Interim Results - Part 4

27th Jul 2009 11:33

Parts 1,2 and 3 of Beazley PLC's Interim Results announcement were released today at 7am under RNS number 2894W. The following is the 4th and final part of the Interim Results.

 

Beazley Announces Interim Results

Beazley plc results for the six months ended 30 June 2009

July 27, 2009 

Part 4

Gross ultimate claims	2002ae	2003	2004	2005	2006	2007	2008	2009
		%	%	%	%	%	%	%
Marine
12 months		59.5	61.9	82.7	57.2	58.2	69.1	-
24 months		45.6	66.0	81.2	42.2	59.9	-	-
36 months		38.9	62.8	71.3	32.3	-	-	-
48 months		36.1	62.2	69.5	-	-	-	-
60 months		35.7	61.0	-	-	-	-	-
72 months		35.6	-	-	-	-	-	-
Position at 30 June 2009		35.2	58.8	70.5	29.0	54.0	71.4	-
Political risk and contingency
12 months		59.0	66.9	60.9	57.5	57.2	57.4	-
24 months		36.2	55.6	38.1	36.2	38.6	-	-
36 months		31.7	52.5	28.4	32.6	-	-	-
48 months		28.8	38.4	24.9	-	-	-	-
60 months		31.5	37.3	-	-	-	-	-
72 months		25.5	-	-	-	-	-	-
Position at 30 June 2009		25.5	35.7	22.1	33.3	46.4	62.0	-
Property
12 months		50.6	65.7	88.8	58.3	58.1	70.0	-
24 months		37.0	65.3	85.4	43.4	56.2	-	-
36 months		34.2	66.1	84.0	42.4	-	-	-
48 months		33.5	64.2	89.1	-	-	-	-
60 months		33.2	64.7	-	-	-	-	-
72 months		33.3	-	-	-	-	-	-
Position at 30 June 2009		33.1	63.4	91.6	42.5	54.1	69.7	-
Reinsurance
12 months		58.6	87.3	199.6	52.3	59.6	59.8	-
24 months		34.2	81.6	192.7	24.8	25.5	-	-
36 months		28.4	78.0	186.9	25.0	-	-	-
48 months		28.7	75.4	183.1	-	-	-	-
60 months		25.6	73.5	-	-	-	-	-
72 months		25.7	-	-	-	-	-	-
Position at 30 June 2009		25.5	72.4	179.9	23.8	25.5	59.8	-
Specialty lines
12 months		73.0	71.6	72.0	72.8	72.8	72.1	-
24 months		70.1	71.0	72.0	72.8	72.4	-	-
36 months		69.0	67.4	69.7	72.8	-	-	-
48 months		60.0	64.5	66.5	-	-	-	-
60 months		53.3	59.4	-	-	-	-	-
72 months		52.5	-	-	-	-	-	-
Position at 30 June 2009		50.9	59.3	64.9	72.2	72.4	72.1	-
Total
12 months		63.0	69.5	90.5	63.0	63.5	68.6	-
24 months		52.5	69.1	87.8	53.3	59.2	-	-
36 months		49.4	66.5	84.1	50.9	-	-	-
48 months		44.9	63.6	82.7	-	-	-	-
60 months		41.5	61.1	-	-	-	-	-
72 months		40.9	-	-	-	-	-	-
Position at 30 June 2009		40.1	60.2	82.1	50.4	58.3	69.0	-
Total ultimate losses(£m)	1,190.0	294.7	509.1	758.4	527.8	664.3	779.5	703.5	5,427.3
Less paid claims (£m)	(984.6)	(210.4)	(348.7)	(493.0)	(193.6)	(172.2)	(56.2)	(0.3)	(2,459.0)
Less unearned portion of ultimate losses (£m)	-	-	-	-	-	(63.4)	(204.1)	(579.3)	(846.8)
Gross claims liabilities (100% level) (£m)	205.4	84.3	160.4	265.4	334.2	428.7	519.2	123.9	2,121.5
Less unaligned share (£m)	(39.0)	(16.0)	(30.5)	(50.4)	(62.4)	(79.9)	(92.4)	(20.2)	(390.8)
Gross claims liabilities, group share (£m)	166.4	68.3	129.9	215.0	271.8	348.8	426.8	103.7	1,730.7

Net ultimate claims	2002ae	2003	2004	2005	2006	2007	2008	2009
		%	%	%	%	%	%	%
Marine
12 months		55.3	57.5	55.3	54.1	55.4	61.2	-
24 months		45.4	53.3	49.1	41.8	56.2	-	-
36 months		40.0	48.6	42.7	32.4	-	-	-
48 months		39.0	47.7	39.5	-	-	-	-
60 months		39.0	46.5	-	-	-	-	-
72 months		39.0	-	-	-	-	-	-
Position at 30 June 2009		38.5	45.8	39.5	31.4	53.3	62.2	-
Political risk and contingency
12 months		56.6	63.6	63.3	56.1	55.4	55.8	-
24 months		37.3	58.5	46.5	40.4	39.4	-	-
36 months		34.8	54.2	35.9	37.0	-	-	-
48 months		33.1	41.3	30.1	-	-	-	-
60 months		35.5	40.9	-	-	-	-	-
72 months		27.7	-	-	-	-	-	-
Position at 30 June 2009		27.7	36.1	26.4	39.1	46.0	60.7	-
Property
12 months		48.3	59.8	65.1	60.9	61.2	66.2	-
24 months		41.0	60.6	62.1	48.0	59.8	-	-
36 months		38.5	60.3	58.5	46.3	-	-	-
48 months		37.8	58.4	61.2	-	-	-	-
60 months		37.4	58.1	-	-	-	-	-
72 months		37.5	-	-	-	-	-	-
Position at 30 June 2009		37.4	57.4	61.6	45.9	58.3	67.9	-
Reinsurance
12 months		59.9	88.7	152.2	54.2	55.3	67.2	-
24 months		39.7	87.3	135.7	36.3	30.0	-	-
36 months		33.9	83.8	125.9	35.1	-	-	-
48 months		34.6	77.1	119.8	-	-	-	-
60 months		31.7	74.1	-	-	-	-	-
72 months		31.7	-	-	-	-	-	-
Position at 30 June 2009		31.6	72.3	114.9	33.3	30.0	67.2	-
Specialty lines
12 months		68.4	69.0	69.1	68.5	69.8	70.2	-
24 months		67.1	68.3	69.1	68.6	68.8	-	-
36 months		66.1	65.5	67.4	68.5	-	-	-
48 months		57.7	62.2	64.1	-	-	-	-
60 months		52.7	56.9	-	-	-	-	-
72 months		50.8	-	-	-	-	-	-
Position at 30 June 2009		48.9	56.4	61.7	68.0	68.8	70.2	-
Total
12 months		60.1	65.9	73.2	62.2	63.1	66.4	-
24 months		53.0	65.3	68.8	54.5	59.3	-	-
36 months		50.5	62.7	65.0	51.9	-	-	-
48 months		46.5	59.5	62.5	-	-	-	-
60 months		43.9	56.5	-	-	-	-	-
72 months		42.8	-	-	-	-	-	-
Position at 30 June 2009		41.8	55.6	60.8	51.4	59.1	67.0	-
Total ultimate losses(£m)	627.3	249.1	386.6	445.7	430.3	570.5	625.7	543.7	3,878.9
Less paid claims (£m)	(552.9)	(185.1)	(266.0)	(258.8)	(174.4)	(171.5)	(68.7)	(1.9)	(1,679.3)
Less unearned portion of ultimate losses (£m)	-	-	-	-	-	(47.7)	(145.4)	(438.4)	(631.5)
Gross claims liabilities (100% level) (£m)	74.4	64.0	120.6	186.9	255.9	351.3	411.6	103.4	1,568.1
Less unaligned share (£m)	(14.1)	(12.2)	(22.9)	(35.5)	(48.3)	(65.2)	(75.5)	(18.0)	(291.7)
Gross claims liabilities, group share (£m)	60.3	51.8	97.7	151.4	207.6	286.1	336.1	85.4	1,276.4

Analysis of movements in loss development tables

We have updated our loss development tables to show the interim ultimate loss ratios as at 30 June 2009 for each underwriting year. As such, care should be taken when comparing these half year movements to the full year movements shown within the body of each table.

The reserves established for the 2004, 2005 and 2008 hurricanes continue to remain sufficient and the level of paid claims has now reached 95%, 90% and 38% of the estimated ultimate claims costs respectively.

Marine

Most years have exhibited a stable or reducing trend.

Political risk and contingency

As covered in the Business Review section, the 2006, 2007 and 2008 underwriting years ultimate claims increased due to an increase in claims on the political class.

Property

The increase on the 2005 underwriting year is due to a dam related loss. As this is covered by our reinsurance programme there is a negligible net movement.

Reinsurance

All years have continued to reduce. In particular the reserves for hurricane Katrina have been reassessed and reduced.

Specialty lines

The trend of consistent releases across underwriting years has continued.

The table below analyses our net insurance claims between current year claims and adjustments to prior year net claims reserves. These have been broken down by department and period.

6 months ended 30 June 2009	Marine £m	Political risk and contingency £m	Property £m	Reinsurance £m	Specialty lines £m	Total £m
Current year	39.4	17.9	40.9	21.1	125.9	245.2
Prior year
- 2006 and earlier	(4.8)	(3.5)	(2.0)	(5.7)	(20.5)	(36.5)
- 2007 year of account	(4.2)	2.3	(1.4)	-	-	(3.3)
- 2008 year of account	0.8	1.8	1.5	-	-	4.1
	(8.2)	0.6	(1.9)	(5.7)	(20.5)	(35.7)
Net insurance claims	31.2	18.5	39.0	15.4	105.4	209.5

6 months ended 30 June 2008	Marine £m	Political risk and contingency £m	Property £m	Reinsurance  £m	Specialty lines £m	Total £m
Current year	26.8	12.6	38.9	16.1	97.8	192.2
Prior year
- 2005 and earlier	(0.7)	(2.4)	0.6	(1.3)	(9.0)	(12.8)
- 2006 year of account	(3.9)	-	(1.1)	(0.2)	-	(5.2)
- 2007 year of account	(0.8)	-	(2.1)	(2.5)	-	(5.4)
	(5.4)	(2.4)	(2.6)	(4.0)	(9.0)	(23.4)
Net insurance claims	21.4	10.2	36.3	12.1	88.8	168.8

Year to 31 December 2008	Marine £m	Political risk and contingency £m	Property £m	Reinsurance £m	Specialty lines £m	Total £m
Current year	74.6	26.0	109.0	38.4	225.9	473.9
Prior year
- 2005 and earlier	(2.3)	(5.8)	2.1	(6.0)	(27.2)	(39.2)
- 2006 year of account	(10.5)	(1.1)	(3.5)	(0.3)	-	(15.4)
- 2007 year of account	-	(4.7)	(2.4)	(10.3)	(0.8)	(18.2)
	(12.8)	(11.6)	(3.8)	(16.6)	(28.0)	(72.8)
Net insurance claims	61.8	14.4	105.2	21.8	197.9	401.1

8. Income tax expense

					6 months ended 30 June 2009  £m	6 months ended 30 June 2008  £m	Year to 31 December 2008
Current tax expense
Current year					19.8	12.9	20.7
Prior year adjustments					-	-	(0.7)
					19.8	12.9	20.0
Deferred tax expense
Origination and reversal of temporary differences					(20.5)	-	3.0
Prior year adjustments					-	-	(0.2)
					(20.5)	-	2.8
Income tax expense					(0.7)	12.9	22.8
Profit before tax					20.8	45.0	87.2
Tax calculated at UK/ Irish tax rates					5.8	12.6	24.9
Effects of:
- Tax rates in foreign jurisdictions					(8.3)	-	0.2
- Non-deductible expenses					1.8	0.3	1.5
- Tax relief on share based payments - current and future years					-	-	(2.9)
- Under/(over) provided in prior years					-	-	(0.9)
Tax (credit)/charge for the period					(0.7)	12.9	22.8

9. Acquisition of business portfolio

On 1st April 2009, Beazley completed the acquisition of First State Management Group Inc from Hartford Financial Services Group Inc for a total consideration of $34.0m (£20.6m).

The acquisition had the following effect on the group's assets and liabilities:-

Fair value of net assets on acquisition		£m
Net assets		0.9
Pipeline profits acquired		3.2
Contribution receivable from syndicate 623		4.5
Goodwill		12.7
Less: transaction costs		(0.7)
Consideration paid		20.6

Responsibility statement of the directors in respect of the interim report 

We confirm that to the best of our knowledge: 

• the set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

• the interim management report includes a fair review of the information required by: 

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Martin Bride

Finance Director

27 July 2009

Independent review report to Beazley plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 which comprises the income statement, statement of comprehensive income, statement of changes in equity, balance sheet, the cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Rees Aronson 

For and behalf of KPMG Audit Plc

Chartered Accountants8 Salisbury SquareLondon

EC4Y 8BB

27 July 2009

Glossary

Admitted carrier

An insurance company authorised to do business in the US. An agreement is entered into which stipulates the terms and conditions under which a business must conduct within a state in the US. 

Aggregates/aggregations

Accumulations of insurance loss exposures which result from underwriting multiple risks that are exposed to common causes of loss.

Aggregate excess of loss

The reinsurer indemnifies an insurance company (the reinsured) for an aggregate (or cumulative) amount of losses in excess of a specified aggregate amount.

A.M. Best

A.M. Best is a worldwide insurance-rating and information agency whose ratings are recognised as an ideal benchmark for assessing the financial strength of insurance related organisations, following a rigorous quantitative and qualitative analysis of a company's balance sheet strength, operating performance and business profile. Beazley plc obtained an A rating, while Beazley Insurance Company, Inc., received a rating of A.

Binding authority

A contracted agreement between a managing agent and a coverholder under which the coverholder is authorised to enter into contracts of insurance for the account of the members of the syndicate concerned, subject to specified terms and conditions.

Capacity

This is the maximum amount of premiums that can be accepted by a syndicate. Capacity also refers to the amount of insurance coverage allocated to a particular policyholder or in the marketplace in general.

Catastrophe reinsurance

A form of excess of loss reinsurance which, subject to a specified limit, indemnifies the reinsured company for the amount of loss in excess of a specified retention with respect to an accumulation of losses resulting from a catastrophic event or series of events.

Claims

Demand by an insured for indemnity under an insurance contract.

Claims ratio

Ratio, in percent, of net insurance claims to net earned premiums.

Combined ratio 

Ratio, in percent, of the sum of net insurance claims, expenses for acquisition of insurance contracts and administrative expenses to net earned premiums. This is also the sum of the expense ratio and the claims ratio.

Coverholder/managing general agent

A firm either in the United Kingdom or overseas authorised by a managing agent under the terms of a binding authority to enter into contracts of insurance in the name of the members of the syndicate concerned, subject to certain written terms and conditions. A Lloyd's broker can act as a coverholder.

Deferred acquisition costs (DAC)

Costs incurred for the acquisition or the renewal of insurance policies (e.g. brokerage, premium levy and staff related costs) which are capitalised and amortised over the term of the contracts.

Earnings per share (EPS) - Basic/Diluted

Ratio, in pence, calculated by dividing the consolidated profit after tax by the weighted average number of ordinary shares issued, excluding shares owned by the group. For calculating diluted earnings per share the number of shares and profit or loss for the year is adjusted for all dilutive potential ordinary shares, such as share options granted to employees.

Excess per risk reinsurance

A form of excess of loss reinsurance which, subject to a specified limit indemnifies the reinsured company against the amount of loss in excess of a specified retention with respect of each risk involved in each loss.

Expense ratio

Ratio, in percent, of the sum of expenses for acquisition of insurance contracts and administrative expenses to net earned premiums.

Facultative reinsurance

A reinsurance risk that is placed by means of a separately negotiated contract as opposed to one that is ceded under a reinsurance treaty. 

Gross premiums written

Amounts payable by the insured, excluding any taxes or duties levied on the premium, including any brokerage and commission deducted by intermediaries.

Hard market 

An insurance market where prevalent prices are high, with restrictive terms and conditions offered by insurers.

Horizontal Limits

Reinsurance coverage limits for multiple events.

Incurred but not reported (IBNR)

These are anticipated or likely claims that may result from an insured event although no claims have been reported so far.

International accounting standards (IAS)/International financial reporting standards (IFRS)

Standards formulated by the IASB with the intention of achieving internationally comparable financial statements. Since 2002, the standards adopted by the IASB have been referred to as International Financial Reporting Standards (IFRS). Until existing standards are renamed, they continue to be referred to as International Accounting Standards (IAS).

International accounting standards board (IASB)

An international panel of accounting experts responsible for developing IAS/IFRS. 

Lead underwriter

The underwriter of a syndicate who is responsible for setting the terms of an insurance or reinsurance contract that is subscribed by more than one syndicate and who generally has primary responsibility for handling any claims arising under such a contract.

Line

The proportion of an insurance or reinsurance risk that is accepted by an underwriter or which an underwriter is willing to accept.

Lloyd's

Lloyd's is the world's leading specialist insurance market. It occupies sixth place in terms of global reinsurance premium income, and is the second largest surplus lines insurer in the US. In 2007, 66 syndicates underwrote insurance at Lloyd's, covering all classes of business from more than 200 countries and territories worldwide.

Managed syndicate

The combination of syndicate 2623 and 623 through which the group underwrite insurance business.

Managing agent

A company that is permitted by Lloyd's to manage the underwriting of a syndicate.

Medium tail

A type of insurance where the claims may be made a few years after the period of insurance has expired. 

Net assets per share

Ratio, in pence calculated by dividing the net assets (total equity) by the number of shares issued.

Net premiums written 

Net premiums written is equal to gross premiums written less outward reinsurance premiums written.

Provision for outstanding claims

Provision for claims that have already been incurred at the balance sheet date but have either not yet been reported or not yet been fully settled.

Rate

The premium expressed as a percentage of the sum insured or limit of indemnity.

Reinsurance to close (RITC)

A reinsurance which closes a year of account by transferring the responsibility for discharging all the liabilities that attach to that year of account (and any year of account closed into that year) plus the right to buy any income due to the closing year of account into an open year of account in return for a premium.

Retention limits

Limits imposed upon underwriters for retention of exposures by the group after the application of reinsurance programmes.

Return on equity (ROE)

Ratio, in percent calculated by dividing the consolidated profit after tax by the average total equity.

Retrocessional reinsurance

The reinsurance of the reinsurance account. It serves to 'lay-off' risk.

Risk

This term may variously refer to:

a) the possibility of some event occurring which causes injury or loss;

b) the subject matter of an insurance or reinsurance contract; or

c) an insured peril.

Short tail

A type of insurance where claims are usually made during the term of the policy or shortly after the policy has expired. Property insurance is an example of short tail business. 

Soft market

An insurance market where prevalent prices are low, and terms and conditions offered by insurers are less restrictive.

Stamp capacity

The volume of business measured in gross written premiums net of acquisition costs underwritten by the group through its managed syndicates at Lloyd's of London.

Surplus lines insurer

An insurer that underwrites surplus lines insurance in the USA. Lloyd's underwriters are surplus lines insurers in all jurisdictions of the USA except Kentucky and the US Virgin Islands.

Total shareholder return

The increase in the share price plus the value of any dividends paid and proposed during the year.

Treaty reinsurance

A reinsurance contract under which the reinsurer agrees to offer and to accept all risks of certain size within a defined class.

Unearned premiums reserve

The portion of premium income in the business year that is attributable to periods after the balance date is accounted for as unearned premiums in the underwriting provisions.

ENDFURBDLFLKDBFBBE

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