23rd Jul 2020 10:42
(Alliance News) - Beazley PLC on Thursday reporting a loss for the first half, as the insurer's combined ratio ballooned to 107%, meaning it is losing money on underwriting.
Shares in the midcap insurer were 5.9% higher in London on Thursday morning at 456.60 pence each.
In the six months to June 30, Beazley sunk to a pretax loss of USD13.8 million compared to a USD166.4 million profit a year before.
Gross written premiums in the first half improved 12% to USD1.66 billion from USD1.48 billion. Net premiums written advanced 8% to USD1.32 billion from USD1.23 billion.
Two areas of significant growth were in Beazley's specialty lines and cyber & executive risk divisions, which saw increases of 15% and 21% respectively driven by a strong performance from its US insurance company.
The company's reinsurance division experienced a reduction in premiums year on year.
"We have taken prompt action in our reinsurance division to actively manage the portfolio to ensure we are maximising profitability. This involved reducing our risk appetite for catastrophe reinsurance after the large natural catastrophes seen in 2017, 2018 and 2019 did not lead to large enough rate movements meaning that the margins for this business did not meet our profitability expectations. However, at the July renewals we have started to see rates improving and so have decided to allocate more of our overall risk appetite for the second half of the year," Beazley said.
The total claims arising from Covid-19 are predicted by some to be the largest insurance market losses of all time, Beazley said.
Beazley's estimated share of this remains at USD170 million net of reinsurance, split between the political, accident & contingency book and its marine, property and reinsurance books.
"We continue to be mindful of the potential claims on our liability business arising from the likely economic recession caused by Covid-19. While it is too early to provide guidance on the value of claims arising from business written pre-Covid-19, we have been actively adjusting our underwriting strategy on business written post the Covid-19 outbreak. These adjustments include proactively minimising the exposure by carefully assessing renewals as well as making amendments to the cover provided and wording of policies," Beazley added.
The Lloyds of London insurer cancelled its interim dividend, compared to the 4.1 pence distribution the year before.
Chief Executive Andrew Horton said: "Beazley achieved strong premium growth of 12% in the first half of 2020, with three of our seven divisions achieving double digit growth. Rates on renewals continue to increase across the market with average rate increases of 11% seen across our business as a whole. Our investments returned 1.4% for the first six months against the backdrop of a volatile investment market."
The insurer's combined ratio worsened to 107% from 100% the year before. Any ratio above 100% means the firm made an underwriting loss.
"Despite this we expect a combined ratio of around 100% should be achievable for the full year," Horton added.
Beazley is also guiding for a low double-digit top-line growth by December 31.
By Paul McGowan; [email protected]
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