Slide 1: Results for the year ended 31 December 2020
Results for the year ended 31 December 2020 Friday, 5 February 2021
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 • Overview 4-8 • Environmental Social & Governance 9-10 • In Focus – COVID-19 11-13 • Financials 14-21 o Performance 15 o Investments 16-17 o Claims releases 18 o Reserves 19 o Capital position 20-21 • Underwriting 22-25 • The Outlook 26-27 • Questions 28 • Appendix 29-32 3
Slide 4: Overview
Overview 4
Slide 5: Strong premium growth in challenging year
Strong premium growth in challenging year • Loss before tax of $50.4m (2019: Profit $267.7m) • Prior year reserve releases of $93.1m (2019: $9.5m) • Return on equity of -3% (2019: 15%) • Net investment income of $188.1m (2019: $263.7m) • Gross premiums written increased by 19% to $3,563.8m • Capital
Slide 6: Consistent delivery on strategy
Consistent delivery on strategy • Achieved significant growth across three major platforms – London market, mainland Europe and North America • Equity raise and increase of banking facility to support growth and manage COVID-19 losses • Our focus has been on evaluating claims fairly and paying promp
Slide 7: Premium growth and expense control
Premium growth and expense control Gross premiums written ($m) Combined ratio* (%) +19% +15% 125% 109% 4,000 +12% 3,563.8 99% 98% 100% +6% +7% 3,003.9 100% 89% 3,000 2,615.3 2,195.6 2,343.8 75% 58% 59% 62% 73% 48% 2,000 50% 1,000 25% 41% 41% 39% 38% 36% 0 0% 2016 2017 2018 2019 2020 2016 2017 2018 2
Slide 8: Shareholder return
Shareholder return 100% r 3B 3 g g g B by zg Q 8 g g g g 3 g g g g g a 3 g mmiVinwioe FL Event 5 WiC in (RFR +10% p.a. to (1 month average) {including dividends) RFR +15% p.a)
Slide 9: Environmental Social & Governance
Environmental Social & Governance 9
Slide 10: Enhanced focus and commitment to ESG
Enhanced focus and commitment to ESG • Published standalone responsible business report • Sustainability strategy to be published in March 2021 • Hired sustainability officer in June 2020 to further enhance • Set new gender diversity targets focus on this area • Commenced workstream to enhance our u
Slide 11: In focus COVID-19
In focus COVID-19 peazley
Slide 12: COVID-19
COVID-19 • During 2020 $340m booked in respect of first party Swift action was taken to re-underwrite COVID-19 COVID-19 claims (net of reinsurance) exposed lines • This estimate would only be revised if events continue to Claims have been and continue to be settled in line be cancelled in the second
Slide 13: COVID-19 - third party claims
COVID-19 - third party claims COVID-19 v all other claims – Specialty Lines & Cyex 3000 2500 • Actively re-underwriting since March last year 2000 All Other Examples of claims 1500 Claims 1000 • D&O – misrepresentations 500 Tag/Cat Code for Covid, 0 Recession, • Healthcare – failure to prevent / mit
Slide 14: Financials
Financials 14
Slide 15: Financial performance
Financial performance Year ended Year ended % Increase 31 December 2020 31 December 2019 Gross premiums written ($m) 3,563.8 3,003.9 19% Net premiums written ($m) 2,917.0 2,503.5 17% Net earned premiums ($m) 2,693.4 2,347.0 15% (Loss)/Profit before income tax ($m) (50.4) 267.7 Claims ratio 73% 62% E
Slide 16: Strong investment return in volatile market
Strong investment return in volatile market 300.0 7.0% 6.0% 250.0 93.4 5.0% 200.0 4.0% USD 150.0 104.1 3.0% 58.9 100.0 170.3 2.0% 30.4 50.0 14.1 79.4 84.0 1.0% 62.7 43.5 33.1 0.0 8.0 0.0% 2015 2016 2017 2018 2019 2020 1st half 2nd half Annual return 16
Slide 17: Investment portfolio
Investment portfolio 2019 Asset Balance $5.9bn 2020 Asset Balance $6.7bn 50% 46% 45% 41% 40% 37% 35% 32% 30% 25% 20% 15% 10% 6% 6% 5% 5% 4% 4% 5% 3% 3% 4% 3% 0% 1% 0% Sovereign Debt Investment Hedge Funds Cash and Cash High Yield Debt Equities Illiquid Credit Other Grade Debt Equivalents Assets 2019
Slide 18: Claims releases improving
Claims releases improving 220 200 14% 180 12% 160 140 10% 120 8% 100 6% $m 80 60 4% 40 2% 20 0 0% -20 -2% -40 -60 -4% 2014 2015 2016 2017 2018 2019 2020 CyEx Marine Market facilities PAC Property Reinsurance Specialty lines % of NEP 18
Slide 19: Reserve surplus remains within target range
Reserve surplus remains within target range Surplus in net held reserves 10.0% % above actuarial estimate 8.2% 8.2% 8.2% 7.9% 7.5% 7.4% 7.4% 6.9% 7.1% 6.7% 6.7% 6.8% 6.4% 6.6% 6.1% 6.3% 5.6% 5.0% 5.0% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Fina
Slide 20: Beazley approach to capital
Beazley approach to capital • We primarily present the Lloyd’s Economic capital requirement (ECR) chosen as it is the most stringent regulatory capital measure, alongside our US capital requirement for BICI • The ECR is the only measure we have a target surplus range for – this is an internally pref
Slide 21: Capital position remains strong and within preferred range
Capital position remains strong and within preferred range • Group capital requirement: Year ended Year ended 31 Dec 2020 31 Dec 2019 $m $m Lloyd’s economic capital requirement (ECR)* 2,116.5 1,828.4 Capital for US insurance company 246.3 203.9 2,362.8 2,032.3 • Our funding is made up of our own equ
Slide 22: Underwriting
Underwriting 22
Slide 23: 2021 overview
2021 overview 2020 Monthly rate change 118.00% • Market sentiment moved materially from Q2 to address issues: 116.00% • New – COVID-19, recession, ransomware 114.00% • Existing – underperformance in most lines, social inflation 112.00% 110.00% • Change in risk : reward ratio led to increased growth
Slide 24: Elevated risk environment – but priced for
Elevated risk environment – but priced for 2019 vs 2020 claims as at 1/1/2021 • Have not seen escalation of social inflation but continue to monitor • Repercussions of COVID-19 expected to manifest • Recession depth & impact remain uncertain • Underwriting action: Healthcare Management Financial Pro
Slide 25: Proactive management of ransomware
Proactive management of ransomware • Frequency of incident increasing for many years but Incidents with extortion payments accelerated in 2019 60% • Exfiltration of data drove average cost rises in 2020 50% 40% • Proximate cause is inadequate network security 30% risk management 20% 10% • Solution i
Slide 26: The outlook
The outlook 26
Slide 27: Strong financial footing for profitable growth in 2021
Strong financial footing for profitable growth in 2021 • Favourable rate environment and double digit growth expected to continue • Well capitalised to take advantage of opportunities • Continued expansion of specialist products globally • Expected combined ratio in the low nineties in 2021 • Curren
Slide 28: Questions
Questions 28
Slide 29: Appendices
Appendices 29
Slide 30: Cumulative rate change since 2015
Cumulative rate change since 2015 140% 135% 130% 125% 120% Rate change 115% 110% 105% 100% 95% 90% 85% 80% 2015 2016 2017 2018 2019 2020 Underwriting year Marine Property Speciality lines CyEx Reinsurance PAC Market facilities All divisions 30
Slide 31: Cyber gross premiums written growth
Cyber gross premiums written growth 600.0 500.0 400.0 GWP (USD$m) 300.0 200.0 100.0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Tech E&O BBR InfoSec Vector 31
Slide 32: Performance by division
Performance by division Year ended 31 December 2020 Cyber & Specialty Market Marine PAC Property Reinsurance Executive Risk Lines Facilities Gross premiums written ($m) 1020.1 337.4 273.0 470.5 194.5 1134.9 133.4 Net premiums written ($m) 864.6 309.4 227.1 389.9 126.9 961.8 37.3 Result from operatin