22nd Feb 2024 10:28
(Alliance News) - Beazley PLC's newly-issued guidance would translate to a sizeable profit hike, Swiss bank UBS said, and the insurer's probable capital distribution sum is far chunkier than expected.
Beazley shares were 9.1% higher at 635.00 pence each in London on Thursday morning.
The company now expects an undiscounted combined ratio in the "mid-70s" for 2023, an improvement on the previous "low-80s" guidance. A combined ratio below 100% means a profit on underwriting, so the lower the better.
UBS analysts said: "This would imply a 30-40% upgrade to FY [earnings per share], equivalent to [around] USD230 million to USD300 million net income."
UBS said the new guidance boost is "material", noting that consensus assumes a combined ratio of 82.3% for 2023. UBS itself predicted 82.9%.
"Should we assume mid-70's level implies 74-76%, then all else equal, we estimate FY23 [profit] would increase by [around] 30-40%. This is equivalent to 4.8-6.2% of the market cap of the group. So even if this is one-off driven, which is unknown at this stage, the stock merits a materially positive share price reaction."
In addition, it said shareholders can expect an "additional capital return in respect of 2023" of USD300 million.
"The capital distribution statement is greater than UBS's base case, though we do note that given the new news on undiscounted combined ratio, we might have expected an even greater distribution," UBS added.
"UBS prior to today's update is a USD208 million special distribution (consensus USD150 million). The guidance of USD300m would imply a special payout of [around] 30% and therefore an all-in payout of 40-45%. The key here is they are still retaining a material amount of earnings, supporting the growth angle."
UBS noted Beazley is its preferred Lloyd's of London market stock going into the reporting season.
Beazley reports annual results on March 7.
By Eric Cunha, Alliance News news editor
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