TIDMBEZ
RNS Number : 8200T
Beazley PLC
23 July 2020
Press Release
Beazley delivers 12% top line growth
London, 23 July 2020
Beazley plc results for period ended 30 June 2020
-- Loss before tax of $13.8m (30 June 2019: profit before tax of $166.4m)
-- Return on equity (annualised) of (1%) (30 June 2019: 19%)
-- Gross premiums written increased by 12% to $1,663.9m (30 June 2019: $1,483.6m)
-- Combined ratio of 107% (30 June 2019: 100%)
-- Rate increase on renewal portfolio of 11% (30 June 2019: increase of 5%)
-- Prior year reserve releases of $58.6m (30 June 2019: $3.4m)
-- Net investment income of $83.2m (30 June 2019: $170.3m)
-- No first interim dividend (30 June 2019: 4.1p)
Period ended Period ended %
30 June 2020 30 June 2019 movement
Gross premiums written
($m) 1,663.9 1,483.6 12%
Net premiums written ($m) 1,317.8 1,225.5 8%
(Loss)/profit before tax
($m) (13.8) 166.4
(Loss)/earnings per share
(pence) (1.7) 20.4
Net assets per share (pence) 239.0 232.3
Net tangible assets per
share (pence) 222.9 214.2
(Loss)/earnings per share
(cents) (2.2) 26.4
Net assets per share (cents) 303.0 295.4
Net tangible assets per
share (cents) 282.6 272.4
Dividend per share (pence) - 4.1
Andrew Horton, Chief Executive Officer, 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 first half of 2020 was defined by COVID-19 and claims
arising from the pandemic have driven the combined ratio to 107%,
with Beazley recording a loss before tax of $13.8m. Despite this we
expect a combined ratio of around 100% should be achievable for the
full year."
For further information, please contact:
Beazley plc Finsbury
Sally Lake Guy Lamming/Humza Vanderman
Tel: +44 (020) 7674 7375 Tel: +44 (020) 7251 3801
Note to editors:
Beazley plc (BEZ.L), is the parent company of specialist
insurance businesses with operations in Europe, North America,
Latin America and Asia. Beazley manages six Lloyd's syndicates and,
in 2019, underwrote gross premiums worldwide of $3,003.9 million.
All Lloyd's syndicates are rated A by A.M. Best.
Beazley's underwriters in the United States focus on writing a
range of specialist insurance products. In the admitted market,
coverage is provided by Beazley Insurance Company, Inc., an A.M.
Best A rated carrier licensed in all 50 states. In the surplus
lines market, coverage is provided by the Beazley syndicates at
Lloyd's.
Beazley's European insurance company, Beazley Insurance dac, is
regulated by the Central Bank of Ireland and is A rated by A.M.
Best and A+ by Fitch.
Beazley is a market leader in many of its chosen lines, which
include professional indemnity, cyber liability, property, marine,
reinsurance, accident and life, and political risks and contingency
business.
COVID-19: navigating the biggest change
Much is at stake for the insurance industry in this decisive
year. As we navigate the many challenges that 2020 continues to
present, there are unique opportunities to prove our value and make
a positive and lasting impact on our clients and in our
communities.
Since we published our 2019 annual report and accounts we have
been living under the shadow of COVID-19. Social distancing, health
and welfare concerns, the economic fallout and anticipated
recession have created multiple challenges for our clients, our
industry and for Beazley. Our risk management and business planning
processes have been thoroughly put to the test. Nevertheless we
have adapted, continued to operate effectively and continued to
grow.
The grave impact of the pandemic on lives and businesses has
placed the insurance industry's reputation and very purpose - to be
there for clients in their hours of need - under scrutiny. What we
say and what we do should always be aligned. However, at a time
when our actions are under close examination versus the
expectations of our clients, integrity and the quality of the
service we deliver have never been more important.
These strange, unprecedented times have also afforded us an
opportunity to question accepted norms and do things differently.
In an environment where there are many problems to solve,
innovation can flourish. How we grasp the opportunities, and to
what ends, will define our business, our values and our long-term
health and stability.
At Beazley our focus is always on how we add value to our
stakeholders. One of the key ways is how Beazley differentiates
itself through its diversified business, entrepreneurial spirit and
strong partnerships.
When we published our annual report and accounts in February, we
noted how change came thick and fast in 2019 and the steps we took
to navigate those changes. Our actions were designed to improve
resilience to external factors such as more fierce and frequent
natural disasters; the growing litigiousness driving claims
inflation; and political-economic unrest including resurgent trade
wars. We strengthened our operational efficiency to begin 2020
ready for the challenges ahead and to be able to take advantage of
changing market dynamics.
Although we could not foresee how events would unfold, the
foundations we built meant we have been better positioned to adapt
and respond to the changing needs of our clients and brokers.
From the beginning of social distancing through to planning the
phased return to our offices, the priority has been our clients and
our colleagues. There was an urgent need to focus on the welfare of
our people, to understand their individual circumstances and
pressures, and to ensure they had the resources to effectively work
remotely. By doing this we have also been able to meet the needs of
our clients and brokers more effectively. Life under lockdown has
caused physical and mental health strains for many and as a
business we have aimed to mitigate this through direct support and
open discussion. We have encouraged colleagues to work flexibly to
help manage workloads and to take time off when they need it,
providing extra wellness days to everyone. We have also expanded
our network of Beazley Mental Health first aiders to ensure our
colleagues are supported through this stressful time.
We have been working from home since 17 March and most of our
colleagues remain so as of July 2020. The smooth transition of our
largely office-based 1600+ workforce to homeworkers is a testament
to the professionalism and tireless efforts of our teams.
We entered lockdown in the advantageous position of having
upgraded IT systems over the past two years to support our
evolution to a more flexible, activity-based working environment.
Therefore colleagues had the equipment and secure systems in place
to work from home with minimal disruption. Without question the
enforced remote working has pushed us further and faster along this
road, opening up possibilities for greater flexibility and control
over work-life balance. We believe this is the right direction for
our business and we intend to continue on this route long-term.
During this period colleagues have been taking time out of their
day jobs to volunteer in their communities and to help COVID-19
relief efforts. From preparing food packages for hard-hit
communities to sewing scrubs for health workers and volunteering in
hospitals newly built for COVID-19 victims, we have been proud of
their considerable efforts. Fundraising has also stepped up during
lockdown, particularly during May when we took part in the 2.6
Challenge initiative, raising money for our global charity partner,
Renewable World.
Again we are reminded of how the pandemic has brought about
cultural shifts within weeks that might have taken years to
achieve. Adaptation to new technology, greater personal
responsibility for cyber security and more global
interconnectedness among colleagues succeeded quickly under
lockdown. This is a trend repeated across the insurance market and
particularly in London where ingrained ways of doing business have
been undone almost overnight.
Time apart has also reminded us of the value of meeting face to
face, and the ways in which we frequently help each other in the
small exchanges previously taken for granted or in healthy
boardroom debates. Personal interactions may be fewer even in the
long-term but perhaps more meaningful.
Our colleagues at Beazley have pulled together during 2020 to
support one another, overcome challenges and deliver consistent
service standards for clients and brokers. Ongoing investment that
is transforming how we work has enabled us to adapt and drive
growth as we navigate change.
In addition, we have received fantastic support from our broking
partners and the relationships we have with them and with our
insureds, have been crucial over the past few months. We have
always emphasised the importance of strong partnerships and the
last few months have further highlighted the benefit of forging
these.
The importance we place on being an agile and responsive
organisation has also been borne out in our pandemic response. We
understand the need for clear and timely communication and open
channels with our broker partners, particularly now. We have made
sure that brokers can speak to the right people and access the
information they need without undue delay. We have increased the
amount of informative content we have been sharing with our
partners.
Unsurprisingly our claims team was among the first to feel the
pressure of an additional workload during the pandemic. A 'Beazley
Citizen' initiative was quickly triggered to invite colleagues from
across the business with spare capacity to volunteer to support the
team. This call was answered by dozens of people who continue to
provide additional hands-on-deck administrative or technical
support, freeing up our dedicated claims specialists to apply their
expertise in the best possible ways. We have endeavoured to
maintain our high claims standards, pay claims quickly and where
there has not been coverage in place, to communicate the decision
swiftly and clearly.
Understanding clients' unique circumstances and providing clear
and current information, particularly on claims and points of
coverage, has been an important element of our service in this
pandemic. An early decision to implement a 60-day 'premium pause'
for any client was positively received. A subsequent option to
suspend a policy with agreement of the underwriter for an agreed
period has also been implemented to help to ease the financial
pressures of our clients in these very difficult times.
In responding to this crisis, the insurance industry faces
record losses on a par with major natural catastrophes. Having a
well-diversified portfolio means our COVID-19-related claims are
neither excessive nor restricted in any particular line of
business. We have estimated that Beazley's pandemic-related losses
will amount to $170m net of reinsurance split between political,
accident & contingency ($70m) and marine, property and
reinsurance ($100m). There is still uncertainty around how COVID-19
will impact liability lines of business.
We have increased the opening claim ratios for specialty lines
and cyber & executive risk over the last few years in
preparation for a likely recession. Both of these books are on a
claims made basis and we have been re-underwriting the more
recession prone lines of business to reduce the potential impact of
future claims. In the last recession, which affected our 2007 to
2010 underwriting years, we did not need to further increase our
claims ratios from where they opened.
We have long been mindful of the potential impact that systemic
issues have on our liability business. There are many examples of
the impact they can have including the DotCom crash, high profile
bankruptcies and the sub-prime crisis. Part of our mitigation
strategy is to protect the business with reinsurance which will
respond if overall losses in specialty lines and cyber &
executive risk reach a predetermined level. For the 2020
underwriting year, if the combination of claims arising from
COVID-19 and recession increased claims by around $10m we would
begin to recover under this reinsurance contract. The limit of this
contract is $140m of which we would bear 20% of any losses. The
reinsurance programme is a multiyear programme and has been
purchased for the 2021 underwriting year already.
As many businesses change their models to adapt to a new normal,
their risk management and risk transfer needs will change. We have
seen growth in areas that we were targeting before COVID-19
including e-sports and the rapidly expanding digital health space.
These sectors are far from unique in seeing growth during lockdown.
It is incumbent on our industry to ensure we are tuned into the
changing needs of our clients and to provide innovative solutions
that keep pace.
Keeping ahead of the curve in difficult times is not always
straightforward but we have continued to differentiate ourselves by
developing strong propositions for our clients throughout lockdown.
This includes the launch of several innovative products including
the roll-out in Canada, Spain and Singapore of virtual care, which
provides comprehensive cover for healthcare, lifestyle &
wellness and technology organisations in the rapidly expanding
digital health sector. We have also launched product recall and
media liability cover in the US, and media influencer liability
cover in the UK. Media liability insurance offers holistic
protection for the technology, media and cyber risks facing media
organisations from the traditional methods through to online
publishers, independent bloggers and influencers. In June we also
launched enhanced cyber and MediaTech policy wordings in Spain. In
addition we rolled out our myBeazley broker e-trading platform to
Singapore, enabling brokers to place smaller risks more
efficiently. We are also pleased to have continued attracting great
talent and making key underwriting and claims hires and promotions
in Asia Pacific, Europe and North America.
Our resolve to push forward in developing flexible and
innovative solutions where there are opportunities to add value
remains steadfast. Although faced with our own challenges, we must
demonstrate through our actions how our values and deep
understanding of risk enable us to continue to provide expert and
consistent service and support to our partners through this
tumultuous time.
The impacts of COVID-19 will remain long after the lockdown and
virus have subsided. Technological advancements, change in working
habits and economic recession are just a few of the areas which
will have a lasting legacy; some for the better and some for the
worse. However, with every challenge comes opportunities and by
utilising our key differentiators in our business model and
strategy we will be able to successfully navigate these impacts.
This approach has put us in good stead over the last six months,
rising to the unprecedented challenges which have crossed our path.
As a result, Beazley enters this unknown post-COVID-19 world in a
strong position, ready for the challenge of embracing the changes
which will inevitably arise in the future.
Diversified business
Interim results statement
Beazley achieved strong growth of 12% with premiums increasing
to $1,663.9m (2019: $1,483.6m) in the first half of 2020. High
volumes of claims arising from COVID-19 impacted lines, as well an
investment return of 1.4%, meant that a loss before tax of $13.8m
was recorded for the period (2019: profit of $166.4m). The combined
ratio for the first half of 2020 deteriorated to 107% (2019:
100%).
We are seeing pleasing growth in addition to rate change in many
areas, but at the same time have been taking a number of
underwriting actions, including withdrawal from classes of business
such as UK marine, as well as our recession planning actions. As
such, the 12% growth seen in the first half of 2020 is only
slightly ahead of the average rate change seen across the group of
11%. We also raised $292.6m of capital in May 2020, in part, to aid
our growth ambitions. This capital will be deployed in the areas we
see most growth opportunities and will allow us to build upon the
rate increases seen in the first half.
Growth was achieved across six of our seven divisions. Two areas
of significant growth were in our specialty lines and cyber &
executive risk divisions which saw increases of 15% and 21%
respectively driven by a strong performance from our US insurance
company.
Our marine division has made a strong start to the year, with
growth of 7% despite the withdrawal from our US trucking and UK
marine portfolios at the end of 2019 and the start of 2020
respectively. We currently see steady growth opportunities across
our cargo, hull and aviation lines, all of which have seen double
digit rate increases in 2020.
Our political, accident and contingency division, which has been
hardest hit due to the mass cancellation of events caused by
COVID-19, also saw growth of 3% writing gross premiums of $150.8m
(2019: $145.9m) driven primarily by our personal accident
business.
Our property division has seen strong growth in the second
quarter, bringing the year to date growth to 1%. This has primarily
been driven by our commercial property team, where rates have
continued to increase and we have increased our risk appetite.
The largest growth was seen in our newly formed market
facilities division with premiums increasing by 173%, albeit from a
small base. At the start of 2020 we took the decision to split out
this business from specialty lines into its own division. This new
division, under the leadership of Will Roscoe, underwrites entire
portfolios of business with the aim of offering a low cost
mechanism for placing follow business within the Lloyd's market.
The expense ratio for this business is expected to reduce as we
gain economies of scale from writing this business.
Our reinsurance division experienced a reduction in premium 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.
The total claims arising from COVID-19 are predicted by some to
be the largest insurance market losses of all time. Our estimated
share of this remains at $170m net of reinsurance, split between
our political, accident and contingency book ($70m) and our marine,
property and reinsurance books ($100m). 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.
Rating environment
Growth in gross premiums written has been supported by rate
increases across all of our divisions. On average rates have
increased by 11%. These increases are primarily due to the
recalibration seen across the market to the heightened claims
activity present since 2017. Primarily led by catastrophe losses,
the claims activity also includes the claims inflation experienced
in several of our liability lines which has been developing over
the last few years. COVID-19 has also had its part to play, with
many affected lines seeing a spike in the rates on the
renewals.
The following table shows the cumulative rate changes (%) since
2015 by business division.
2015 2016 2017 2018 2019 2020HY
Cyber and executive
risk 100 100 100 99 104 118
Marine 100 93 90 93 103 118
Market facilities - - - 100 103 116
Political, accident
& contingency 100 96 92 91 91 93
Property 100 96 96 106 117 135
Reinsurance 100 96 94 100 105 114
Specialty Lines 100 101 102 103 107 116
All divisions 100 98 97 100 106 118
Innovating change
The COVID-19 pandemic has demonstrated the need for robust
systems and processes, coupled with stable infrastructure to
facilitate remote working. I am pleased to see that our effort over
the past few years in building a platform and encouraging the
behaviours that enable colleagues to work remotely - through our
shift to activity-based working - has aided our transition from an
office based environment to a home based environment in the first
half of 2020.
I am a firm believer that a company is only as strong as its
people and am pleased to report that our staff took the change to
home working in their stride. Their dedication and resilience meant
we were able to continue to deliver for our stakeholders across the
globe. They also allowed us to facilitate the product innovation
which has become key to our business model.
In April 2020 we announced that we were introducing a new
product recall insurance policy for private enterprises within the
US. Our initial team of four are based in our Farmington office and
will focus on writing US SME business. As well as new products, we
have also looked at extending our reach by rolling out existing
products across more territories. This year we launched our virtual
care product in Canada, Spain and Singapore. The demand for virtual
care - from medical practitioners to health & wellness app
developers - has seen a steady increase year on year. This demand
has been further compounded by COVID-19 and the industry has seen
an explosion of both providers across the care spectrum.
Executive management changes
As mentioned in our March 2020 trading statement, Bethany
Greenwood took over from Mike Donovan as head of our cyber &
executive risk division in June 2020, and has also joined the
group's executive committee. Bethany joined Beazley in September
2019 and has already clearly demonstrated the expertise and skills
required to drive this division forward.
I would like to take this opportunity to thank Mike for his
leadership of the cyber & executive risk division and
dedication to Beazley over the past 16 years. Mike joined Beazley
in 2004 and led Beazley's global cyber and technology errors &
omissions underwriting business from its inception. In 2008, he
developed the Beazley Breach Response policy which became Beazley's
flagship product and the leading cyber offering in the market. Mike
has played an instrumental role in Beazley's growth in the US and
also across the group as a member of the executive committee since
2015.
Investment performance
30 June 30 June 30 June 30 June
2020 2020 2019 2019
$m % $m %
------------------------------------------------ ------- ------- ------- -------
Cash and cash equivalents 359.7 5.8 293.7 5.7
Fixed and floating rate debt securities
-Government, quasi-government and supranational 2,335.7 37.4 1,654.3 31.8
-Corporate bonds
- Investment grade 2,720.3 43.5 2,468.3 47.6
- High yield 169.1 2.7 143.9 2.8
-Senior secured loans - - 0.6 -
Syndicate loans 16.7 0.3 7.1 0.1
Derivative financial assets 10.2 0.1 3.0 0.1
------------------------------------------------ ------- ------- ------- -------
Core portfolio 5,611.7 89.8 4,570.9 88.1
------------------------------------------------ ------- ------- ------- -------
Equity funds 86.9 1.4 115.1 2.2
Hedge funds 340.1 5.4 285.8 5.5
Illiquid credit assets 211.3 3.4 219.8 4.2
------------------------------------------------ ------- ------- ------- -------
Capital growth assets 638.3 10.2 620.7 11.9
------------------------------------------------ ------- ------- ------- -------
Total 6,250.0 100.0 5,191.6 100.0
------------------------------------------------ ------- ------- ------- -------
Our investments returned $83.2m, or 1.4%, in the first half of
2020 (30 June 2019: $170.3m, 3.3%). This return is consistent with
expectations at the beginning of the year and hides the dramatic
financial market volatility we have seen in the interim. Falling
risk-free yields in the first quarter generated significant capital
gains on our fixed income exposures, but these were offset by the
losses arising from risk assets. Risk assets have recovered much of
their losses in the second quarter, while risk-free yields remained
low, so the earlier fixed income gains have driven the year to date
return. Looking ahead, available fixed income yields are very low
and likely to remain so in the medium term. More volatile asset
classes, including equities, look increasingly expensive in the
context of unprecedented economic weakness. We see elevated risks
of further market volatility and expect returns to be modest in the
remainder of the year. As such our investment strategy remains
cautious in the current environment.
Investment return by asset type
30 June 30 June
30 June 2020 30 June 2019
2020 annualised 2019 annualised
return return
$m % $m %
---------------------- ------- ----------- ------- -----------
Core portfolio 102.1 3.8 141.3 6.3
Capital growth assets (18.9) (5.5) 29.0 9.4
---------------------- ------- ----------- ------- -----------
Overall return 83.2 2.8 170.3 6.6
---------------------- ------- ----------- ------- -----------
Capital position
Our funding comes from a mixture of our own equity alongside
$547.0m of tier 2 subordinated debt. We also have a banking
facility of $450m (31 December 2019: $225m) of which, $225m has
been drawn down and placed as a letter of credit at Lloyd's to
support our Funds at Lloyd's (FAL).
30 June 30 June
2020 2019
$m $m
-------------------------------- ------- -------
Shareholders' funds 1,827.6 1,551.6
Tier 2 subordinated debt (2029) 298.1 -
Tier 2 subordinated debt (2026) 248.9 248.8
Retail bond (2019) - 95.3
-------------------------------- ------- -------
Total 2,374.6 1,895.7
-------------------------------- ------- -------
In May 2020, we successfully raised $292.6m of new capital
through a non-pre-emptive share issuance.
Projected
31 December 31 December
2020 2019
$m $m
------------------------------------------- ------------ -----------
Lloyd's economic capital requirement (ECR) 1,996.5 1,828.4
Capital for US insurance company 301.4 203.9
------------------------------------------- ------------ -----------
Total 2,297.9 2,032.3
------------------------------------------- ------------ -----------
At 30 June 2020, we have surplus capital of 22% of projected
year end ECR on a Solvency II basis (31 December 2019: 22%). This
capital surplus position allows for our increased expectation of
growth into 2021 as well as Solvency II adjustments which include
an allowance for future claims arising from COVID-19 and
recession.
Dividend
The board has taken the decision not to declare a dividend for
the first half of 2020. The board will assess the dividend for the
second half of 2020 based on the results of the company as at 31
December 2020.
Outlook
Rates continue to increase across a number of the lines of
business we currently write. We also see good growth opportunities
where we are seeking to write new business, particularly through
our European insurance company, Beazley Insurance dac, and US
insurance company, Beazley Insurance Company Inc, where the growth
year on year is 92% (excluding the internal reinsurance contract
with Beazley Underwriting Limited) and 33% respectively.
As we move into the second half of the year, we enter this
period with a strong balance sheet, bolstered by the capital raise
in May of $292.6m. This extra capital means we can continue to make
the most of the many planned growth opportunities present in the
market whilst ensuring we remain in a strong position to address
any developments in liability claims arising from COVID-19 in the
second half of the year.
This additional capital, and rate momentum, should allow us to
maintain low double digit top line growth by 31 December 2020. We
also anticipate that a full year combined ratio around 100% will be
achievable.
The events of the last six months have been unprecedented and a
number of changes have occurred, and will continue to occur.
However I believe that by keeping our stakeholders, whether that be
our insureds, our brokers, our employees or our shareholders at the
forefront of what we do at Beazley, we will be well-positioned to
adapt to face the challenges of an ever-changing post lockdown
world.
Andrew Horton
Chief executive officer
22 July 2020
Condensed consolidated statement of profit or loss for the six
months ended 30 June 2020
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2020 2019 2019
$m $m $m
Gross premiums written 1,663.9 1,483.6 3,003.9
Written premiums ceded to reinsurers (346.1) (258.1) (500.4)
--------------------------------------------- -------- -------- -------------
Net premiums written 1,317.8 1,225.5 2,503.5
Change in gross provision for unearned
premiums (202.6) (183.4) (184.5)
Reinsurer's share of change in the provision
for unearned premiums 118.6 75.9 28.0
--------------------------------------------- -------- -------- -------------
Change in net provision for unearned
premiums (84.0) (107.5) (156.5)
Net earned premiums 1,233.8 1,118.0 2,347.0
Net investment income 83.2 170.3 263.7
Other income 12.2 14.1 25.8
--------------------------------------------- -------- -------- -------------
95.4 184.4 289.5
Revenue 1,329.2 1,302.4 2,636.5
Insurance claims 1,195.8 834.1 1,842.5
Insurance claims recovered from reinsurers (326.7) (141.0) (390.0)
--------------------------------------------- -------- -------- -------------
Net insurance claims 869.1 693.1 1,452.5
Expenses for the acquisition of insurance
contracts 327.9 298.4 645.4
Administrative expenses 121.8 129.6 244.3
Foreign exchange loss/(gain) 5.5 3.7 (1.1)
--------------------------------------------- -------- -------- -------------
Operating expenses 455.2 431.7 888.6
Expenses 1,324.3 1,124.8 2,341.1
Results of operating activities 4.9 177.6 295.4
Finance costs (18.7) (11.2) (27.7)
(Loss)/profit before income tax (13.8) 166.4 267.7
--------------------------------------------- -------- -------- -------------
Income tax credit/(expense) 1.1 (27.8) (33.6)
--------------------------------------------- -------- -------- -------------
(Loss)/profit after income tax - all
attributable to equity shareholders (12.7) 138.6 234.1
--------------------------------------------- -------- -------- -------------
(Loss)/earnings per share (cents per
share):
Basic (2.2) 26.4 44.6
Diluted (2.2) 26.0 44.0
(Loss)/earnings per share (pence per
share):
Basic (1.7) 20.4 35.0
Diluted (1.7) 20.1 34.5
--------------------------------------------- -------- -------- -------------
Condensed consolidated statement of comprehensive income for the
six months ended 30 June 2020
6 months 6 months
ended ended
Year to
30 June 30 June 31 December
2020 2019 2019
$m $m $m
--------------------------------------------------- --------- --------- ------------
(Loss)/profit after income tax (12.7) 138.6 234.1
Other comprehensive income
Items that will never be reclassified to profit
or loss:
(Loss)/gain on remeasurement of retirement benefit
obligations (9.3) - 6.6
Income tax on defined benefit obligation 0.8 - (0.4)
Items that may be reclassified subsequently to
profit or loss:
Foreign currency translation differences (2.1) (0.4) 1.8
--------------------------------------------------- --------- --------- ------------
Total other comprehensive (expense)/income (10.6) (0.4) 8.0
--------------------------------------------------- --------- --------- ------------
Total comprehensive (expense)/income recognised (23.3) 138.2 242.1
--------------------------------------------------- --------- --------- ------------
Condensed consolidated statement of changes in equity for the
six months ended 30 June 2020
Foreign
currency
Share Share translation Other Retained
capital premium reserve reserves earnings Total
$m $m $m $m $m $m
-------------------------------- -------- --------- ------------ --------- --------- -------
Balance as at 1 January 2019 38.0 1.6 (95.9) 16.5 1,507.0 1,467.2
-------------------------------- -------- --------- ------------ --------- --------- -------
Total comprehensive income
recognised - - (0.4) - 138.6 138.2
Dividends paid - - - - (52.7) (52.7)
Equity settled share-based
payments - - - 4.5 - 4.5
Issue of shares 0.1 - - - - 0.1
Acquisition of own shares
held in trust - - - (6.9) - (6.9)
Tax on share option vestings - - - (0.7) 2.1 1.4
Transfer of shares to employees - - - (4.1) 3.9 (0.2)
-------------------------------- -------- --------- ------------ --------- --------- -------
Balance as at 30 June 2019 38.1 1.6 (96.3) 9.3 1,598.9 1,551.6
-------------------------------- -------- --------- ------------ --------- --------- -------
Total comprehensive income
recognised - - 2.2 - 101.7 103.9
Dividends paid - - - - (26.8) (26.8)
Equity settled share-based
payments - - - 0.2 - 0.2
Issue of shares - 1.6 - - - 1.6
Acquisition of own shares
held in trust - - - (6.9) - (6.9)
Tax on share option vestings - - - 1.7 0.5 2.2
Transfer of shares to employees - - - (0.7) 0.2 (0.5)
-------------------------------- -------- --------- ------------ --------- --------- -------
Balance as at 31 December
2019 38.1 3.2 (94.1) 3.6 1,674.5 1,625.3
Total comprehensive expense
recognised - - (2.1) - (21.2) (23.3)
Dividends paid - - - - (50.2) (50.2)
Equity settled share-based
payments - - - 1.2 - 1.2
Equity raise(1) 4.8 - - - 287.8 292.6
Acquisition of own shares
held in trust - - - (13.6) - (13.6)
Tax on share option vestings - - - - (5.5) (5.5)
Transfer of shares to employees - 0.1 - 4.9 (3.9) 1.1
Balance as at 30 June 2020 42.9 3.3 (96.2) (3.9) 1,881.5 1,827.6
-------------------------------- -------- --------- ------------ --------- --------- -------
1 During the six months to 30 June 2020, the group raised
$292.6m through a share issuance via a cash box structure. Merger
relief under the Companies Act 2006, section 612 was available, and
thus no share premium was recognised. As the redemption of the cash
box entity's shares was in the form of cash, the transaction was
treated as qualifying consideration and the premium is therefore
considered to be immediately distributable and can be recognised
within retained earnings. The funds raised are net of issuance
costs
Condensed consolidated statement of financial position as at 30
June 2020
30 June 30 June 31 December
2020 2019 2019
$m $m $m
------------------------------------- ------- ------- -----------
Assets
Intangible assets 123.3 120.7 122.2
Plant and equipment 12.9 7.3 8.9
Right of use assets 52.0 40.1 35.9
Deferred tax asset 41.5 29.2 41.0
Investments in associates - - 0.1
Deferred acquisition costs 391.7 356.6 350.7
Reinsurance assets 1,649.4 1,243.3 1,338.2
Retirement benefit asset - - 5.4
Financial assets at fair value 5,890.3 4,897.9 5,572.8
Insurance receivables 1,258.6 1,107.6 1,048.0
Other receivables 86.9 76.3 72.0
Cash and cash equivalents 359.7 293.7 278.5
------------------------------------- ------- ------- -----------
Total assets 9,866.3 8,172.7 8,873.7
------------------------------------- ------- ------- -----------
Equity
Share capital 42.9 38.1 38.1
Share premium 3.3 1.6 3.2
Foreign currency translation reserve (96.2) (96.3) (94.1)
Other reserves (3.9) 9.3 3.6
Retained earnings 1,881.5 1,598.9 1,674.5
------------------------------------- ------- ------- -----------
Total equity 1,827.6 1,551.6 1,625.3
------------------------------------- ------- ------- -----------
Liabilities
Insurance liabilities 6,697.9 5,657.8 6,059.0
Financial liabilities 554.9 353.8 554.8
Lease liabilities 55.7 43.2 39.4
Retirement benefit liability 2.8 1.1 -
Deferred tax liabilities 20.3 7.8 19.5
Current income tax liabilities 3.6 7.6 9.3
Other payables 703.5 549.8 566.4
------------------------------------- ------- ------- -----------
Total liabilities 8,038.7 6,621.1 7,248.4
------------------------------------- ------- ------- -----------
Total equity and liabilities 9,866.3 8,172.7 8,873.7
------------------------------------- ------- ------- -----------
Condensed consolidated statement of cash flows for the six
months ended 30 June 2020
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2020 2019 2019
$m $m $m
--------------------------------------------- --------- --------- -------------
Cash flow from operating activities
(Loss)/profit before income tax (13.8) 166.4 267.7
Adjustments for:
Amortisation of intangibles 8.2 6.2 14.1
Equity settled share based compensation 2.3 4.5 4.7
Net fair value gain on financial investments (25.5) (116.2) (151.6)
Depreciation of plant and equipment 1.6 1.0 2.4
Depreciation of right of use assets 5.2 4.9 10.1
Impairment of reinsurance assets (written
back)/recognised (1.7) (2.5) 1.5
Increase in insurance and other liabilities 768.9 306.2 722.8
Increase in insurance, reinsurance and
other receivables (531.5) (235.0) (265.0)
Increase in deferred acquisition costs (41.0) (49.2) (43.3)
Financial income (60.5) (60.3) (120.9)
Finance expense 18.7 11.2 27.7
Foreign exchange of financial liabilities - (0.4) (3.2)
Income tax paid (1.1) (1.2) (6.8)
Net cash from operating activities 129.8 35.6 460.2
Cash flow from investing activities
Purchase of plant and equipment (4.0) (1.2) (6.3)
Expenditure on software development (10.0) (3.2) (12.3)
Purchase of investments (3,355.0) (1,911.2) (4,824.5)
Proceeds from sale of investments 3,063.0 1,853.2 4,125.3
Interest and dividends received 57.0 55.8 112.0
--------------------------------------------- --------- --------- -------------
Net cash used in investing activities (249.0) (6.6) (605.8)
Cash flow from financing activities
Acquisition of own shares in trust (13.6) (6.9) (13.8)
Finance costs (17.6) (10.3) (25.8)
Payment of lease liabilities (6.8) (5.6) (10.8)
Issuance of debt - - 297.8
Equity raise 292.6 - -
Repayment of borrowings - - (92.6)
Issuance of shares - 0.1 1.7
Dividends paid (50.2) (52.7) (79.5)
--------------------------------------------- --------- --------- -------------
Net cash from/(used in) financing activities 204.4 (75.4) 77.0
--------------------------------------------- --------- --------- -------------
Net increase/(decrease) in cash and cash
equivalents 85.2 (46.4) (68.6)
Cash and cash equivalents at beginning
of period 278.5 336.3 336.3
Effect of exchange rate changes on cash
and cash equivalents (4.0) 3.8 10.8
--------------------------------------------- --------- --------- -------------
Cash and cash equivalents at end of period 359.7 293.7 278.5
--------------------------------------------- --------- --------- -------------
1 Statement of accounting policies
Beazley plc is a company incorporated in England and Wales and
is resident for tax purposes in the United Kingdom. The condensed
consolidated interim financial statements of the group for the six
months ended 30 June 2020 comprise the parent company, its
subsidiaries and the group's interest in associates.
The condensed consolidated interim financial statements have
been prepared and approved by the directors in accordance with IAS
34 Interim Financial Reporting as adopted by the EU ('Adopted
IFRS'). The majority of the principal risks and uncertainties faced
by the group remain consistent with those risks and uncertainties
faced at year end 31 December 2019. These risks are discussed and
disclosed on pages 44 to 50 of the group's 2019 annual report and
accounts.
In the first half of 2020 COVID-19 has added an additional layer
of uncertainty to several of the principle risks. A risk assessment
of the impact which COVID-19 has had on the business is disclosed
in note 11 and note 12. The disclosure addresses the impact of
COVID-19 on the business for the six months ended 30 June 2020.
The financial information included in this document does not
comprise statutory financial statements within the meaning of the
Companies Act 2006.
The preparation of condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. The potential impact of COVID-19 on the group has been
considered in the preparation of the interim financial statements
including our evaluation of critical accounting estimates and
judgements. Actual results may differ from these estimates. The
significant judgements made by management in applying the group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements as at, and for, the year ended 31 December 2019.
The annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the EU. As required by the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority, the
condensed set of financial statements has been prepared applying
the accounting policies and presentation that were applied in the
preparation of the company's published consolidated financial
statements for the year ended 31 December 2019.
The independent auditor's report on the group accounts for the
year ended 31 December 2019 is unqualified, does not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and does not
include a statement under s.498(2) or (3) of the Companies Act
2006.
In the current year, the group have applied amendments to IFRS
issued by the IASB that are mandatorily effective for an accounting
period that begins on or after 1 January 2020. None of the
amendments issued by the IASB have had an impact to the group.
Going concern
The condensed consolidated interim financial statements of
Beazley plc have been prepared on a going concern basis. The
directors of the company have a reasonable expectation that the
group and the company have adequate resources to continue in
operational existence for the foreseeable future. The principal
risks and uncertainties faced by the group remain consistent
with those risks and uncertainties discussed and disclosed on
pages 44 to 50 of the group's 2019 annual report and accounts.
The group continues to monitor and respond to the global
COVID-19 outbreak, in particular in relation to the impact on the
group that is expected to relate to claims on the business
previously written. The current assessment is an exposure of $170m
net of reinsurance across our political, accident and contingency,
property, marine and reinsurance divisions. It is too early to say
what the quantum of claims within our liability classes will be as
these will emerge as the impact of the pandemic is fully realised
over the next few years. The group has taken a number of
underwriting actions which should reduce this impact. The group's
investment portfolio at 31 December 2019 was heavily weighted
toward government issued and investment grade corporate debt,
however the group took further action throughout the first quarter
of 2020 to reduce its exposures to equities and to lengthen the
duration of the investment portfolio as a whole. The group expects
this action will help reduce the impact of the current market
volatility on the group.
The capital raised from the share issuance in May 2020
($292.6m), while predominantly held to better position the business
for future growth opportunities, also provides additional strength
to the balance sheet in light of the continued uncertainty from
COVID-19.
The directors are mindful of the risks associated with COVID-19
and have a plan in place to ensure the continuation of the group's
operations during COVID-19 and we have no reason to believe it will
impact the going concern of the company.
2 Segmental analysis
Segment information is presented in respect of reportable
segments. This is based on the group's management and internal
reporting structures and represents the level at which financial
information is reported to the board, being the chief operating
decision maker as defined in IFRS 8.
Finance costs and taxation have not been allocated to operating
segments as these items are determined by group level factors and
do not relate to operating performance.
Cyber Political,
& executive accident
risk Market & Specialty
Marine facilities contingency Property Reinsurance lines Total
30 June 2020 $m $m $m $m $m $m $m
--------------- -------------- ------- ------------ ----------- -------- ----------- --------- ---------
Gross premiums written 419.6 176.3 60.7 150.8 233.5 151.0 472.0 1,663.9
Net premiums written 360.7 153.8 17.5 110.8 183.8 92.1 399.1 1,317.8
Net earned premiums 367.9 141.3 12.1 97.0 177.5 50.8 387.2 1,233.8
Net investment income 24.1 5.4 0.4 5.4 8.5 5.1 34.3 83.2
Other income 2.8 0.5 - 0.6 2.2 1.0 5.1 12.2
------------------------ ----- ------- ------------ ----------- -------- ----------- --------- ---------
Revenue 394.8 147.2 12.5 103.0 188.2 56.9 426.6 1,329.2
Net insurance
claims 217.3 87.9 3.5 116.7 194.8 27.8 221.1 869.1
Expenses for the
acquisition of
insurance
contracts 79.1 39.1 8.1 36.5 48.4 15.1 101.6 327.9
Administrative
expenses 31.1 11.4 2.2 12.1 17.3 5.2 42.5 121.8
Foreign exchange
loss 1.6 0.7 0.1 0.5 0.8 0.2 1.6 5.5
------------------- ---------- ------- ------------ ----------- -------- ----------- --------- ---------
Expenses 329.1 139.1 13.9 165.8 261.3 48.3 366.8 1,324.3
Segment result 65.7 8.1 (1.4) (62.8) (73.1) 8.6 59.8 4.9
Finance costs (18.7)
------------------- ---------- ------- ------------ ----------- -------- ----------- --------- ---------
Loss before income
tax (13.8)
Income tax credit 1.1
Loss after income
tax (12.7)
------------------------ ----- ------- ------------ ----------- -------- ----------- --------- ---------
Claims ratio 59% 62% 29% 120% 110% 55% 57% 71%
Expense ratio 30% 36% 85% 50% 37% 40% 37% 36%
Combined ratio 89% 98% 114% 170% 147% 95% 94% 107%
Segment assets and liabilities
Segment assets 2,624.0 681.8 174.3 747.5 1,147.2 824.2 3,667.3 9,866.3
Segment
liabilities (2,061.0) (600.3) (166.1) (641.8) (917.5) (670.0) (2,982.0) (8,038.7)
--------------- -------------- ------- ------------ ----------- -------- ----------- --------- ---------
Net assets 563.0 81.5 8.2 105.7 229.7 154.2 685.3 1,827.6
--------------- -------------- ------- ------------ ----------- -------- ----------- --------- ---------
Cyber
& executive
risk Political,
accident
& Specialty
Market
facilities
Marine 1 contingency Property Reinsurance lines Total
30 June 2019 $m $m $m $m $m $m $m
----------------- ------------- ------- ------------- -------------- -------- ----------- --------- ---------
Gross premiums
written 348.1 165.1 22.2 145.9 230.9 161.4 410.0 1,483.6
Net premiums
written 303.9 138.4 9.5 126.0 180.7 97.8 369.2 1,225.5
Net earned
premiums 296.1 134.2 5.6 109.4 176.8 57.2 338.7 1,118.0
Net investment
income 50.2 14.4 - 8.7 19.3 11.3 66.4 170.3
Other income 3.5 0.6 - 0.7 2.3 0.5 6.5 14.1
----------------- ------------- ------- ------------- --------- ------------- ----------- --------- ---------
Revenue 349.8 149.2 5.6 118.8 198.4 69.0 411.6 1,302.4
Net insurance
claims 186.1 91.6 2.4 56.0 90.6 55.3 211.1 693.1
Expenses for the
acquisition of
insurance
contracts 62.7 39.4 3.5 35.0 52.1 17.9 87.8 298.4
Administrative
expenses 33.1 13.8 1.4 11.3 19.4 6.9 43.7 129.6
Foreign exchange
loss 1.0 0.4 - 0.4 0.6 0.2 1.1 3.7
----------------- ------------- ------- ------------- --------- ------------- ----------- --------- ---------
Expenses 282.9 145.2 7.3 102.7 162.7 80.3 343.7 1,124.8
Segment result 66.9 4.0 (1.7) 16.1 35.7 (11.3) 67.9 177.6
Finance costs (11.2)
----------------- ------------- ------- ------------- --------- ------------- ----------- --------- ---------
Profit before
income
tax 166.4
Income tax
expense (27.8)
Profit after
income
tax 138.6
----------------- ------------- ------- ------------- --------- ------------- ----------- --------- ---------
Claims ratio 63% 68% 43% 51% 51% 97% 62% 62%
Expense ratio 32% 40% 87% 43% 41% 43% 39% 38%
Combined ratio 95% 108% 130% 94% 92% 140% 101% 100%
Segment assets
and
liabilities
Segment assets 2,116.7 704.7 37.9 496.3 880.7 721.6 3,214.8 8,172.7
Segment
liabilities (1,710.5) (586.0) (30.6) (397.3) (723.4) (559.7) (2,613.6) (6,621.1)
----------------- ------------- ------- ------------- --------- ------------- ----------- --------- ---------
Net assets 406.2 118.7 7.3 99.0 157.3 161.9 601.2 1,551.6
----------------- ------------- ------- ------------- --------- ------------- ----------- --------- ---------
1 From 1 January 2020, the market facilities business has been
split out of the specialty lines division to form a separate
division. The prior year comparatives have been re-presented to
allow comparison.
Cyber
& executive
risk Political,
accident
& Specialty
Market
facilities
Marine 1 contingency Property Reinsurance lines Total
31 December 2019 $m $m $m $m $m $m $m
------------------ ----------- --------- -------------- -------------- ---------- --------------- ----------- ---------
Gross premiums
written 823.0 306.4 60.5 272.7 428.7 206.0 906.6 3,003.9
Net premiums
written 712.2 222.1 22.3 245.8 365.6 123.0 812.5 2,503.5
Net earned
premiums 644.5 222.2 15.1 237.4 361.8 123.0 743.0 2,347.0
Net investment
income 76.8 21.8 0.9 13.0 28.7 17.0 105.5 263.7
Other income 6.2 1.3 - 1.7 5.1 1.2 10.3 25.8
------------------ ----------- --------- -------------- -------------- ---------- ---------- ---------------- ---------
Revenue 727.5 245.3 16.0 252.1 395.6 141.2 858.8 2,636.5
Net insurance
claims 395.7 126.8 5.5 110.5 207.3 144.6 462.1 1,452.5
Expenses for the
acquisition
of insurance
contracts 143.2 82.4 9.9 76.4 110.3 30.6 192.6 645.4
Administrative
expenses 62.2 27.8 1.8 24.1 34.9 14.3 79.2 244.3
Foreign exchange
loss (0.2) (0.1) - (0.1) (0.2) (0.1) (0.4) (1.1)
------------------ ----------- --------- -------------- -------------- ---------- ---------- ---------------- ---------
Expenses 600.9 236.9 17.2 210.9 352.3 189.4 733.5 2,341.1
Segment result 126.6 8.4 (1.2) 41.2 43.3 (48.2) 125.3 295.4
Finance costs (27.7)
------------------ --------------- --------- --------------- ------------- ------------ ---------------------- ---------
Profit before
income
tax 267.7
Income tax expense (33.6)
Profit after
income
tax 234.1
------------------ --------------- --------- --------------- ------------- ------------ ------------- ------- ---------
Claims ratio 61% 57% 36% 47% 57% 118% 62% 62%
Expense ratio 32% 50% 78% 42% 40% 36% 37% 38%
Combined ratio 93% 107% 114% 89% 97% 154% 99% 100%
Segment assets and
liabilities
Segment assets 2,481.2 633.3 68.1 479.0 976.5 767.5 3,468.1 8,873.7
Segment
liabilities (1,980.5) (560.8) (60.8) (385.0) (772.2) (630.5) (2,858.6) (7,248.4)
------------------ ----------- --------- -------------- -------------- ---------- ---------- ---------------- ---------
Net assets 500.7 72.5 7.3 94.0 204.3 137.0 609.5 1,625.3
------------------ ----------- --------- -------------- -------------- ---------- ---------- ---------------- ---------
1 From 1 January 2020, the market facilities business has been
split out of the specialty lines division to form a separate
division. The prior year comparatives have been re-presented to
allow comparison.
3 Net investment income
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2020 2019 2019
$m $m $m
------------------------------------------------ -------- -------- ------------
Interest and dividends on financial investments
at fair value through profit or loss 60.4 60.1 120.6
Interest on cash and cash equivalents 0.2 0.2 0.3
Net realised (losses)/gains on financial
investments at fair value through profit
or loss (0.1) 8.1 21.5
Net unrealised fair value gains on financial
investments at fair value
through profit or loss 25.6 108.1 130.1
------------------------------------------------ -------- -------- ------------
Investment income from financial investments 86.1 176.5 272.5
Investment management expenses (2.9) (6.2) (8.8)
------------------------------------------------ -------- -------- ------------
83.2 170.3 263.7
------------------------------------------------ -------- -------- ------------
4 Other income
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2020 2019 2019
$m $m $m
------------------- -------- -------- ------------
Commission income 11.6 10.5 21.2
Profit commissions (1.0) 2.0 1.0
Agency fees 1.5 1.3 2.5
Other income 0.1 0.3 1.1
------------------- -------- -------- ------------
12.2 14.1 25.8
------------------- -------- -------- ------------
As at 30 June 2020 there is nil (30 June 2019: nil; 31 December
2019: nil) accrued profit commission at risk of being reversed if
there was to be an adverse impact on syndicate 623's profit.
As at 30 June 2020 $1.0m of previously recognised profit
commissions from business written by Beazley Canada Limited prior
to acquisition by Beazley in 2017 was reversed due to adverse
impacts on profit.
5 Finance costs
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2020 2019 2019
$m $m $m
------------------------------------------ -------- -------- ------------
Interest expense on financial liabilities 17.6 10.5 25.8
Interest expense on lease liabilities 1.1 0.7 1.9
------------------------------------------ -------- -------- ------------
18.7 11.2 27.7
------------------------------------------ -------- -------- ------------
The increase in interest expense on financial liabilities is due
to the issuance of $300m of tier 2 subordinated debt in September
2019, as well as increasing the banking facility from $225m to
$450m in the first half of 2020. These increases were partially
offset by redemption of a $75m retail bond in September 2019.
6 (Loss)/earnings per share
6 months 6 months Year to
ended ended 31 December
30 June 30 June 2019
2020 2019 $m
---------------- -------- -------- ------------
Basic (cents) (2.2) 26.4 44.6
Diluted (cents) (2.2) 26.0 44.0
Basic (pence) (1.7) 20.4 35.0
Diluted (pence) (1.7) 20.1 34.5
---------------- -------- -------- ------------
Basic
Basic earnings per share are calculated by dividing loss after
income tax of $12.7m (30 June 2019: profit of $138.6m; 31 December
2019: profit of $234.1m) by the weighted average number of shares
in issue during the six months of 573.6m (30 June 2019: 525.0m; 31
December 2019: 525.1 m). The shares held in the Employee Share
Options Plan (ESOP) of 3.9m (30 June 2019: 3.9 m; 31 December 2019:
4.8m) have been excluded from the calculation until such time as
they vest unconditionally with the employees.
Diluted
Diluted earnings per share are calculated by dividing loss after
income tax of $12.7m (30 June 2019: profit of $138.6m; 31 December
2019: profit of $234.1m) by the adjusted weighted average number of
shares of 579.0m (30 June 2019: 533.4m; 31 December 2019: 532.4 m).
The adjusted weighted average number of shares assumes conversion
of dilutive potential ordinary shares, being shares from the SAYE
(Save As You Earn), retention and deferred share schemes. The
shares held in the ESOP of 3.9m (30 June 2019: 3.9m; 31 December
2019: 4.8m) have been excluded from the calculation until such time
as they vest unconditionally with the employees.
7 Dividends
The board has taken the decision not to declare a first interim
dividend in respect of the six months to 30 June 2020 (2019:
4.1p).
A second interim dividend of 8.2p per ordinary share was paid on
30 March 2020 to shareholders registered at 5.00pm on 28 February
2020 in respect of the six months ended 31 December 2019. No
special dividend was declared for 2019.
8 Income tax (credit)/expense
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2020 2019 2019
$m $m $
-------------------------------------------------- -------- -------- ------------
Current tax expense
Current year 9.2 32.3 38.8
Prior year adjustments (4.8) (2.1) (4.0)
-------------------------------------------------- -------- -------- ------------
4.4 30.2 34.8
Deferred tax expense
Origination and reversal of temporary differences (5.7) (3.7) 2.3
Impact of change in UK tax rates (0.7) (0.3) (0.5)
Prior year adjustments 0.9 1.6 (3.0)
-------------------------------------------------- -------- -------- ------------
(5.5) (2.4) (1.2)
-------------------------------------------------- -------- -------- ------------
Income tax (credit)/expense (1.1) 27.8 33.6
-------------------------------------------------- -------- -------- ------------
Reconciliation of tax expense
The weighted average of statutory tax rates applied to the
(losses)/profits earned in each country in which the group operates
is 23.9% (30 June 2019: 16.6%), whereas the tax charged for the
period ending 30 June 2020 as a percentage of (loss)/profit before
tax is 8.0% (30 June 2019: 16.7%). The reasons for the difference
are explained below:
6 months 6 months 6 months 6 months
ended ended ended ended Year to Year to
30 June 30 June 30 June 30 June 31 December 31 December
2020 2020 2019 2019 2019 2019
$m % $m % $m %
------------------------------- -------- -------- -------- -------- ------------ ------------
(Loss)/profit before tax (13.8) 166.4 267.7
Tax calculated at the weighted
average of statutory tax
rates 3.3 (23.9) 27.7 16.6 40.3 15.0
------------------------------- -------- -------- -------- -------- ------------ ------------
Effects of:
Non-deductible expenses 0.2 (1.4) 0.9 0.6 1.5 0.6
Non-taxable gains on foreign
exchange - - 0.6 0.4 - -
Tax relief on share based
payments - current and
future years - - (0.6) (0.4) (0.7) (0.3)
Over provided in prior
years (3.9) 28.3 (0.5) (0.3) (7.0) (2.6)
Change in UK tax rates(1) (0.7) 5.0 (0.3) (0.2) (0.5) (0.1)
------------------------------- -------- -------- -------- -------- ------------ ------------
(Credit)/charge for the
period (1.1) 8.0 27.8 16.7 33.6 12.6
------------------------------- -------- -------- -------- -------- ------------ ------------
1 A change to the main UK corporation tax rate, announced in the
Budget on 11 March 2020, was substantively enacted on 17 March
2020. The rate applicable from 1 April 2020 now remains at 19
percent, rather than the previously enacted reduction to 17
percent. The 19 percent tax rate has been reflected in the
calculation of the deferred tax balances as at 30 June 2020.
The group has assessed the potential impact of the diverted
profits tax (DPT) following the enactment of new legislation in
April 2015 and is of the view that no liability arises. The
ultimate outcome may differ and any profits that did fall within
the scope of the DPT would potentially be taxed at a rate of 25%
rather than 12.5% (the current rate of tax on corporate earnings in
Ireland). The earnings that would potentially be taxed at 25% are
the relevant earnings from 2015 to 2020. The relevant earnings are
determined in relation to 75% of the profits and losses in
Beazley's syndicates potentially starting with a proportion of the
profits on the 2013, 2014 and 2015 years of account and 75% of all
profits and losses in Beazley's syndicates on years of account from
2016 onwards.
A new Tax Act (the Tax Cuts and Jobs Act) was signed into law in
the US in December 2017. The Tax Act includes base erosion
anti-avoidance tax provisions (the "BEAT"). We have performed an
assessment for our intra-group transactions potentially in scope of
BEAT. The application of this new BEAT legislation is still
uncertain for some types of transaction and we are keeping
developments under review. With support from external advisors, we
believe that the BEAT impact on the group is not significant. For
the six months ended 30 June 2020 $0.5m was provided in the group
accounts for BEAT liabilities (for the year ended 2019 the group
paid BEAT tax of $1.9m). The ultimate outcome may differ and if any
additional amounts did fall within the scope of BEAT, incremental
tax at 10% might arise on some or all of those amounts.
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting
period and not recognised in net profits or loss or other
comprehensive income but directly debited or credited to
equity:
2020 HY 2019 HY 2019 FY
$m $m $m
----------------------------------- ------- ------- -------
Current tax: share based payments (1.3) (2.1) (2.6)
Deferred tax: share based payments 6.8 0.7 (1.0)
----------------------------------- ------- ------- -------
5.5 (1.4) (3.6)
----------------------------------- ------- ------- -------
9 Financial assets and liabilities
30 June 30 June 31 December
2020 2019 2019
$m $m $m
---------------------------------------------- ------- ------- -----------
Financial assets at fair value
Government issued 2,335.7 1,629.5 1,870.9
Quasi-government - 17.2 -
Supranational - 7.6 -
Senior secured loans - 0.6 -
Corporate bonds
- Investment grade 2,720.3 2,468.3 2,698.4
- High yield 169.1 143.9 235.8
Syndicate loans 16.7 7.1 8.0
---------------------------------------------- ------- ------- -----------
Total fixed and floating rate debt securities
and syndicate loans 5,241.8 4,274.2 4,813.1
---------------------------------------------- ------- ------- -----------
Equity funds 86.9 115.1 163.6
Hedge funds 340.1 285.8 354.0
Illiquid credit assets 211.3 219.8 216.6
---------------------------------------------- ------- ------- -----------
Total capital growth 638.3 620.7 734.2
---------------------------------------------- ------- ------- -----------
Total financial investments at fair value
through statement of profit or loss 5,880.1 4,894.9 5,547.3
Derivative financial assets 10.2 3.0 25.5
---------------------------------------------- ------- ------- -----------
Total financial assets at fair value 5,890.3 4,897.9 5,572.8
---------------------------------------------- ------- ------- -----------
Quasi-government securities include securities which are issued
by non-sovereign entities but which have an explicit sovereign
guarantee. Supranational securities are issued by institutions
sponsored by more than one sovereign issuer. Investment corporate
bonds are rated BBB-/Baa3 or higher by at least one major rating
agency, while high yield corporate bonds have lower credit ratings.
Senior secured loans are tradeable, floating rate debt obligations
of corporate issuers, with credit ratings of BB+/Ba1 or below.
Hedge funds are investment vehicles pursuing alternative investment
strategies, structured to have minimal correlation to traditional
asset classes. Equity funds are investment vehicles which invest in
equity securities and provide diversified exposure to global equity
markets. Illiquid credit assets are investment vehicles that
predominantly target private lending opportunities, often with
longer investment horizons. The fair value of these assets at 30
June 2020 excludes an unfunded commitment of $67.3m (30 June 2019:
$72.9m). Syndicate loans have been introduced and collected by
Lloyd's of London to support underwriting at Lloyd's Brussels on
the 2019 and 2020 years of account.
The amount expected to mature before and after one year are:
30 June 30 June 31 December
2020 2019 2019
$m $m $m
---------------- ------- ------- -----------
Within one year 1,383.9 871.9 1,037.3
After one year 3,868.1 3,405.3 3,801.3
---------------- ------- ------- -----------
Total 5,252.0 4,277.2 4,838.6
---------------- ------- ------- -----------
Our capital growth assets have no defined maturity dates and
have thus been excluded from the above maturity table. However,
$86.9m (30 June 2019: $115.1m) of equity funds could be liquidated
within two weeks, $277.5m (30 June 2019: $213.8m) of hedge fund
assets within six months and the remaining $62.6m (30 June 2019:
$72.0m) of hedge fund assets within 18 months, in normal market
conditions. Illiquid credit assets are not readily realisable and
principal will be returned over the life of these assets, which may
be up to 12 years.
30 June 30 June 31 December
2020 2019 2019
Financial liabilities $m $m $m
----------------------------------------------- ------- ------- -----------
Retail bond - 95.3 -
Tier 2 subordinated debt (2029) 298.1 - 297.9
Tier 2 subordinated debt (2026) 248.9 248.8 248.9
Derivative financial liabilities 7.9 9.7 8.0
----------------------------------------------- ------- ------- -----------
Total financial liabilities 554.9 353.8 554.8
----------------------------------------------- ------- ------- -----------
30 June 30 June 31 December
2020 2019 2019
The amount expected to mature before and after
one year are: $m $m $m
----------------------------------------------- ------- ------- -----------
Within one year 7.9 105.0 8.0
After one year 547.0 248.8 546.8
----------------------------------------------- ------- ------- -----------
Total 554.9 353.8 554.8
----------------------------------------------- ------- ------- -----------
Valuation hierarchy
The table below summarises financial assets carried at fair
value using a valuation hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value
hierarchy has the following levels:
Level 1 - Valuations based on quoted prices in active markets
for identical instruments. An active market is a market in which
transactions for the instrument occur with sufficient frequency and
volume on an ongoing basis such that quoted prices reflect prices
at which an orderly transaction would take place between market
participants at the measurement date. Included within level 1 are
bonds, treasury bills of government and government agencies,
corporate bonds and equity funds which are measured based on quoted
prices in active markets.
Level 2 - Valuations based on quoted prices in markets that are
not active, or based on pricing models for which significant inputs
can be corroborated by observable market data (e.g. interest rates
and exchange rates). Included within level 2 are government bonds
and treasury bills, equity funds and corporate bonds, which are not
actively traded, hedge funds and senior secured loans.
Level 3 - Valuations based on inputs that are unobservable or
for which there is limited market activity against which to measure
fair value.
The availability of financial data can vary for different
financial assets and is affected by a wide variety of factors,
including the type of financial instrument, whether it is new and
not yet established in the marketplace, and other characteristics
specific to each transaction. To the extent that valuation is based
on models or inputs that are unobservable in the market, the
determination of fair value requires more judgement. Accordingly
the degree of judgement exercised by management in determining fair
value is greatest for instruments classified in level 3. The group
uses prices and inputs that are current as of the measurement date
for valuation of these instruments.
If the inputs used to measure the fair value of an asset or a
liability could be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire
measurement.
The group has an established control framework and valuation
policy with respect to the measurement of fair values.
Level 2 investments
For the group's level 2 debt securities our fund administrator
obtains the prices used in the valuation from independent pricing
vendors such as Bloomberg, Standard & Poor's, Reuters, Markit
and International Data Corporation. The independent pricing vendors
derive an evaluated price from observable market inputs. The market
inputs include trade data, two-sided markets, institutional bids,
comparable trades, dealer quotes, news media, and other relevant
market data. These inputs are verified in their pricing engines and
calibrated with the pricing models to calculate spread to
benchmarks, as well as other pricing assumptions such as Weighted
Average life (WM), Discount Margins (DM), Default rates, and
recovery and prepayments assumptions for mortgage securities. While
such valuations are sensitive to estimates, it is believed that
changing one or more of the assumptions to reasonably possible
alternative assumptions would not change the fair value
significantly.
The group records the unadjusted price provided and validates
the price through various tolerance checks, such as comparison with
prices provided by investment custodians and investment managers,
to assess the reasonableness and accuracy of the price to be used
to value each security. In the rare case that a price fails the
tolerance test, it is escalated and discussed internally. We would
not normally override a price retrospectively, but we would work
with the administrator and pricing vendor to investigate the
difference. This generally results in the vendor updating their
inputs. We also review our valuation policy on a regular basis to
ensure it is fit for purpose. As at 30 June 2020, no adjustments
have been made to the prices obtained from the independent
sources.
For our hedge funds and equity funds, the pricing and valuation
of each fund is undertaken by administrators in accordance with
each underlying fund's valuation policy. For the equity funds, the
individual fund prices are published on a daily, weekly or monthly
basis via Bloomberg and other market data providers such as
Reuters. For the hedge funds, the individual fund prices are
communicated by the administrators to all investors via the monthly
investor statements. The fair value of the hedge fund and equity
fund portfolios are calculated by reference to the underlying net
asset values of each of the individual funds.
Additional information is obtained from fund managers relating
to the underlying assets within individual hedge funds. We
identified that 82% (30 June 2019: 83%, 31 December 2019: 83%) of
these underlying assets were level 1 and the remainder level 2.
This enables us to categorise our hedge fund as level 2.
Prior to any new hedge fund investment, extensive due diligence
is undertaken on each fund to ensure that pricing and valuation is
undertaken by an independent administrator and that each fund's
valuation policy is appropriate for the financial instruments the
manager will be employing to execute the investment strategy. Fund
liquidity terms are reviewed prior to the execution of any
investment to ensure that there is no mismatch between the
liquidity of the underlying fund assets and the liquidity terms
offered to fund investors. As part of the monitoring process,
underlying fund subscriptions and redemptions are assessed by
reconciling the increase or decrease in fund assets with the
investment performance in any given period.
Level 3 investments
The group's level 3 investments consist of a diversified
portfolio of illiquid credit fund investments managed by third
party managers (generally closed ended limited partnerships or open
ended funds). While the funds provide full transparency on their
underlying investments, the investments themselves are
predominantly in private and unquoted instruments and are therefore
classified as level 3 investments. Although there have been no
additional fund commitments made in 2020 to date, existing funds
that are in their investment period continue to draw down capital,
whilst funds that are in their harvest period distribute capital as
the underlying investments are realised.
The valuation techniques used by the fund managers to establish
the fair value of the underlying private/unquoted investments may
incorporate discounted cash flow models or a more market based
approach, whilst the main inputs might include discount rates,
fundamental pricing multiples, recent transaction prices, or
comparable market information to create a benchmark multiple.
We take the following steps to ensure accurate valuation of
these level 3 assets. A substantial part of the pre-investment due
diligence process is dedicated to a comprehensive review of each
fund's valuation policy and the internal controls of the manager.
In addition to this, confirmation that the investment reaches a
minimum set of standards relating to the independence of service
providers, corporate governance, and transparency is sought prior
to approval. Post investment, quarterly capital statements are
reviewed to ensure consistency between audited and unaudited
valuations and compare the updated values to the estimated figures
used in previous valuations in order to highlight and explain any
discrepancies. Particular emphasis is placed on identifying assets
that have been either marked up or down, as well as whether any
specific assets are at particular risk due to prevailing
economic/market conditions. The review also involves regular
conversations with the managers and industry sources, particularly
in times of market stress. Audited financial statements are
received and reviewed on an annual basis, with the valuation of
each transaction being confirmed.
For the group's annual and interim accounts, we use the latest
fund valuation statements, which are typically as at the previous
quarter or month end. To ensure that values are materially correct
at the reporting date, all fund managers are contacted to confirm
whether there has been a material impairment to the fund valuations
since the most recent valuation date. In the event that a manager
confirms a material impairment since the latest valuation date, we
would make a downwards revision to the value of our fund holding
based on the manager's assessment. Furthermore, during major stress
events in public financial markets (defined as >10% fall in
leveraged loan market indices), such as the macroeconomic
uncertainty caused by COVID-19, we would consider adjusting the
valuations of all level 3 fund holdings to account for material
impairment in the valuation between the latest valuation date and
the reporting date. The magnitude and breadth of any broader
portfolio impairment would be dependent on the specific
situation.
The following table shows the fair values of financial assets
and financial liabilities, including their levels in the fair value
hierarchy.
Level
Level 1 Level 2 3 Total
30 June 2020 $m $m $m $m
----------------------------------------- ------- ------- ----- -------
Financial assets measured at fair value
Government issued 2,263.1 72.6 - 2,335.7
Corporate bonds
- Investment grade 1,647.8 1,072.5 - 2,720.3
- High yield 164.6 4.5 - 169.1
Syndicate loans - - 16.7 16.7
Equity funds 82.0 4.9 - 86.9
Hedge funds - 340.1 - 340.1
Illiquid credit assets - - 211.3 211.3
Derivative financial assets 10.2 - - 10.2
----------------------------------------- ------- ------- ----- -------
Total financial assets measured at fair
value 4,167.7 1,494.6 228.0 5,890.3
----------------------------------------- ------- ------- ----- -------
Financial liabilities measured at fair
value
Derivative financial liabilities 7.9 - - 7.9
----------------------------------------- ------- ------- ----- -------
Financial liabilities not measured at
fair value
Tier 2 subordinated debt (2029) - 310.9 - 310.9
Tier 2 subordinated debt (2026) - 262.5 - 262.5
----------------------------------------- ------- ------- ----- -------
Total financial liabilities not measured
at fair value - 573.4 - 573.4
----------------------------------------- ------- ------- ----- -------
Level
Level 1 Level 2 3 Total
30 June 2019 $m $m $m $m
----------------------------------------- ------- ------- ----- -------
Financial assets measured at fair value
Government issued 1,626.2 3.3 - 1,629.5
Quasi-government 9.2 8.0 - 17.2
Supranational 7.6 - - 7.6
Senior secured loans 0.6 - - 0.6
Corporate bonds
- Investment grade 1,460.8 1,007.5 - 2,468.3
- High yield 4.5 139.4 - 143.9
Syndicate loans 7.1 - - 7.1
Equity funds - 115.1 - 115.1
Hedge funds - 285.8 - 285.8
Illiquid credit assets - - 219.8 219.8
Derivative financial assets 3.0 - - 3.0
----------------------------------------- ------- ------- ----- -------
Total financial assets measured at fair
value 3,119.0 1,559.1 219.8 4,897.9
----------------------------------------- ------- ------- ----- -------
Financial liabilities measured at fair
value
----------------------------------------- ------- ------- ----- -------
Derivative financial liabilities 9.7 - - 9.7
----------------------------------------- ------- ------- ----- -------
Financial liabilities not measured at
fair value
Retail bond - 96.1 - 96.1
Tier 2 subordinated debt - 249.9 - 249.9
----------------------------------------- ------- ------- ----- -------
Total financial liabilities not measured
at fair value - 346.0 - 346.0
----------------------------------------- ------- ------- ----- -------
Level
Level 1 Level 2 3 Total
31 December 2019 $m $m $m $m
----------------------------------------- ------- ------- ----- -------
Financial assets measured at fair value
Government issued 1,839.1 31.8 - 1,870.9
Corporate bonds
- Investment grade 1,244.1 1,454.3 - 2,698.4
- High yield - 235.8 - 235.8
Syndicate loans - 8.0 - 8.0
Equity funds - 163.6 - 163.6
Hedge funds - 354.0 - 354.0
Illiquid credit assets - - 216.6 216.6
Derivative financial assets 25.5 - - 25.5
----------------------------------------- ------- ------- ----- -------
Total financial assets measured at fair
value 3,108.7 2,247.5 216.6 5,572.8
----------------------------------------- ------- ------- ----- -------
Financial liabilities measured at fair
value
----------------------------------------- ------- ------- ----- -------
Derivative financial liabilities 8.0 - - 8.0
----------------------------------------- ------- ------- ----- -------
Financial liabilities not measured at
fair value
Tier 2 subordinated debt (2029) - 318.6 - 318.6
Tier 2 subordinated debt (2026) - 276.8 - 276.8
----------------------------------------- ------- ------- ----- -------
Total financial liabilities not measured
at fair value - 595.4 - 595.4
----------------------------------------- ------- ------- ----- -------
The table above does not include financial assets and
liabilities that are, in accordance with the group's accounting
policies, recorded at amortised cost, if the carrying amount of
these financial assets and liabilities approximates their fair
values at the reporting date. Cash and cash equivalents have not
been included in the table above; however, the full amount of cash
and cash equivalents would be classified under level 2 in both the
current and prior year.
Transfers
The group determines whether transfers have occurred between
levels in the fair value hierarchy by assessing categorisation at
the end of the reporting period.
For the period ended 30 June 2020, enhanced understanding of
vendor pricing methodologies and the purchase of a new valuation
tool in 2019 have provided better quality data used in determining
the fair value hierarchy classification, which has resulted in the
following transfers between level 1,2 & 3 for the period ended
30 June 2020:
Level Level
1 2
30 June 2020 vs 30 June 2019 transfer from level 1
to level 2 $m $m
--------------------------------------------------- ------- -----
- Investment grade (491.7) 491.7
- Government issued (71.9) 71.9
- High yield (4.5) 4.5
--------------------------------------------------- ------- -----
Level Level
1 2
30 June 2020 vs 30 June 2019 transfer from level 2
to level 1 $m $m
--------------------------------------------------- ----- -------
- Investment grade 395.2 (395.2)
- Equity funds 66.7 (66.7)
--------------------------------------------------- ----- -------
Level Level
1 3
30 June 2020 vs 30 June 2019 transfer from level 1
to level 3 $m $m
--------------------------------------------------- ----- -----
Syndicate loans (7.6) 7.6
--------------------------------------------------- ----- -----
The values shown in the transfer tables above are translated at
foreign exchange rate as at 30 June 2020.
Level Level
1 2
30 June 2020 vs 31 December 2019 transfer from level
1 to level 2 $m $m
----------------------------------------------------- ------- -----
- Investment grade (367.0) 367.0
- Government issued (24.5) 24.5
----------------------------------------------------- ------- -----
Level Level
1 2
30 June 2020 vs 31 December 2019 transfer from level
2 to level 1 $m $m
----------------------------------------------------- ----- -------
- Investment grade 600.9 (600.9)
- Equity funds 66.7 (66.7)
- High yield 142.4 (142.4)
----------------------------------------------------- ----- -------
Level Level
2 3
30 June 2020 vs 31 December 2019 transfer from level
2 to level 3 $m $m
----------------------------------------------------- ----- -----
Syndicate loans (7.6) 7.6
----------------------------------------------------- ----- -----
The values shown in the transfer tables above are translated at
foreign exchange rate as at 30 June 2020.
Level 3 investment reconciliations
The table below shows a reconciliation from the opening balances
to the closing balances of level 3 fair values. The total net
unrealised losses recognised in the profit or loss of $4.7m (30
June 2019: gain of $4.9 m) is included in the net investment income
number of $83.2m (30 June 2019: $170.3m) shown in the condensed
consolidated statement of profit or loss.
30 June 30 June 31 December
2020 2019 2019
$m $m $m
----------------------------------------------- ------- ------- -----------
As at 1 January 216.6 186.6 186.6
Purchases 28.7 50.7 68.9
Sales (20.2) (22.4) (48.0)
Transfer from level 2 7.6 - -
Total net unrealised (losses)/gains recognised
in profit or loss (4.7) 4.9 9.1
----------------------------------------------- ------- ------- -----------
As at period end 228.0 219.8 216.6
----------------------------------------------- ------- ------- -----------
Unconsolidated structured entities
A structured entity is defined as an entity that has been
designed so that voting or similar rights are not the dominant
factor in deciding who controls the entity, such as when any voting
rights relate to administrative tasks only, or when the relevant
activities are directed by means of contractual arrangements. As
part of its standard investment activities the group holds
investments in high yield bond funds, equity funds, hedge funds and
illiquid credit assets which in accordance with IFRS 12 are
classified as unconsolidated structured entities. The group does
not sponsor any of the unconsolidated structured entities. The
assets classified as unconsolidated structured entities are held at
fair value on the statement of financial position.
The investments comprising the group's unconsolidated structured
entities are as follows:
30 June 30 June 31 December
2020 2019 2019
$m $m $m
---------------------------------------------- ------- ------- -----------
High yield 169.1 143.9 235.8
Equity funds 86.9 115.1 163.6
Hedge funds 340.1 285.8 354.0
Illiquid credit assets 211.3 219.8 216.6
---------------------------------------------- ------- ------- -----------
Investments through unconsolidated structured
entities 807.4 764.6 970.0
---------------------------------------------- ------- ------- -----------
Currency exposures
The currency exposures of our financial assets held at fair
value are detailed below:
UK GBP CAD $ EURO EUR Subtotal US $ Total
30 June 2020 $m $m $m $m $m $m
----------------------------- ------ ----- -------- -------- ------- -------
Financial assets at fair
value
Fixed and floating rate debt
securities 12.4 211.1 - 223.5 5,001.6 5,225.1
Syndicate loans 16.7 - - 16.7 - 16.7
Equity funds - - - - 86.9 86.9
Hedge funds - - - - 340.1 340.1
Illiquid credit assets 5.3 - 27.4 32.7 178.6 211.3
Derivative financial assets - - - - 10.2 10.2
----------------------------- ------ ----- -------- -------- ------- -------
Total 34.4 211.1 27.4 272.9 5,617.4 5,890.3
----------------------------- ------ ----- -------- -------- ------- -------
UK GBP CAD $ EURO EUR Subtotal US $ Total
30 June 2019 $m $m $m $m $m $m
---------------------------- ------ ----- -------- -------- ------- -------
Financial assets at fair
value
Fixed and floating rate
debt securities 13.2 194.4 - 207.6 4,059.5 4,267.1
Syndicate loans 7.1 - - 7.1 - 7.1
Equity funds - - 26.4 26.4 88.7 115.1
Hedge funds - - - - 285.8 285.8
Illiquid credit assets 0.6 - 21.7 22.3 197.5 219.8
Derivative financial assets - - - - 3.0 3.0
---------------------------- ------ ----- -------- -------- ------- -------
Total 20.9 194.4 48.1 263.4 4,634.5 4,897.9
---------------------------- ------ ----- -------- -------- ------- -------
UK GBP CAD $ EURO EUR Subtotal US $ Total
31 December 2019 $m $m $m $m $m $m
----------------------------- ------ ----- -------- -------- ------- -------
Financial assets at fair
value
Fixed and floating rate debt
securities 13.7 198.8 - 212.5 4,592.6 4,805.1
Syndicate loans 8.0 - - 8.0 - 8.0
Equity funds - - 28.1 28.1 135.5 163.6
Hedge funds - - - - 354.0 354.0
Illiquid credit assets 4.8 - 25.9 30.7 185.9 216.6
Derivative financial assets - - - - 25.5 25.5
----------------------------- ------ ----- -------- -------- ------- -------
Total 26.5 198.8 54.0 279.3 5,293.5 5,572.8
----------------------------- ------ ----- -------- -------- ------- -------
The above qualitative and quantitative disclosures along with
the risk management disclosure included in note 2 of the annual
report for the year ending 31 December 2019, enables more
comprehensive evaluation of Beazley's exposure to risks arising
from financial instruments.
10 Cash and cash equivalents
30 June 30 June 31 December
2020 2019 2019
$m $m $m
-------------------------------------------------- ------- ------- -----------
Cash at bank and in hand 312.0 281.4 276.9
Short-term deposits and highly liquid investments 47.7 12.3 1.6
-------------------------------------------------- ------- ------- -----------
359.7 293.7 278.5
-------------------------------------------------- ------- ------- -----------
Total cash and cash equivalents include $9.4m (31 December 2019:
$9.8m) held in Lloyd's Singapore trust accounts. These funds are
only available for use by the group to meet local claim and expense
obligations.
11 Insurance claims
The loss development tables below provide information about
historical claims development by the seven segments - cyber &
executive risk, market facilities, marine, political, accident
& contingency, property, reinsurance and specialty lines. The
tables are by underwriting year which in our view provides the most
transparent reserving basis. We have supplied tables for both
ultimate gross claims ratios and ultimate net claims ratios.
The top part of the table illustrates how the group's estimated
claims ratio for each underwriting year has changed at successive
year ends.
While the information in the tables provide a historical
perspective on the adequacy of the claims liabilities established
in previous years, users of these financial statements are
cautioned against extrapolating past redundancies or deficiencies
on current claims liabilities. The group believes that the
estimates of total claims liabilities as at 30 June 2020 are
adequate. However, due to inherent uncertainties in the reserving
process, it cannot be assured that such balances will ultimately
prove to be adequate.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Gross ultimate
claims 2010ae % % % % % % % % % % Total
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Cyber & executive risk
12 months 75.3 71.9 71.4 66.6 64.9 62.3 59.7 61.3 62.1
24 months 74.5 72.1 71.7 66.9 64.9 62.2 61.4 62.2
36 months 79.6 69.4 71.4 63.7 59.6 58.9 56.9
48 months 77.5 64.1 69.0 64.9 55.0 58.5
60 months 78.5 62.1 66.8 69.5 56.8
72 months 70.9 59.8 63.3 68.2
84 months 74.3 59.1 63.4
96 months 76.8 58.0
108 months 78.8
Position
at
30 June
2020 79.0 58.0 62.4 68.6 59.5 57.8 56.9 60.8 62.7
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Marine
12 months 54.5 55.9 56.5 57.5 56.7 59.5 68.1 61.9 60.0
24 months 47.3 46.3 52.0 46.8 54.0 70.4 62.4 68.2
36 months 38.9 34.7 44.4 47.0 47.3 65.4 61.7
48 months 33.6 32.2 42.7 46.6 45.4 63.9
60 months 35.2 31.4 42.1 55.5 43.2
72 months 31.6 30.6 41.4 52.9
84 months 30.8 29.9 40.2
96 months 29.3 29.7
108 months 29.2
Position
at
30 June
2020 29.2 29.8 39.0 52.1 42.8 63.6 59.2 67.9 61.1
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Market
facilities
12 months - - - - - - - 65.9 72.9
24 months - - - - - - - 66.1
36 months - - - - - - -
48 months - - - - - -
60 months - - - - -
72 months - - - -
84 months - - -
96 months - -
108 months -
Position
at
30 June
2020 - - - - - - - 58.7 72.9
-------- --------- -------- --------- --------- -------- -------- ---------- ----------
Political, accident & contingency
12 months 57.5 60.0 59.1 59.2 59.8 61.3 57.9 59.1 57.3
24 months 44.5 54.4 49.4 51.2 58.7 54.3 49.2 55.1
36 months 44.1 51.2 44.9 46.9 57.0 49.2 45.9
48 months 39.2 48.9 43.8 50.1 57.7 47.7
60 months 37.5 45.8 45.9 51.4 53.7
72 months 35.4 45.1 45.7 52.6
84 months 34.9 44.1 45.5
96 months 35.0 44.1
108 months 35.0
Position
at
30 June
2020 34.8 43.9 45.8 52.6 53.0 47.4 46.2 70.7 122.4
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Property
12 months 58.1 55.4 55.1 53.2 55.0 58.9 72.5 63.4 53.1
24 months 50.3 47.4 49.1 47.7 49.0 68.4 88.7 63.1
36 months 47.7 39.7 45.7 41.3 45.9 71.3 91.3
48 months 45.9 36.6 45.7 40.6 44.8 71.7
60 months 45.1 36.1 45.6 39.7 43.7
72 months 43.9 35.5 47.3 40.1
84 months 43.4 35.4 46.6
96 months 43.0 36.7
108 months 43.0
Position
at
30 June
2020 43.1 37.7 46.6 40.5 44.2 72.4 91.4 65.7 66.1
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Reinsurance
12 months 79.2 62.9 59.1 61.5 65.9 67.0 124.9 95.2 101.8
24 months 77.7 37.6 45.3 33.7 33.7 41.5 117.5 123.9
36 months 69.4 32.2 42.7 31.1 25.7 40.4 130.4
48 months 65.7 31.3 41.3 27.8 25.5 41.2
60 months 62.9 31.3 38.3 27.6 25.4
72 months 62.7 31.0 38.1 27.1
84 months 57.9 31.1 37.2
96 months 57.9 30.7
108 months 58.4
Position
at
30 June
2020 58.3 30.7 37.1 27.2 24.7 41.1 134.0 123.4 77.8
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Specialty
lines
12 months 75.5 75.1 74.8 70.0 69.7 67.8 65.8 68.4 66.5
24 months 76.0 75.2 74.3 69.7 70.1 67.7 65.9 68.8
36 months 74.7 73.9 74.1 66.1 68.8 64.9 66.0
48 months 74.3 74.2 69.5 62.1 68.0 63.2
60 months 71.6 70.8 64.3 58.5 69.9
72 months 68.6 69.7 62.2 56.1
84 months 64.7 69.1 61.5
96 months 62.7 71.6
108 months 60.9
Position
at
30 June
2020 60.8 71.7 61.2 55.2 76.1 60.6 64.6 68.2 67.0
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Total
12 months 67.2 64.6 63.8 62.2 62.7 63.3 70.5 66.7 64.9
24 months 62.7 58.2 59.3 55.8 58.4 62.9 71.5 69.5
36 months 60.3 53.2 56.4 52.5 54.5 60.6 71.5
48 months 57.8 51.0 54.4 51.5 52.4 59.9
60 months 56.8 49.1 52.4 52.7 52.7
72 months 53.7 48.1 51.5 51.9
84 months 52.4 47.4 50.9
96 months 52.2 48.2
108 months 51.8
Position
at
30 June
2020 51.8 48.5 50.4 51.7 54.9 59.1 71.0 70.4 70.5
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Total ultimate
losses ($m) 8,619.7 996.1 964.4 1,104.0 1,207.3 1,271.5 1,563.2 1,943.4 2,206.7 2,475.5 2,546.0 24,897.8
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Less paid
claims ($m) (8,406.4) (909.6) (869.5) (958.2) (1,070.0) (986.1) (1,104.9) (1,142.0) (842.6) (359.6) (106.1) (16,755.0)
Less unearned
portion of
ultimate
losses ($m) - - - - - - - - (21.4) (286.2) (2,041.9) (2,349.5)
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Gross claims
liabilities
(100% level)
($m) 213.3 86.5 94.9 145.8 137.3 285.4 458.3 801.4 1,342.7 1,829.7 398.0 5,793.3
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Less unaligned
share ($m) (41.6) (15.0) (17.5) (22.1) (22.7) (55.4) (68.7) (131.4) (200.2) (269.0) (54.4) (898.0)
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
Gross claims
liabilities,
group share
($m) 171.7 71.5 77.4 123.7 114.6 230.0 389.6 670.0 1,142.5 1,560.7 343.6 4,895.3
--------------- --------- ------- ------- -------- --------- -------- --------- --------- -------- -------- ---------- ----------
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Net ultimate
claims 2010ae % % % % % % % % % % Total
------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------ ---------------
Cyber &
executive
risk
12 months 72.8 69.1 67.3 64.1 61.3 59.8 58.2 58.6 60.2
24 months 72.0 67.9 67.0 64.6 61.1 59.8 59.2 60.5
36 months 72.8 65.0 65.8 62.4 57.0 56.4 55.6
48 months 70.4 59.6 62.2 61.3 51.2 56.6
60 months 71.2 58.6 59.9 65.7 52.4
72 months 67.5 56.2 57.4 64.9
84 months 69.9 55.6 56.9
96 months 71.7 54.6
108 months 74.0
Position
at
30 June
2020 73.9 53.8 56.0 64.9 52.9 54.6 55.5 59.6 61.0
Marine
12 months 55.5 55.4 56.0 56.4 56.7 56.7 57.6 59.4 56.5
24 months 47.5 46.0 53.2 48.4 52.5 62.6 61.5 67.8
36 months 38.5 37.4 47.5 46.5 47.1 61.5 61.8
48 months 34.3 35.0 45.9 45.5 46.7 62.1
60 months 35.3 33.9 45.3 46.7 45.4
72 months 32.1 33.2 44.7 44.9
84 months 31.1 32.8 42.6
96 months 30.0 32.6
108 months 30.0
Position
at
30 June
2020 29.9 32.7 42.1 44.6 45.1 61.7 60.6 70.4 57.6
------------------ --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------ ---------------
Market
facilities
12 months - - - - - - - 38.5 26.8
24 months - - - - - - - 39.2
36 months - - - - - - -
48 months - - - - - -
60 months - - - - -
72 months - - - -
84 months - - -
96 months - -
108 months -
Position
at
30 June
2020 - - - - - - - 34.7 26.8
------------------ --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------ ---------------
Political, accident & contingency
12 months 54.8 58.6 58.6 56.9 57.5 60.2 56.9 58.3 56.6
24 months 45.1 52.5 50.9 49.8 56.1 53.2 48.6 54.1
36 months 45.3 49.8 47.3 44.9 55.2 49.6 45.0
48 months 42.1 46.8 44.7 49.9 54.5 47.1
60 months 40.0 43.7 45.2 50.4 51.5
72 months 37.9 42.9 45.4 51.4
84 months 37.4 42.4 45.5
96 months 37.4 42.7
108 months 37.6
Position
at
30 June
2020 37.5 42.5 45.7 51.4 51.2 46.8 44.7 58.2 78.4
------------------ --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------ ---------------
Property
12 months 60.2 58.5 56.7 54.5 55.0 57.6 76.5 64.5 56.4
24 months 57.6 52.9 56.3 51.1 50.2 69.6 94.0 66.7
36 months 53.5 45.9 52.2 44.2 46.8 71.4 95.8
48 months 50.2 41.2 50.1 42.8 44.7 70.8
60 months 48.9 40.6 49.9 41.9 44.4
72 months 47.8 40.1 51.6 42.9
84 months 47.5 39.9 51.7
96 months 47.3 41.4
108 months 47.2
Position
at
30 June
2020 47.5 42.2 51.6 43.1 44.8 71.1 94.4 69.0 67.1
------------------ --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------ ---------------
Reinsurance
12 months 90.1 67.0 57.1 58.9 61.4 60.5 107.3 84.5 87.2
24 months 87.9 45.6 52.0 37.5 34.2 38.7 93.8 99.5
36 months 80.1 39.2 48.6 33.7 24.2 38.1 105.7
48 months 74.6 37.8 47.1 30.8 24.1 39.9
60 months 72.3 37.8 43.5 30.5 24.3
72 months 72.3 37.5 43.2 30.1
84 months 67.0 37.5 42.3
96 months 67.0 37.1
108 months 67.7
Position
at
30 June
2020 67.8 37.1 42.2 30.1 23.9 40.7 109.2 98.2 74.6
------------------ --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------ ---------------
Specialty lines
12 months 72.3 71.9 70.9 67.4 65.7 65.5 63.8 66.1 64.5
24 months 72.6 72.0 70.3 67.0 66.2 65.5 63.6 67.0
36 months 71.2 70.7 70.4 64.5 64.0 61.3 63.5
48 months 69.1 69.0 64.5 59.7 59.3 56.7
60 months 69.5 66.8 59.5 56.4 59.7
72 months 69.4 67.1 58.2 55.0
84 months 66.8 66.8 57.9
96 months 65.5 68.2
108 months 64.2
Position
at
30 June
2020 64.2 68.3 57.6 54.2 62.0 53.6 60.0 66.3 65.0
------------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------ ---------------
Total
12 months 67.0 64.0 62.2 60.7 60.1 60.7 66.2 63.6 61.8
24 months 63.5 58.3 60.2 56.1 56.5 61.0 68.0 66.2
36 months 60.1 53.7 57.4 52.5 52.7 58.8 68.0
48 months 57.0 50.7 54.2 50.9 49.7 57.4
60 months 56.6 49.3 52.1 51.0 49.6
72 months 55.0 48.6 51.5 50.5
84 months 53.8 48.3 50.9
96 months 53.4 48.8
108 months 53.4
Position
at
30 June
2019 53.4 48.8 50.6 50.3 50.3 56.1 66.7 66.6 64.8
------------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ----------- ----------
Total ultimate
losses ($m) 6,145.6 863.3 840.8 928.3 990.2 1,031.4 1,182.1 1,544.3 1,610.0 1,899.8 1,934.2 18,970.0
------------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ----------- ----------
Less paid
claims ($m) (5,988.7) (799.7) (766.0) (831.2) (884.6) (823.6) (896.8) (900.4) (563.6) (331.3) (104.2) (12,890.1)
Less unearned
portion of
ultimate
losses ($m) - - - - - - - - (8.9) (230.8) (1,546.4) (1,786.1)
------------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ----------- ----------
Net claims
liabilities
(100% level)
($m) 156.9 63.6 74.8 97.1 105.6 207.8 285.3 643.9 1,037.5 1,337.7 283.6 4,293.8
------------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ----------- ----------
Less unaligned
share ($m) (29.8) (11.9) (13.7) (17.8) (19.0) (35.9) (48.6) (98.5) (151.3) (194.9) (38.4) (659.8)
------------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ----------- ----------
Net claims
liabilities,
group share
($m) 127.1 51.7 61.1 79.3 86.6 171.9 236.7 545.4 886.2 1,142.8 245.2 3,634.0
------------------- --------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ----------- ----------
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 2020 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 the
table.
Cyber & executive risk
All years continue to perform well with the 2016 underwriting
year releasing as claims experience crystalises.
Marine
Releases continue on older underwriting years as the risks
expire. The 2018 underwriting year saw an overall strengthening net
of reinsurance driven by the marine hull account, and the 2019 saw
adverse development in the UK marine book which is currently in run
off.
Market facilities
The loss development tables are presented gross of acquisition
costs. Due to the market facilities division being significantly
reinsured and this reinsurance being ceded net of acquisition
costs, the net of reinsurance loss development values are much
lower than the gross of reinsurance. The release on the 2018
underwriting year arises as the risk expires.
Political, accident & contingency
This division has been significantly affected by COVID-19
claims. The contingency, accident and life classes have been
strengthened on the 2019 underwriting years. The contingency class
benefits from clash reinsurance, causing this effect to be less
pronounced net of reinsurance.
Property
The mature underwriting years continue to see adverse
development from the construction and engineering book, which is
now in run off. There was strengthening in commercial property on
the 2018 underwriting year, and the increase on the 2019
underwriting year is caused by COVID-19 experience.
Reinsurance
Favourable development on established catastrophes has led to
positive reductions on the 2018 and 2019 underwriting years. The
increase in 2017 is due to a reduction in expectation for further
reinsurance premiums relating to the catastrophes within that
year.
Specialty lines
The 2015 underwriting year continues to see claims development
in excess of expectations, however this year is now recovering
under aggregate excess of loss reinsurance programmes so the effect
is lower net of reinsurance. Other underwriting years continue to
release as the risks expire.
Claims releases
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 segment and period.
The net of reinsurance claims release on 2019 and prior
underwriting years totalled $58.6m (2019: $3.4m). We saw a
significant overall release on the 2017 and earlier years of
account driven by releases of $39.6m and $13.6m on our specialty
lines and cyber & executive risk divisions respectively. Both
our political, accident and contingency division and our property
division saw overall strengthenings at 30 June 2020. Our political,
accident and contingency division strengthened by $2.2m on the 2018
underwriting year and by $5.9m on the 2019 underwriting year. The
property team saw strengthening on both the 2017 and 2018
underwriting years driven by deterioration on engineering claims
and adverse large loss experience from 2018 catastrophes. Our
reinsurance division saw an overall release of $18.1m driven by a
large release of $16.2m on the 2019 underwriting year due to a
reduction in the overall estimate for Typhoons Hagibis and Faxai
claims.
Historically our reserves have been within the range of 5-10%
above our actuarial estimates, which themselves include some margin
for uncertainty. The margin held above actuarial estimate was 7.0%
at 30 June 2020 (30 June 2019: 5.2%).
The movements shown on 2017 and earlier are absolute claim
movements and are not impacted by any current year movements on
premium on those underwriting years.
Cyber Political,
& accident
executive Market & Specialty
6 months ended 30 risk Marine facilities contingency Property Reinsurance lines Total
June 2020 $m $m $m $m $m $m $m $m
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Current year 230.0 88.1 3.8 109.0 188.5 45.9 262.4 927.7
Prior year
- 2017 and earlier (13.6) (5.8) - (0.4) 6.9 2.1 (39.6) (50.4)
- 2018 underwriting
year 3.9 5.3 (0.3) 2.2 3.6 (4.0) (1.0) 9.7
- 2019 underwriting
year (3.0) 0.3 - 5.9 (4.2) (16.2) (0.7) (17.9)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
(12.7) (0.2) (0.3) 7.7 6.3 (18.1) (41.3) (58.6)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Net insurance claims 217.3 87.9 3.5 116.7 194.8 27.8 221.1 869.1
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Cyber Political,
& accident
executive Market & Specialty
6 months ended 30 risk Marine facilities contingency Property Reinsurance lines Total
June 2019 $m $m $m $m $m $m $m $m
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Current year 187.2 84.6 2.4 60.2 93.7 33.4 235.0 696.5
Prior year
- 2016 and earlier (2.9) (5.4) - (1.4) (3.7) 1.8 (23.4) (35.0)
- 2017 underwriting
year (0.9) 8.2 - (3.5) 3.3 10.4 (0.4) 17.1
- 2018 underwriting
year 2.7 4.2 - 0.7 (2.7) 9.7 (0.1) 14.5
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
(1.1) 7.0 - (4.2) (3.1) 21.9 (23.9) (3.4)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Net insurance claims 186.1 91.6 2.4 56.0 90.6 55.3 211.1 693.1
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- ------
Cyber Political,
& accident
executive Market & Specialty
Year to 31 December risk Marine facilities contingency Property Reinsurance lines Total
2019 $m $m $m $m $m $m $m $m
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
Current year 405.1 120.4 5.4 127.3 190.2 114.5 499.1 1,462.0
Prior year
- 2016 and earlier 4.3 (11.1) - (6.6) 9.3 (3.6) (34.2) (41.9)
- 2017 underwriting
year (13.2) 6.1 - (7.8) 8.4 17.4 (3.4) 7.5
- 2018 underwriting
year (0.5) 11.4 - (2.4) (0.6) 16.3 0.7 24.9
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
(9.4) 6.4 - (16.8) 17.1 30.1 (36.9) (9.5)
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
Net insurance claims 395.7 126.8 5.4 110.5 207.3 144.6 462.2 1,452.5
--------------------- ---------- ------ ----------- ------------ -------- ----------- --------- -------
12 Risk management - COVID-19
Operational risk
The operational risks are consistent with those disclosed within
the 2019 annual report on pages 162 to 163. COVID-19 has caused a
temporary shift in the operational strategy of Beazley from an
office based environment to a completely remote working
environment. This has meant that internal processes, capability of
people and systems have been put to the test. The group have
adapted to the changes in the operational environment and business
processes have continued to be carried out. The group continues to
actively manage the operational risks, while engaging in open
communication with staff. The group also continues to regularly
monitor the performance of its controls through the risk management
reporting process.
Insurance risk
The insurance risks are consistent with those disclosed within
the 2019 annual report on pages 155 to 159. The group assesses its
insurance risk and runs various realistic disaster scenarios (RDS)
to monitor exposure to catastrophe risk. The group believes that
the largest individual RDS modelled is higher than the net impact
of COVID-19.
Credit risk
The credit risks are consistent with those disclosed within the
2019 annual report on pages 163 to 165. COVID-19 has caused
economic disruption around the world with many businesses and
individuals forced to cease business activity in light of
government lockdowns. As a result the risk that counterparties fail
to meet their financial obligations as they fall due has
increased.
As at 30 June 2020, the group has not seen an increase in
defaults but continues to monitor this closely.
The group has offered extended credit terms between 30 and 60
days to a number of its insured to aid them during this challenging
time.
To assist in the understanding of credit risks, A.M. Best,
Moody's and Standard & Poor's (S&P) ratings are used. These
ratings have been categorised below as used for Lloyd's
reporting:
A.M. Best Moody's S&P
------ --------- ------- --------
A++ to Aaa to AAA to
Tier 1 A- A3 A-
B++ to Baa1 to BBB+ to
Tier 2 B- Ba3 BB-
C++ to B1 to B+ to
Tier 3 C- Caa CCC
D, E, Ca to R, (U,S)
Tier 4 F, S C 3
------ --------- ------- --------
The following tables summarise the group's concentrations of
credit risk:
Tier 1 Tier 2 Tier 3 Tier 4 Unrated Total
30 June 2020 $m $m $m $m $m $m
----------------------------------- ------- ------ ------ ------ ------- -------
Financial assets at fair
value
- fixed and floating rate
debt securities 4,558.0 667.1 - - - 5,225.1
- syndicate loans 16.7 - - - - 16.7
- equity funds - - - - 86.9 86.9
- hedge funds - - - - 340.1 340.1
- illiquid credit assets - - - - 211.3 211.3
- derivative financial instruments - - - - 10.2 10.2
Insurance receivables - - - - 1,258.6 1,258.6
Reinsurance assets 1,649.4 - - - - 1,649.4
Other receivables 86.9 - - - - 86.9
Cash and cash equivalents 355.2 4.5 - - - 359.7
----------------------------------- ------- ------ ------ ------ ------- -------
Total 6,666.2 671.6 - - 1,907.1 9,244.9
----------------------------------- ------- ------ ------ ------ ------- -------
Tier 1 Tier 2 Tier 3 Tier 4 Unrated Total
31 December 2019 $m $m $m $m $m $m
----------------------------------- ------- ------- ------ ------ ------- -------
Financial assets at fair
value
- fixed and floating rate
debt securities 3,536.0 1,269.1 - - - 4,805.1
- syndicate loans 8.0 - - - - 8.0
- equity funds - - - - 163.6 163.6
- hedge funds - - - - 354.0 354.0
- illiquid credit assets - - - - 216.6 216.6
- derivative financial instruments - - - - 25.5 25.5
Insurance receivables - - - - 1,048.0 1,048.0
Reinsurance assets 1,338.2 - - - - 1,338.2
Other receivables 72.0 - - - - 72.0
Cash and cash equivalents 278.5 - - - - 278.5
----------------------------------- ------- ------- ------ ------ ------- -------
Total 5,232.7 1,269.1 - - 1,807.7 8,309.5
----------------------------------- ------- ------- ------ ------ ------- -------
The largest counterparty exposure within tier 1 is $2,006.0m of
US treasuries (31 December 2019: $1,599.9m).
Financial investments falling within the unrated category
comprise hedge funds and illiquid credit assets for which there is
no readily available market data to allow classification within the
respective tiers. Additionally, insurance receivables are
classified as unrated, due to premium debtors not being credit
rated.
The timing and level of impact of business failures as a result
of COVID-19 is uncertain. Current and expected collection of trade
receivables since the start of the COVID-19 pandemic have been
modelled on a region-specific basis, taking into account
macroeconomic factors, such as revised GDP outlooks, government
support available, and other regional specific microeconomic
factors. Compared to historical receivable collection rates,
management have recognised a $2.1m provision against insurance
receivables. This provision is in light of an increase in balances
over 90 days as a proportion of total insurance receivables over
the past three months.
Insurance receivables in respect of coverholder business are
credit controlled by third-party managers. We monitor third-party
coverholders' performance and their financial processes through the
group's coverholder management team. These assets are individually
impaired after considering information such as the occurrence of
significant changes in the counterparties' financial position,
patterns of historical payment information and disputes with
counterparties.
An analysis of the overall credit risk exposure indicates that
the group has reinsurance assets that are impaired at the reporting
date. The total impairment in respect of the reinsurance assets,
including reinsurer's share of outstanding claims, at 30 June 2020
was as follows:
Individual Collective
impairment impairment Total
$m $m $m
------------------------------------------ ----------- ----------- -----
Balance at 1 January 2019 2.8 9.4 12.2
Impairment loss recognised 0.3 1.2 1.5
------------------------------------------ ----------- ----------- -----
Balance at 31 December 2019 3.1 10.6 13.7
Impairment loss (written back)/recognised (0.1) 1.8 1.7
------------------------------------------ ----------- ----------- -----
Balance at 30 June 2020 3.0 12.4 15.4
------------------------------------------ ----------- ----------- -----
The group has insurance receivables and reinsurance assets that
are past due at the reporting date. An aged analysis of these is
presented below:
Greater
Up to 30-60 60-90 than
30 days days days 90 days
past due past due past due past due Total
30 June 2020 $m $m $m $m $m
---------------------- --------- --------- --------- --------- -----
Insurance receivables 79.8 15.1 16.1 39.6 150.6
Reinsurance assets 32.6 5.9 1.0 13.7 53.2
---------------------- --------- --------- --------- --------- -----
Greater
Up to 30-60 60-90 than
30 days days days 90 days
past due past due past due past due Total
31 December 2019 $m $m $m $m $m
---------------------- --------- --------- --------- --------- -----
Insurance receivables 59.2 26.0 8.6 31.9 125.7
Reinsurance assets 3.0 5.6 0.9 7.3 16.8
---------------------- --------- --------- --------- --------- -----
The total impairment provision in the statement of financial
position in respect of reinsurance assets past due (being
reinsurance recoverables due on paid claims) by more than 30 days
at 30 June 2020 was $3.0m (2019: $3.1m). This $3.0m provision in
respect of overdue reinsurance recoverables is included within the
total provision of $15.4m shown in the table above.
The group believes that the unimpaired amounts that are past due
more than 30 days are still collectable in full, based on historic
payment behaviour and analyses of credit risk.
Liquidity risk
The liquidity risks are consistent with those disclosed within
the 2019 annual report on pages 165 to 167. COVID-19 has meant that
there has been an increase in claims in 2020 across several of the
group's divisions. Many of these claims will be settled in 2020
meaning that cash will need to be available. The group has actively
monitored and adjusted its liquidity by utilising $225m of its
banking facility by placing a letter of credit to meet its Funds at
Lloyd's requirement. As a result of this, assets previously used to
meet the Funds at Lloyd's requirement were brought back into the
portfolio, thus aiding liquidity if required. The group also raised
additional capital of $292.6m primarily to make the most of any
growth opportunities, but also to strengthen the balance sheet and
liquidity position of the group.
The following is an analysis by business segment of the
estimated timing of the net cash flows based on the net claims
liabilities balance held:
Weighted
Greater average
Within than term
1 year 1-3 years 3-5 years 5 years Total to settlement
30 June 2020 $m $m $m $m $m (years)
----------------------- ------- --------- --------- -------- ------- --------------
Cyber & executive risk 234.7 427.5 215.0 80.8 958.0 2.4
Marine 110.9 124.3 39.8 20.1 295.1 1.9
Market facilities 0.6 2.5 2.2 3.5 8.8 4.9
Political, accident &
contingency 79.4 79.9 17.9 14.0 191.2 1.9
Property 164.4 190.7 44.3 25.2 424.6 1.9
Reinsurance 101.2 96.8 27.1 20.2 245.3 2.0
Specialty lines 218.7 468.5 348.1 475.7 1,511.0 4.2
----------------------- ------- --------- --------- -------- ------- --------------
Net claims liabilities 909.9 1,390.2 694.4 639.5 3,634.0
----------------------- ------- --------- --------- -------- ------- --------------
Weighted
Greater average
Within than term
1 year 1-3 years 3-5 years 5 years Total to settlement
31 December 2019 $m $m $m $m $m (years)
---------------------------------- ------- --------- --------- -------- ------- --------------
Cyber & executive risk 263.2 431.0 177.8 58.4 930.4 2.2
Marine 112.2 100.5 35.1 16.5 264.3 1.8
Market facilities 0.5 1.9 1.6 2.0 6.0 4.4
Political, accident & contingency 69.9 51.1 13.1 12.2 146.3 1.9
Property 159.5 129.0 31.9 20.9 341.3 1.7
Reinsurance 106.8 93.8 26.0 19.4 246.0 1.9
Specialty lines 245.8 481.5 339.8 390.1 1,457.2 3.8
---------------------------------- ------- --------- --------- -------- ------- --------------
Net claims liabilities 957.9 1,288.8 625.3 519.5 3,391.5
---------------------------------- ------- --------- --------- -------- ------- --------------
The following table is an analysis of the net contractual cash
flows based on all the liabilities held:
Greater
Within than
30 June 2020 1 year 1-3 years 3-5 years 5 years Total
----------------------- ------- --------- --------- -------- -------
Net claims liabilities 909.9 1,390.2 694.4 639.5 3,634.0
Borrowings - - - 547.0 547.0
Other payables 703.5 - - - 703.5
----------------------- ------- --------- --------- -------- -------
Greater
Within than
31 December 2019 1 year 1-3 years 3-5 years 5 years Total
----------------------- ------- --------- --------- -------- -------
Net claims liabilities 957.9 1,288.8 625.3 519.5 3,391.5
Borrowings - - - 546.8 546.8
Other payables 566.4 - - - 566.4
-----------------------
The group makes additional interest payments for borrowings.
The next two tables summarise the carrying amount at reporting
date of financial instruments analysed by maturity date.
5-10
Maturity <1 yr 1-2 yrs 2-3 yrs 3-4 yrs 4-5 yrs yrs >10 yrs Total
30 June 2020 $m $m $m $m $m $m $m $m
Fixed and floating
rate debt securities 1,600.4 1,767.6 809.3 403.7 587.9 32.4 23.8 5,225.1
Syndicate loans - - - - - - 16.7 16.7
Derivative financial
instruments 10.2 - - - - - - 10.2
Cash and cash equivalents 359.7 - - - - - - 359.7
Insurance receivables 1,258.6 - - - - - - 1,258.6
Other receivables 86.9 - - - - - - 86.9
Other payables (703.5) - - - - - - (703.5)
Borrowings - - - - - (547.0) - (547.0)
Total 2,612.3 1,767.6 809.3 403.7 587.9 (514.6) 40.5 5,706.7
5-10
<1 yr 1-2 yrs 2-3 yrs 3-4 yrs 4-5 yrs yrs >10 yrs Total
31 December 2019 $m $m $m $m $m $m $m $m
Fixed and floating
rate debt securities 1,229.5 1,686.6 954.2 410.2 471.2 27.5 25.9 4,805.1
Syndicate loans - - - - - - 8.0 8.0
Derivative financial
instruments 25.5 - - - - - - 25.5
Cash and cash equivalents 278.5 - - - - - - 278.5
Insurance receivables 1,048.0 - - - - - - 1,048.0
Other receivables 72.0 - - - - - - 72.0
Other payables (566.4) - - - - - - (566.4)
Borrowings - - - - - (546.8) - (546.8)
Total 2,087.1 1,686.6 954.2 410.2 471.2 (519.3) 33.9 5,123.9
Borrowings consist of two items. The first is $250m of
subordinated tier 2 debt raised in November 2016. This debt is due
in 2026 and has annual interest of 5.875% payable in May and
November of each year. The second comprises $300m of subordinate
tier 2 debt raised in September 2019. This debt is due in 2029 and
has annual interest of 5.5% payable in March and September each
year.
Illiquid credit assets, hedge funds and equity funds are not
included in the maturity profile because the basis of maturity
profile cannot be determined with any degree of certainty.
Government grant COVID-19 specific
The group has received $0.1m of government grants relating to
COVID-19 for wage relief for our Singapore employees (30 June 2019:
nil; 31 December 2019: nil). These grants are deemed to be tax free
in the hands of the employer. Under IAS 20: Government Grants,
government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an
expense item, it is recognised as income on a systematic basis over
the periods that the related costs, for which it is intended to
compensate, are expensed.
Impairment testing of goodwill
Beazley's impairment test for goodwill and intangible assets
with indefinite lives is based on value-in-use calculations. The
key assumptions used to determine the recoverable amount for the
different cash generating units were disclosed in the annual
consolidated financial statements for the year ended 31 December
2019.
Due to COVID-19 having a large impact on both the economic
market and insurance market, driving a reduction in investment
income and high claims, the forecast on which the impairment
analysis at the end of 2019 was based is no longer appropriate.
As a result, management performed an impairment test as at 30
June 2020 across all divisions which have goodwill, with the
updated value in use numbers derived from amended forecasts and an
amended discount rate of 8.4% (31 December 2019: 7.0%). The
discount rate has been adjusted to reflect the current market
assessment of the risks specific to the insurance industry and was
estimated based on the weighted average cost of capital for the
group. As a result of the updated analysis, management did not
identify impairment across any of the cash-generating units.
To test the segment's sensitivity to variances from forecast
profits, the discount rate has been flexed to 5% above and 5% below
the central assumption. Within this range, the recovery of goodwill
was stress tested and remains supportable across all cash
generating units.
Political,
Cyber & accident
executive Market & Specialty
risk Marine facilities contingency Property Reinsurance lines Total
2020 $m $m $m $m $m $m $m $m
Goodwill 1.5 2.3 - 29.6 24.9 0.8 2.9 62.0
Capacity 1.7 1.6 - 1.0 2.5 0.8 3.1 10.7
Licences 3.3 - - - 1.9 - 4.1 9.3
Total 6.5 3.9 - 30.6 29.3 1.6 10.1 82.0
Political,
Cyber & accident
executive Market & Specialty
risk Marine facilities contingency Property Reinsurance lines Total
2019 $m $m $m $m $m $m $m $m
Goodwill 1.5 2.3 - 29.6 24.9 0.8 2.9 62.0
Capacity 1.7 1.6 - 1.0 2.5 0.8 3.1 10.7
Licences 3.3 - - - 1.9 - 4.1 9.3
Total 6.5 3.9 - 30.6 29.3 1.6 10.1 82.0
13 Share capital
On 19 May 2020, the group successfully completed the placing of
new ordinary shares in the capital of the company. A total of
78,501,420 new ordinary shares of five pence each in the capital of
the group were placed at a price of 315 pence per Placing Share. A
total of 13,085 Subscription Shares were subscribed through the
Subscription. The placing raised total net proceeds of $292.6m.
The Placing Price of 315 pence represented a discount of 4.95
per cent to the closing share price of 331.4 pence on 18 May 2020.
The Placing Shares and the Subscription Shares being issued
together represented approximately 15 per cent of the existing
issued ordinary share capital of Beazley prior to the Placing and
Subscription.
This equity was raised through a cash box structure. Pre-emptive
rights were not considered with the placing, however prior to
issuance, senior management consulted with approximately 85% of
existing shareholders (calculated by voting rights) who were given
the option to participate. The shares issued are classified as
ordinary shares and carry the same voting rights as previously
issued ordinary shares. The group considered it an appropriate time
to raise equity in order to position the business for future growth
opportunities. It also provides further strength to the balance
sheet in light of the continued uncertainty from COVID-19.
2020
No. of
shares
(m) $m
Ordinary shares of 5p each
Placing 78.5 4.8
Total 78.5 4.8
The total net proceeds received in respect to the cash box structure
were $292.6m and were credited as follows:
2020
Share capital 4.8
Retained earnings (1) 287.8
Balance at 30 June 292.6
1 The amount attributed to retained earnings is net of $9.6m relating
to expenses incurred from the equity issuance.
The following table illustrates the movement in loss per share
before and after the issuance.
6 months 6 months
ended ended
June June
2020 2020
(incl. (excl.
share share
issuance
issuance) )
Basic (cents) (2.2) (2.4)
Diluted (cents) (2.2) (2.4)
Basic (pence) (1.7) (1.9)
Diluted (pence) (1.7) (1.9)
14 Related party transactions
The related party transactions of the group are consistent in
nature and scope with those disclosed in note 30 of the group's
consolidated financial statements for the year ended 31 December
2019.
15 Foreign exchange rates
The group used the following exchange rates to translate foreign
currency assets, liabilities, income and expenses into US dollars,
being the group's presentation currency:
6 months 6 months
ended ended Year to
30 June 30 June 31 December
2020 2019 2019
Average
Pound sterling 0.79 0.77 0.79
Canadian dollar 1.36 1.34 1.33
Euro 0.91 0.88 0.89
Spot
Pound sterling 0.79 0.79 0.76
Canadian dollar 1.35 1.33 1.32
Euro 0.88 0.88 0.90
16 Subsequent events
There are no events that are material to the operations of the
group that have occurred since the reporting date.
Glossary
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.
Alternative performance measures (APMs)
The group uses APMs to help explain its financial performance
and position. These measures, such as combined ratio, expense
ratio, claims ratio and investment return, are not defined under
IFRS. The group is of the view that the use of these measures
enhances the usefulness of the financial statements. Definitions of
key APMs are included within the glossary.
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 statement of financial position strength, operating
performance and business profile.
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.
Capital growth assets
These are assets that do not pay a regular income and target an
increase in value over the long term. They will typically have a
higher risk and volatility than that of the core portfolio.
Currently these are the hedge funds, equity linked funds and
illiquid credit assets.
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 percentage terms, of net insurance claims to net
earned premiums. The calculation is performed excluding the impact
of foreign exchange. In 2020, this ratio was 71% (30 June 2019:
62%; 31 December 2019: 62%). This represented total claims of
$869.1m (30 June 2019: $693.1m; 31 December 2019: $1,452.5m)
divided by net earned premiums of $1,233.8m (30 June 2019:
$1,118.0m; 31 December 2019: $2,347.0m).
Combined ratio
Ratio, in percentage terms, 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. The calculation is performed
excluding the impact of foreign exchange. In 2020, this ratio was
107% (30 June 2019: 100%; 31 December 2019: 100%). This represents
the sum of net insurance claims of $869.1m (30 June 2019: $693.1m;
31 December 2019: $1,452.5m), expenses for acquisition of insurance
contracts of $327.9m (30 June 2019: $298.4m; 31 December 2019:
$645.4m) and administrative expenses of $121.8m (30 June 2019:
$129.6m; 31 December 2019: $244.3m) to net earned premiums of
$1,233.8m (30 June 2019: $1,118.0m; 31 December 2019: $2,347.0m).
This is also the sum of the expense ratio 36% (30 June 2019: 38%;
31 December 2019: 38%) and the claims ratio 71% (30 June 2019: 62%;
31 December 2019: 62%).
Coverholder
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 and cents, 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 certain dilutive
potential ordinary shares such as share options granted to
employees.
Economic Capital Requirement (ECR)
The capital required by a syndicate's members to support their
underwriting. Calculated as the uSCR 'uplifted' by 35% to ensure
capital is in place to support Lloyd's ratings and financial
strength.
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 to
each risk involved in each loss.
Expense ratio
Ratio, in percentage terms, of the sum of expenses for
acquisition of insurance contracts and administrative expenses to
net earned premiums. The calculation is performed excluding the
impact of foreign exchange on non-monetary items. In 2020, the
expense ratio was 36% (30 June 2019: 38%; 31 December 2019: 38%).
This represents the sum of expenses for acquisition of insurance
contracts of $327.9m (30 June 2019: $298.4m; 31 December 2019:
$645.4m) and administrative expenses of $121.8m (30 June 2019:
$129.6m; 31 December 2019: $244.3m) to net earned premiums of
$1,233.8m (30 June 2019: $1,118.0m; 31 December 2019:
$2,347.0m).
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, but 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 but which have not yet been reported.
International Accounting Standards Board (IASB)
An independent accounting body responsible for developing IFRS
(see below).
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).
Investment return
Ratio, in percentage terms, calculated by dividing the net
investment income by the average financial assets at fair value,
including cash. In 2020, this was calculated as net investment
income of $83.2m (30 June 2019: $170.3m; 31 December 2019: $263.7m)
divided by average financial assets at fair value, including cash,
of $6,050.7m (30 June 2019: $5,122.1m; 31 December 2019:
$5,452.0m).
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.
Managing agent
A company that is permitted by Lloyd's to manage the
underwriting of a syndicate.
Managing general agent (MGA)
An insurance intermediary acting as an agent on behalf of an
insurer.
Market facilities
Market facilities come in many forms and have existed in the
Lloyd's market for decades. They involve the broker seeking
capacity to underwrite a portfolio of risks often from a specific
class or geography, though multi class facilities also exist. They
have similarities with lines slips, quota shares and binders.
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 and cents, 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.
Private enterprise
The private enterprise team offers specialised professional and
general liability coverage supported by a high service proposition,
focusing on meeting the needs of small businesses with assets up to
$35.0m and up to 500 employees.
Provision for outstanding claims
Provision for claims that have already been incurred at the
reporting 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.
Rate change
The percentage change in premium income charged relative to the
level of risk on renewals.
Reinsurance special purpose syndicate
A special purpose syndicate (SPS) created to operate as a
reinsurance 'sidecar' to Beazley's treaty account, capitalising on
Beazley's position in the treaty reinsurance market.
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.
Retrocessional reinsurance
The reinsurance of the reinsurance account. It serves to 'lay
off' risk.
Return on equity (ROE)
Ratio, in percentage terms, calculated by dividing the
consolidated profit or loss after tax by the average daily total
equity. In 2020, this was calculated as loss after tax of $12.7m
(30 June 2019: profit of $138.6m; 31 December 2019: profit of
$234.1m) divided by average equity of $1,726.5m (30 June 2019:
$1,494.2m; 31 December 2019: $1,538.6m).
Risk
This term may 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.
Sidecar special purpose syndicate
Specialty reinsurance company designed to provide additional
capacity to a specific insurance company. It operates by purchasing
a portion or all of a group of insurance policies, typically cat
exposures. These companies have become quite prominent in the
aftermath of Hurricane Katrina as a vehicle to add risk-bearing
capacity, and for investors to participate in the potential profits
resulting from sharp price increases.
Soft market
An insurance market where prevalent prices are low, and terms
and conditions offered by insurers are less restrictive.
Solvency Capital Requirement on an ultimate basis (uSCR)
The capital requirement under Solvency II calculated by
Beazley's internal model which captures the risk in respect of the
planned underwriting for the prospective year of account in full,
covering ultimate adverse development and all exposures.
Surplus lines insurer
An insurer that underwrites surplus lines insurance in the US.
Lloyd's underwriters are surplus lines insurers in all
jurisdictions of the US except Kentucky and the US Virgin
Islands.
Total shareholder return (TSR)
The increase in the share price plus the value of any first and
second 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 reporting date in the
underwriting provisions.
Underwriting profit
This is calculated as net earned premiums, less net insurance
claims, acquisition costs and administrative expenses .
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR RTMBTMTBTTTM
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