Slide 1: Results for the six months ended 30 June 2016
Cover Results for the six months ended 30 June 2016 Friday, 22 July 2016 1
Slide 2: Disclaimer notice
Disclaimer notice Certain statements made in this presentation, both oral and written, are or may constitute “forward looking statements” with respect to the operation, performance and financial condition of the Company and/or the Group. These forward looking statements are not based on historical f
Slide 3: Contents
Contents Pages Overview 5 Business update 6 Financials 7 Performance 8 Investments 9-10 Reserves 11-12 Capital position 13-14 In Focus: Marine 15-20 The Outlook 21-25 Appendix 27-36 3
Slide 4: Overview
Generic title white Overview
Slide 5: Overview – good results despite continued competition
Overview – good results despite continued competition • Profit before income tax of $150.2m (2015: $154.5m) • Gross premiums written increased by 2% to $1,124.1m (2015: $1,099.7m) • Combined ratio 90% (2015: 86%) • Rate change on renewal business -2% (2015: -2%) • Prior year reserve releases of $77.
Slide 6: Business update
Business update • Attracting and retaining good people across all facets of our business • 36 new underwriters joined Beazley in the first six months of 2016 • New and expanding teams have included: • UK and international medical malpractice for SMEs • Fine art and specie (London) • Expanded environ
Slide 7: Financials
Generic title white Financials
Slide 8: Six months financial performance
Six months financial performance 6 months ended 6 months ended % increase/ 30 June 2016 30 June 2015 decrease Gross premiums written ($m) 1,124.1 1,099.7 2% Net premiums written ($m) 930.4 879.2 6% Net earned premiums ($m) 861.4 857.7 - Profit before income tax ($m) 150.2 154.5 (3%) Earnings per sha
Slide 9: Portfolio delivered 1.4% return
Portfolio delivered 1.4% return 100.0 7.0% 90.0 6.0% 80.0 Annualised Investment return 5.0% 70.0 Investment Return ($m) 36.2 60.0 46.5 4.0% 50.0 14.1 3.0% 40.0 30.0 62.7 2.0% 46.8 20.0 43.3 43.5 36.1 1.0% 10.0 0.0 0.0% 2012 2013 2014 2015 2016 1st half 2nd half Return 9
Slide 10: Portfolio mix – investment grade credit increased
Portfolio mix – investment grade credit increased 30 June 2016 31 December 2015 Illiquid Credit Assets 2.9% Illiquid Credit Assets, 2.0% Hedge Funds 6.7% Hedge Funds 7.3% Equity Linked funds 2.3% Equity Linked funds, 3.3% Cash and Cash Senior Secured Loans 1.9% Cash and Cash Equivalents Senior Secur
Slide 11: Stable prior year reserve releases
Stable prior year reserve releases 220 22.0% 200 20.0% 180 18.0% 160 16.0% 140 14.0% 120 12.0% % of NEP $m 100 10.0% 80 8.0% 60 6.0% 40 4.0% 20 2.0% 0 0.0% 2011 2012 2013 2014 2015 2015 HY 2016 HY -20 -2.0% Specialty lines Political risks and contingency Life accident and health Marine Property Rein
Slide 12: Whole account reserve strength within our target range
Whole account reserve strength within our target range Surplus in net held reserves Preferred upper end 10.0% 8.2% 8.2% 8.2% % above actuarial estimate 7.9% 7.5% 7.4% 7.4% 7.1% 6.9% 6.7% 6.7% 6.7% 6.4% 6.1% 5.0% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (HY) Financia
Slide 13: Update on debt strategy
Update on debt strategy • Expect to call the £76.5m of outstanding 2006 20nc10 in October 2016 • An opportunity to deploy more underwriting capital would be the trigger for using more debt leverage • Considering making a new issuance of up to £250m in 2016 13
Slide 14: Underwriting capital – a growth prospective
Underwriting capital – a growth prospective • Group capital requirement: Projected Period ended Year ended 31 Dec 2016 30 June 2016 31 December 2015 $m $m $m Lloyd’s economic capital requirement (ECR) 1,500.0 1,333.3 1,326.9 Capital for US insurance company 107.7 107.7 107.7 1,607.7 1,441.0 1,434.6
Slide 15: In Focus - Marine
In Focus - Marine
Slide 16: Diversification of the marine account
Diversification of the marine account 2009 2016 Satellite Cargo 4.4% 12.6% Aviation Energy 10.2% 22.3% Marine Liabilities Energy 3.8% 35.8% UK Marine 6.9% War 16.1% Cargo Hull 13.6% 22.0% Marine Liabilities Hull 13.4% War 31.7% 7.2% $265m $248m 16
Slide 17: Track record of navigating the cycle profitably
Track record of navigating the cycle profitably Top KPIs ($m) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 GWP (GAAP) 253.7 279.6 275.1 265.0 261.7 274.2 311.2 315.9 325.2 269.3 Profit before tax and finance 50.4 74.6 33.5 74.2 75.4 69.3 83.4 83.0 71.1 66.9 costs (GAAP) Rate change 9% (7%) (6%)
Slide 18: Lloyd's marine claims statistics
Lloyd’s marine claims statistics 140% 120% Average claims ratio (2011-2015) 100% 80% 60% 40% 20% 0% Beazley First quintile Second quintile Third quintile Fourth quintile Fifth quintile Lloyd’s marine syndicates 18
Slide 19: Investing across the rating cycle
Investing across the rating cycle • Hull and cargo underwriters in Singapore • Two pleasure craft and yacht underwriters • One additional UK small craft and fishing vessel underwriter • The purchase of Leviathan • Extensive analysis of French and US marine markets 19
Slide 20: Looking forward
Looking forward • Difficult trading conditions • Well placed to take advantage of change in the market • Enthusiastic about the diversity in our portfolio • Continued focus on identifying areas for profitable growth • People • Locations 20
Slide 21: The Outlook
Generic title white The Outlook
Slide 22: Cumulative rate change since 2008
Cumulative rate change since 2008 120% 115% 110% 105% 100% 95% 90% 85% 80% 75% 2008 2009 2010 2011 2012 2013 2014 2015 2016 HY Life, accident & health Marine Political risks & contingency Property Specialty Lines Reinsurance All divisions 22
Slide 23: Group's gross premium growth by division $m
Group’s gross premium growth by division $m 2,500 2,000 1,500 1,000 500 - 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Specialty Lines Reinsurance Property Political risk and contingency Marine Life accident and health 23
Slide 24: Group's gross premium split by division
Group’s gross premium split by division 2012 2015 LAH LAH 5% 6% Marine Marine 13% 16% PCG Specialty lines 6% 43% PCG Specialty lines 6% 49% Property Property 17% 20% Reinsurance Reinsurance 10% 9% Total GWP: $1,895.9m Total GWP: $2,080.9m 24
Slide 25: Outlook
Outlook • Competitive pressures remain strong: • Returns should be expected to reduce • Rate pressure, particularly on short tail catastrophe exposed lines • Continued focus on strategy and strategic initiatives • Growth in US remains strong • Attracting and retaining talented people remains a prior
Slide 26: Any questions?
Questions? Any questions?
Slide 27: Appendix
Generic title white Appendix
Slide 28: US interest rates
US interest rates 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% US 10 Year Index US 5 Year Index US 2 Year Index 28
Slide 29: Specialty lines incurred claims remain in line with expectations
Specialty lines incurred claims remain in line with expectations 140% 6 to Latest Net incurred loss ratio at each development year 6 5 120% 113% 4 3 2 100% ULR 89% Net incurred loss ratio 77% 80% 73% 73% 69% 67% 63% 61% 60% 52% 48% 48% 50% 45% 40% 36% 21% 20% 7% 0% 1993- 1997- 2001 2002 2003 2004 20
Slide 30: Diversified portfolio achieves consistent combined ratio through market cycles
Diversified portfolio achieves consistent combined ratio through market cycles 160 140 120 Combined ratio (%) 100 80 60 40 2011 2012 2013 2014 2015 2016 HY Year 30
Slide 31: Life, accident & health
Life, accident & health 6 months ended 30 June 2016 2015 Gross premiums written ($m) 79.9 79.7 • Growth in US admitted business Net premiums written ($m) 71.8 67.1 to $17.7m (2015: $13.8m) Net earned premiums ($m) 56.5 56.3 • Combined ratio increases to 105% (2015: 103%) Claims ratio 60% 60% Rate ch
Slide 32: Marine
Marine 6 months ended 30 June 2016 2015 Gross premiums written ($m) 134.0 162.1 Net premiums written ($m) 107.9 131.4 • Combined ratio increases to Net earned premiums ($m) 110.7 144.2 97% (2015: 76%) Claims ratio 52% 38% Rate change on renewals (7%) (8%) Percentage of business led 52% 48% 32
Slide 33: Political risks and contingency
Political risks and contingency 6 months ended 30 June 2016 2015 Gross premiums written ($m) 69.4 67.9 • Combined ratio improves to 88% Net premiums written ($m) 57.0 55.4 (2015: 93%) Net earned premiums ($m) 46.7 50.7 • Prior year reserve releases increase to $6.5m (2015: $2.4m) Claims ratio 36% 46
Slide 34: Property
Property 6 months ended 30 June 2016 2015 Gross premiums written ($m) 173.0 188.6 • Prior year releases stable of Net premiums written ($m) 142.1 151.2 $17.6m (2015: $18.8m) Net earned premiums ($m) 144.1 147.0 • Contribution to group operating profit of $26.0m (2015: $33.8m) Claims ratio 41% 38% Ra
Slide 35: Reinsurance
Reinsurance 6 months ended 30 June 2016 2015 Gross premiums written ($m) 150.2 159.5 • Increased spend on outward Net premiums written ($m) 92.9 109.3 reinsurance premium to $57.3m (2015: $50.2m) Net earned premiums ($m) 63.9 70.4 • Prior year reserve releases of $17.5m (2015: $17.7m) Claims ratio 2
Slide 36: Specialty lines
Specialty lines 6 months ended 30 June 2016 2015 Gross premiums written ($m) 517.6 441.9 • 17% growth in gross premiums written Net premiums written ($m) 458.7 364.8 Net earned premiums ($m) 439.5 389.1 • Increased prior year reserve releases of $35.5m (2015: $16.9m) Claims ratio 57% 60% • Contribut