“In a catastrophe year such as that of 2017, a short term reduction in profits is inevitable. However, with appropriate cycle management and a balanced portfolio of business, the temporary reduction in profits can be minimised before deploying resources to take advantage of improving underwriting conditions.”
The full report is available on Beazley’s website which can be accessed via the Beazley's website.