Slide 1: Results for the six months ended 30 June 2011
Results for the six months ended 30 June 2011 Results for the six months ended 30 June 2011 Friday, 22 July 2011 1
Slide 2: Disclaimer notice
Disclaimer notice Certain statements in the presentation, are or may constitute “forward looking statements”. Such forward looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company, or industry results, to be mate
Slide 3: Contents
Contents Page No. Overview 4-5 Large losses in the first half year 6 Business update 7 Financials Performance 9 Investments 10 Capital growth 11 Reserves 12-13 Solvency II 14 Capital position 15 Divisional review Political risks and contingency 16-22 Underwriting review and outlook 23-26 Appendix Pe
Slide 4: Overview
Generic title white Overview
Slide 5: Overview
Overview • Loss before income tax of $24.2m (2010 profit: $115.5m) • Gross written premiums decreased 1.7% to $924.8m (2010: $940.6m) • Combined ratio 108% (2010: 90%) • No rate change on renewal business (2010: 2% reduction) • Prior year reserve releases of $88.6m (2010: $65.9m) • Investment income
Slide 6: Large losses in the first half year
Large losses in the first half year • Reported estimates of first quarter losses of $154m arising from catastrophic events in Australia, New Zealand and Japan remain unchanged • Further tornado events occurred in Alabama and Missouri. Market estimates for these losses are between $15bn and $25bn. Be
Slide 7: Business update
Business update • Acquisition of Australian managing general agent, writing group disability insurance to compliment our life, accident and health division. Estimated to generate gross written premiums of $32m in 2011 • Fidelity and crime insurance is introduced to broaden our specialty professional
Slide 8: Financials
Generic title white Financials
Slide 9: Six months financial performance
Six months financial performance 6 months ended 6 months ended % (decrease)/ 30 June 2011 30 June 2010 increase Gross written premiums ($m) 924.8 940.6 (1.7) Net written premiums ($m) 635.5 624.7 1.7 Net earned premiums ($m) 670.5 678.2 (1.1) (Loss)/ profit before tax ($m) (24.2) 115.5 (Loss)/ earni
Slide 10: Investment returns reflect conservative portfolio
Investment returns reflect conservative portfolio 120.0 7.0% 100.0 52.0 6.0% 80.0 5.0% 46.9 4.0% Investment Return Annualised Investment Return 60.0 47.0 3.0% 40.0 31.1 ($m) 2.0% 52.5 43.5 29.0 20.0 30.8 1.0% 11.8 19.8 21.3 22.5 4.8 4.3 6.4 8.5 - 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 -1.
Slide 11: Conservative portfolio position maintained
Conservative portfolio position maintained June 2011 December 2010 Alternative assets Alternative assets Cash and cash 10.6% 11.3% equivalents 31.7% ABS, MBS, CMBS, Corp Bonds ABS, MBS, CMBS, Corp Other Bonds Other 5.0% 7.5% Cash and cash equivalents 32.9% Corp Bond Corp Bond Financial Financial Non
Slide 12: Strong prior year reserve releases
Strong prior year reserve releases 150 14% 130 12% 110 10% 90 8% 70 6% 50 4% 30 2% 10 -10 2006 2007 2008 2009 2010 2011HY 0% Life, accident and health Marine Political risks & contingency Property Reinsurance Specialty lines % of NEP 12
Slide 13: Whole account reserve strength remains within target range
Whole account reserve strength remains within our target range Surplus in net held reserves Preferred upper end % above actuarial best estimate 8.2% 7.9% 7.5% 7.4% 6.7% 6.7% 6.4% 6.4% 6.1% Preferred lower end 2003 2004 2005 2006 2007 2008 2009 2010 2011HY Financial year 13
Slide 14: Solvency II
Solvency II • We remain on track to meet the requirements of the Solvency II regulatory regime by 1 January 2013 • We have completed the internal model rebuild for Solvency II • Programme budget unchanged at £4.6m plus internal resource • We are maintaining our increased capital buffer of 20% 14
Slide 15: Strong surplus capital position
Strong surplus capital position 2011 HY 2010 FY $m $m Sources of funds Shareholders funds 1,011.8 1,082.9 Debt 259.9 248.8 1,271.7 1,331.7 Uses of funds Lloyd’s underwriting 788.0 776.9 US Insurance Company 107.7 107.7 895.7 884.6 Surplus 376.0 447.1 Unavailable surplus - (80.2) Fixed and intangible
Slide 16: Divisional review – Political risks and contingency
Generic title white Divisional review – Political risks and contingency
Slide 17: Breadth of coverage
Breadth of coverage Political Risk and Terrorism and Contingency Trade Credit Political Violence • We mitigate our clients’ • Physical damage to • Event cancellation cross-border risks in almost any listed asset • Film and advertising respect of assets, and occupation agents contracts, payments • Bu
Slide 18: Composition of the account – 2010
Composition of the account – 2010 Other contingency 10% Stand alone Focus Dec -10 Lloyd’s terrorism Groups GWP ($m) Market Event cancellation 43% share 15% Terrorism 43.4 6.8% Political risk & 32.3 6.9% trade credit Contingency 25.2 9.2% Total 100.9 Trade credit 15% Political risk 17% 18
Slide 19: Political gross exposure as at 1 January 2011
Political gross exposure as at 1 January 2011 Russia & E. Europe 7% Canada W. Europe 1% 7% USA Far East MENA 2% 12% 24% West Indies 1% Africa 26% South America 13% Australasia 7% 19
Slide 20: High profile contingency accounts
High profile contingency accounts We have taken a lead position on or a major participation in: • A number of formula 1 Grand prix events • Olympics - Summer and Winter • Rugby World Cup • Cricket World Cup • World championships for Alpine and Nordic Skiing • Major Athletic Events • Major Tennis Eve
Slide 21: Performance 2003 – 2011 HY
Performance 2003 – 2011 HY 140 120% 120 100% 100 80% 80 60% 60 40% 40 20% 20 - 0% 2003 2004 2005 2006 2007 2008 2009 2010 HY 2011 Gross written premiums Claims ratio (GAAP) 21
Slide 22: Growth opportunities
Growth opportunities • Organic growth model based on positioning expert underwriters in locations with identifiable business flows and broker penetration. • Political risk and contingency is expanding its presence in the following locations as part of Beazley group strategic initiatives: • USA (New
Slide 23: Underwriting review and outlook
Generic title white Underwriting review and outlook
Slide 24: Cumulative rate change since 2001
Cumulative rate change since 2001 220% 200% 180% Rate Change 160% 140% 120% 100% 80% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011HY Underwriting Year Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All Depts. 24
Slide 25: Incurred comparison - Specialty lines
Incurred comparison - Specialty lines Net incurred loss ratio at each development year Development Year 6 140% 5 4 3 120% 114% 2 ULR 100% Net incurred loss ratio 84% 80% 74% 57% 60% 50% 41% 42% 41% 41% 41% 40% 18% 20% 6% 0% Net ultimate 1993-1996 1997-2000 2001 2002 2003 2004 2005 2006 2007 2008 200
Slide 26: Outlook
Outlook • Underlying portfolio (excluding catastrophe business) performing well • We continue to look for opportunities to hire talented underwriters and pick up books of business • Most lines remain competitive • Plan for flat premium rates overall but further catastrophes will move the market • We
Slide 27: Any questions?
Questions? Any questions?
Slide 28: Appendix
Generic title white Appendix
Slide 29: Life, accident & health
Life, accident & health 6 months ended 30 June 2011 2010 Gross premiums written 39.6 45.3 • Acquired Australian coverholder ($m) based in Sydney in April 2011 Net premiums written ($m) 34.9 39.5 Net earned premiums ($m) 34.1 30.7 Claims ratio 52% 54% Rate change on renewals 1% - Percentage of busine
Slide 30: Marine
Marine 6 months ended 30 June 2011 2010 Gross premiums written 154.1 149.1 • Another strong trading performance ($m) from the Marine division Net premiums written ($m) 127.3 123.4 • Prior year reserve releases of $11.9m Net earned premiums ($m) 110.8 112.2 • New Energy underwriter recruited Claims r
Slide 31: Political risks and contingency
Political risks and contingency 6 months ended 30 June 2011 2010 Gross premiums written ($m) 48.8 55.3 • Appointed Chris Parker to lead our terrorism and political violence team within Political risks and contingency Net premiums written ($m) 34.4 45.4 group Net earned premiums ($m) 38.5 47.1 • Impa
Slide 32: Property
Property 6 months ended 30 June 2011 2010 Gross premiums written ($m) 195.4 202.5 • Property was impacted by losses in Japan and Australia Net premiums written ($m) 111.2 109.6 • Prior year reserve releases of $21.7m Net earned premiums ($m) 140.4 136.1 • Positive rating outlook following catastroph
Slide 33: Reinsurance
Reinsurance 6 months ended 30 June 2011 2010 Gross premiums written ($m) 135.6 135.2 • Impacted by losses in Australia, New Zealand, Japan and the US Net premiums written ($m) 89.2 97.1 • Rates improving across international Net earned premiums ($m) 55.1 56.8 lines and to a lower extent in the US Cl
Slide 34: Specialty lines
Specialty lines 6 months ended 30 June 2011 2010 Gross premiums written ($m) 351.3 353.2 • US business developing well writing $114.1m Net premiums written ($m) 238.5 209.7 • Prior years continue to develop well Net earned premiums ($m) 291.6 295.3 with releases of $21.6m • New products launched suc
Slide 35: US originated business $183m for HY 2011
US originated business $183m for HY 2011 GWP by Product 150 140 130 120 110 100 90 80 $m 70 60 50 40 30 20 10 0 2007 2008 2009 2010 2011 Architects and engineers Technology and media Management liability Healthcare and lawyers High value homeowners Other property Commercial property Life, accident &
Slide 36: Claims frequency
Claims frequency Claims Frequency - Rolling 12 month average 170% 160% 150% 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% US lawyers US architects & engineers US D&O* US employment practices liability UK prof. indemnity *US D&O statistics are market-wide 36