Slide 1: Results for the six months ended 30 June 2017
Cover Results for the six months ended 30 June 2017 Friday, 21 July 2017 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 4-5 Business update 6 Financials 7 Performance 8 Investments 9-10 Reserves 11-12 Capital position 13 In Focus: Risk Management & Innovation at Beazley 14-18 The Outlook 19-22 Appendix 24-32 3
Slide 4: Overview
Generic title white Overview
Slide 5: Overview – strong results
Overview – strong results • Profit before income tax of $158.7m (2016: $150.2m) • Gross premiums written increased by 2% to $1,149.3m (2016: $1,124.1m) • Combined ratio 90% (2016: 90%) • Rate change on renewal business -2% (2016: -2%) • Prior year reserve releases of $83.4m (2016: $77.4m) • Investme
Slide 6: Business update
Business update • Acquisition of Creechurch Underwriters to establish Beazley in Canada • Growth of 9% in US based gross premiums written • Europe • Obtained insurance licence to change Beazley Re dac to an insurance company (now Beazley Insurance dac); • Applying for branch offices in Germany, UK,
Slide 7: Financials
Generic title white Financials
Slide 8: Six months financial performance
Six months financial performance 6 months ended 6 months ended % increase 30 June 2017 30 June 2016 Gross premiums written ($m) 1,149.3 1,124.1 2% Net premiums written ($m) 936.4 930.4 1% Net earned premiums ($m) 886.7 861.4 3% Profit before income tax ($m) 158.7 150.2 6% Earnings per share (pence)
Slide 9: Portfolio delivered an excellent 3.4% annualised return
Portfolio delivered an excellent 3.4% annualised return 100.0 7.0% 90.0 6.0% 80.0 30.4 5.0% Annualised Investment Return 70.0 $m Investment Return 36.2 60.0 4.0% 50.0 14.1 3.0% 40.0 79.4 30.0 62.7 2.0% 46.8 43.3 43.5 20.0 1.0% 10.0 0.0 0.0% 2013 2014 2015 2016 2017 1st half 2nd half Return 9
Slide 10: Minor changes to portfolio mix
Minor changes to portfolio mix 30 June 2017 31 December 2016 Illiquid Credit Assets, 3.6% Illiquid Credit Assets 2.8% Hedge Funds , 7.4% Hedge Funds, 6.7% Equity Linked funds, 3.6% Cash and Cash Equity Linked funds, 2.5% Equivalents Cash and Cash Senior Secured Loans, 2.0% Senior Secured Loans 2.0%
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% 2012 2013 2014 2015 2016 2016HY 2017HY -20 -2.0% Specialty lines PAC Marine Property Reinsurance % of NEP 11
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% % above actuarial estimate 8.2% 8.2% 8.2% 7.9% 7.5% 7.4% 7.4% 7.1% 6.9% 6.7% 6.7% 6.6% 6.4% 6.3% 6.1% 5.0% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 (HY
Slide 13: Underwriting capital – remains in a strong position
Underwriting capital – remains in a strong position • Group capital requirement: Projected Year ended 31 Dec 2017 31 Dec 2016 $m $m Lloyd’s economic capital requirement (ECR) 1,590.0 1,489.2 Capital for US insurance company 107.7 107.7 1,697.7 1,596.9 • Expect to still be above the 15%-25% of ECR bu
Slide 14: In Focus: Risk management and innovation at Beazley
Generic title white In Focus Risk management and innovation at Beazley
Slide 15: Role of the Chief Risk Officer at Beazley
Role of the Chief Risk Officer at Beazley Risk • Supporting the board in setting risk appetite • Monitoring the group’s operation against risk appetite Assessment • Assessing emerging and strategic risk Risk • Identifying capital requirements using the internal model Quantification • Quantifying the
Slide 16: Risk Management Framework
Identify risk Reassess risk Assess risk (emerging risk) Independently Set risk test control Risk appetite effectiveness Management Framework Manage risk: Report on Controls control proportionate to effectiveness risk appetite Monitor risk: Control effectiveness captured in risk register 16
Slide 17: Risk management framework and the internal model
Risk management framework and the internal model Risk assessment Risk Register Control Internal assessment model Consolidated Risk incident assurance reporting report 17
Slide 18: Innovation and Product Development
Innovation and Product Development Four key steps: Developing a Idea Product Post launch viable identification delivery support product • The executive are currently monitoring 15 new products ideas: • 3 are at the “idea identification” stage • 5 are at the “developing a viable product” stage • 7 ar
Slide 19: The Outlook
Generic title white The Outlook
Slide 20: Cumulative rate change since 2008
Cumulative rate change since 2008 120% 115% 110% 105% 100% Rate Change 95% 90% 85% 80% 75% 70% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017HY Underwriting Year Marine Property Specialty Lines Reinsurance PAC All divisions 20
Slide 21: Cyber insurance at Beazley
Cyber insurance at Beazley • Cyber remains our largest product currently • Currently cyber insurance very US centric • EU General Data Protection Regulation comes into force in Europe in May 2018 • By then, Beazley BBR response services will be available in the UK, France, Germany, Spain and Italy •
Slide 22: Outlook
Outlook • Competitive pressures remain: • Low catastrophe environment; • Challenge for achieving profitable growth; and • Continued focus on proven successful strategy • Continued growth opportunities: • Aim for mid-single digit growth of premium for 2017 • Focus on: • US; • Cyber; and • SL Internat
Slide 23: Any questions?
Questions? Any questions?
Slide 24: Appendix
Generic title white Appendix
Slide 25: US interest rates
US interest rates 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% US 10 Year Index US 5 Year Index US 2 Year Index 25
Slide 26: Specialty lines incurred claims remain in line with expectations
Specialty lines incurred claims remain in line with expectations Net incurred loss ratio at each development year 6 to Latest 6 140% 5 4 120% 113% 3 Net incurred loss ratio 100% 2 89% 78% ULR 80% 75% 72% 70% 68% 63% 58% 60% 53% 49% 48% 48% 45% 38% 40% 20% 20% 6% 0% 1997- 2001 2002 2003 2004 2005 200
Slide 27: 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 2017HY Year 27
Slide 28: Marine
Marine 6 months ended 30 June 2017 2016 Gross premiums written ($m) 145.6 134.0 Net premiums written ($m) 118.9 107.9 • Improved combined ratio at Net earned premiums ($m) 114.0 110.7 96% (2016: 97%) • Expense ratio of 43% (2016: 45%) Claims ratio 53% 52% Rate change on renewals (4%) (7%) Percentage
Slide 29: Political, accident and contingency
Political, accident and contingency 6 months ended 30 June 2017 2016 Gross premiums written ($m) 108.4 149.3 Net premiums written ($m) 94.9 128.8 • Previously life, accident and health division and political risks Net earned premiums ($m) 91.5 103.2 and contingency division Claims ratio 53% 49% Rate
Slide 30: Property
Property 6 months ended 30 June 2017 2016 Gross premiums written ($m) 194.1 173.0 • Expense ratio of 42% (2016: Net premiums written ($m) 149.6 142.1 46%) Net earned premiums ($m) 147.6 144.1 • Contribution to group operating profit of $18.4m (2016: $26.0m) Claims ratio 51% 41% Rate change on renewa
Slide 31: Reinsurance
Reinsurance 6 months ended 30 June 2017 2016 Gross premiums written ($m) 140.8 150.2 • Contribution to group Net premiums written ($m) 82.9 92.9 operating profit of $19.6m (2016: $29.8m) Net earned premiums ($m) 55.6 63.9 Claims ratio 38% 27% Rate change on renewals (2%) (4%) Percentage of business
Slide 32: Specialty lines
Specialty lines 6 months ended 30 June 2017 2016 Gross premiums written ($m) 560.4 517.6 • 8% growth in gross premiums written Net premiums written ($m) 490.1 458.7 Net earned premiums ($m) 478.0 439.5 • Contribution to group operating profit of $121.3m (2016: $85.8m) Claims ratio 49% 57% • Combined