Beazley Plc · LSE:BEZ
Beazley — Investor Presentation (July 2023)
40 slides from Beazley's investor presentation, Jul 31, 2023
Slide 1: IFRS 17 2022 indicative comparatives
IFRS 17 2022 indicative comparatives 31 July 2023
Slide 2: Forward-looking statements disclaimer
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 facts but rather re
Slide 3: Agenda
Agenda 04 Recap 09 Impact on equity 11 IFRS17 concepts 19 Reserving 22 Profit and Loss 29 Combined ratio 37 Key takeaways 32 Q&A 3
Slide 4: Recap
beazley
Slide 5: What's staying the same?
What’s staying the same? Strategy Cash generation Dividends and capital IFRS 17 and IFRS 9 do not Our cashflows stay the same There is no impact to change our strategy or the way under IFRS 17. It’s the timing of our regulatory capital position we do business. profit recognition that will change. or
Slide 6: What's changing?
What’s changing? Proforma and KPI Reserving approach Introduction of changes Discounting The way we report will look Our reserving approach and IFRS 17 requires that insurance different under IFRS 17 and our setting of the risk adjustment will cashflows are on a discounted basis. KPIs will be revise
Slide 7: Accounting choices
Accounting choices Our choices The impacts MEASUREMENT General Measurement Model We have consistent accounting treatment across all MODEL (GMM) business. RISK We expect the reserve confidence level will be Cost of Capital approach ADJUSTMENT between the 80th to 90th percentile range. DISCOUNTING Bot
Slide 8: Accounting choices
Accounting choices Our choices The impacts Aggregation of products with similar Our approach to aggregation reflects the way we AGGREGATION risks (Portfolios) and two Groupings manage risks and our business. (profitable and onerous) Fully Retrospective The standard will be applied as though it TRANS
Slide 9: Expected impact on equity on transition from IFRS 4 to IFRS 17
Expected impact on equity on transition from IFRS 4 to IFRS 17 9
Slide 10: IFRS 4 to 17 Net Shareholder's Equity Walk as at 1 January 2022
IFRS 4 to 17 Net Shareholder's Equity Walk as at 1 January 2022 US$bn 10
Slide 11: IFRS 17 concepts and how they moved in 2022
IFRS 17 concepts and how they moved in 2022 11
Slide 12: IFRS 17 concepts
IFRS 17 concepts IFRS 17 introduces new concepts and some of the key ones include: As per the requirements of the standard, we have reclassified some expenses as “non- EXPENSES attributable” and so these are recognised outside of the insurance service result Gross Premium Written is replaced with In
Slide 13: Expenses
Expenses Split between directly and non directly attributable expenses Directly attributable Non directly attributable 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HY 2022 IFRS 4 HY 2022 IFRS 17 FY 2022 IFRS 4 FY 2022 IFRS 17 13
Slide 14: Gross Written Premium vs Insurance Written Premium Growth
Gross Written Premium vs Insurance Written Premium Growth US$m 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 IFRS 4 Gross Written Premium IFRS 17 Insurance Written Pr
Slide 15: Gross Written Premium vs Insurance Written Premium Growth
Gross Written Premium vs Insurance Written Premium Growth 6 14% 5 30% 14% 19% 29% 4 3 19% 2 1 2019 2020 2021 2022 IFRS 4 Gross Written Premium IFRS 17 Insurance Written Premium 15
Slide 16: CSM Movement YE2021 to YE2022
CSM Movement YE2021 to YE2022 US$m CSM – Gross of Reinsurance 350 Increase in CSM from 2021 to 2022: 300 • Majority due to increase in discounting 250 credit during 2022 200 • Remainder due to a combination of: 337 150 • business growth over the year • increased cyber profitability following 100 215
Slide 17: Onerosity Movement YE2021 to YE2022
Onerosity Movement YE2021 to YE2022 US$m Loss Component – Gross of 45 Reinsurance 40 • Material reduction in onerous business during 35 2022 30 • Largely driven by improved Cyber Risks 25 business profitability through 2022 20 15 30 10 5 10 0 YE2021 YE2022 17
Slide 18: Discounting YE2021 to YE2022
Discounting YE2021 to YE2022 • Significant increase in discounting credit at year end 2022 • Driven by the change in discount rates during 2022 & impact of discounting on new liabilities more than offsetting discount unwind 18
Slide 19: Discounting YE2021 to HY2022
Discounting YE2021 to HY2022 • Significant increase in discounting credit also at half year 2022 • Driven by the change in discount rates during 2022 & impact of discounting on new liabilities more than offsetting discount unwind 19
Slide 20: Reserving
Reserving beazley
Slide 21: Maintaining a prudent reserving approach
Maintaining a prudent reserving approach • Preferred reserve confidence level in the 80th to • We have employed a consistent and prudent 90th percentile range reserving strategy • The level of reserve margin will be calculated on • Aim to hold a margin of 5%-10% above actuarial a ground up basis wit
Slide 22: Impacts to Profit & Loss emergence
Impacts to Profit & Loss emergence • The level of reserves and how they move over an accounting period will be driven by different factors under IFRS 17: • the best estimate • the level of risk adjustment (which we calculate using a cost of capital approach) • how this releases over time, and • the
Slide 23: Comparing the IFRS 4 and IFRS 17 Profit & Loss
Comparing the IFRS 4 and IFRS 17 Profit & Loss 23
Slide 24: 31 December 2022 Profit & Loss – IFRS 4 to IFRS 17
31 December 2022 Profit & Loss – IFRS 4 to IFRS 17 IFRS 4 PROFIT AND LOSS STATEMENT* $m IFRS 17 PROFIT AND LOSS STATEMENT $m Insurance revenue 4,761 Insurance revenue 4,808 Insurance service expense (4,302) Insurance service expense (4,069) Allocation of reinsurance premium (1,147) Allocation of rei
Slide 25: IFRS 4 to 17 FY 22 profit before tax walk
IFRS 4 to 17 FY 22 profit before tax walk 25
Slide 26: Segmental – full year to 31 December 2022
Segmental – full year to 31 December 2022 Property Specialty IFRS 17 segmental ($m) Cyber Risks Digital MAP Risks Total Risks Risks Insurance revenue 1,008 211 958 808 1,823 4,808 Insurance service expense (752) (158) (905) (697) (1,557) (4,069) Allocation of reinsurance premium (196) (27) (226) (13
Slide 27: 30 June 2022 Profit & Loss – IFRS 4 to IFRS 17
30 June 2022 Profit & Loss – IFRS 4 to IFRS 17 IFRS 4 PROFIT AND LOSS IFRS 17 PROFIT AND LOSS STATEMENT` $m $m STATEMENT* Insurance revenue 2,330 Insurance revenue 2,347 Insurance service expense (2,133) Insurance service expense (1,839) Allocation of reinsurance premium (541) Allocation of reinsura
Slide 28: IFRS 4 to 17 HY 22 profit before tax walk
IFRS 4 to 17 HY 22 profit before tax walk 28
Slide 29: Segmental – six months to 30 June 2022
Segmental – six months 30 June 2022 Property Specialty IFRS 17 segmental ($m) Cyber Risks Digital MAP Risks Total Risks Risks Insurance revenue 428 99 420 392 991 2,330 Insurance service expense (296) (73) (494) (277) (699) (1,839) Allocation of reinsurance premium (91) (16) (83) (46) (142) (378) Am
Slide 30: Combined ratio
Combined ratio 30
Slide 31: Combined Ratio
Combined Ratio Insurance service expense less amounts recoverable from reinsurers for incurred claims Insurance revenue less allocation of reinsurance premium 31
Slide 32: Combined Ratio – IFRS 4 to IFRS 17 as at 31 Dec 2022
Combined Ratio – IFRS 4 to IFRS 17 as at 31 Dec 2022 32
Slide 33: Cyber Risks - 31 Dec 2022
Cyber Risks - 31 Dec 2022 100% 90% 80% 74% (1%) 70% 3% (6%) (1%) 60% 50% 40% 30% 20% 10% 0% Reserving Changes Discounting Onerosity IFRS 17 COR IFRS 4 COR IFRS 4 COR rebased Non-directly attributable... Other beazley 33
Slide 34: Digital - 31 Dec 2022
Digital - 31 Dec 2022 100% 90% 87% 81% 80% (6%) (2%) 0% 1% 72% 70% (8%) 60% 50% 40% 30% 20% 10% 0% Reserving Changes Discounting Onerosity IFRS 17 COR IFRS 4COR IFRS 4 COR rebased Non-directly attributable. .. Other beazley
Slide 35: MAP Risks - 31 Dec 2022
MAP Risks - 31 Dec 2022 100% 90% 85% 3% 1% 80% (2%) 70% 60% 50% 40% 30% 20% 10% 0% Reserving Changes Discounting Onerosity IFRS 17 COR IFRS 4COR IFRS 4 COR rebased Non-directly attributable expenses Other beazley
Slide 36: Property Risks - 31 Dec 2022
Property Risks - 31 Dec 2022 36
Slide 37: Specialty Risks - 31 Dec 2022
Specialty Risks - 31 Dec 2022 37
Slide 38: Key takeaways
Key takeaways 38
Slide 39: Key takeaways
Key takeaways Growth measure consistent under IFRS 17 Discounting increases FY 2022 profit by $273m (due to discounting of liabilities and interest rate movements across the year) Reserve confidence level of 86% at FY 2022 COR under IFRS 17 of 79% at FY 2022 (due mainly to expense changes and discou
Slide 40: Questions
Questions 40