Slide 1: Results for the year ended 31 December 2011
Cover Results for the year ended 31 December 2011 Tuesday, 7 February 2012
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 of 2011 5-8 Financials Performance 10 Investments 11-12 Reserves 13-14 Capital 15 Solvency II 16 Underwriting review 17-23 Outlook 24 Appendix 26-35 3
Slide 4: Overview of 2011
Generic title white Overview of 2011
Slide 5: Strong performance in difficult markets
Strong performance in difficult markets • Profit before income tax of $62.7m (2010: $250.8m) • Return on equity of 6% (2010: 19%) • Gross written premiums decreased by 2% to $1,712.5m (2010: $1,741.6m) • Combined ratio of 99% (2010: 88%) • Rate increase on renewal portfolio of 1% (2010: 2% decrease)
Slide 6: Sustained high performance
Cover Sustained high performance Gross premiums written ($m) Combined ratio (%) 120% 2000 1800 100% 1600 1400 80% 37% 1200 39% 34% 35% 36% 1000 60% 1,751.3 1,741.6 1,712.5 800 1,561.0 1,620.0 40% 600 62% 51% 56% 55% 52% 400 20% 200 0 0% 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Expense ratio
Slide 7: After stormy year, an improving outlook
After stormy year, an improving outlook • Well diversified portfolio enabled us to maintain track record of profitability in 2011 despite record natural catastrophes • Rates now hardening in catastrophe exposed classes, notably commercial property and reinsurance. Market still very competitive for p
Slide 8: Board changes
Board changes Dennis Holt (joins Beazley plc Board as non-executive director and chairman elect) Dennis Holt has more than 40 years experience in financial services markets. He was formerly a Main Board Executive Director at LloydsTSB (2000-01) and Chief Executive of AXA UK and a member of AXA’s Glo
Slide 9: Financials
Generic title white Financials
Slide 10: Maintaining our track record of profitability
Maintaining our track record of profitability Year ended Year ended % increase/ 31 Dec 2011 31 Dec 2010 (decrease) Gross premiums written ($m) 1,712.5 1,741.6 (2%) Net premiums written ($m) 1,374.0 1,402.1 (2%) Net earned premiums ($m) 1,385.0 1,405.2 (1%) Profit before income tax ($m) 62.7 250.8 (7
Slide 11: Portfolio delivers stable 1% return in 2011
Portfolio delivers stable 1% return in 2011 120.0 7.0% 100.0 6.0% 52.0 80.0 5.0% 46.9 4.0% 60.0 Investment Return Annualised Investment Return 3.0% 40.0 16.8 2.0% ($m) 52.5 43.5 29.0 20.0 1.0% 21.3 22.5 8.5 0.0 0.0% -1.0% -20.0 -62.8 -2.0% -40.0 -3.0% -60.0 -4.0% -80.0 -5.0% 2007 2008 2009 2010 2011
Slide 12: Conservative portfolio positioning maintained
Conservative portfolio positioning maintained December 2011 December 2010 Alternative assets Alternative assets, Cash and cash 10.3% 11.3% equivalents 16.2% Cash and cash ABS, MBS, CMBS, equivalents, 19.4% ABS, MBS, CMBS, Corp Bonds Other, Corp Bonds Other 7.7% 11.4% Corp Bond Financial Corp Bond No
Slide 13: Prior year reserve releases mitigate catastrophes
Prior year reserve releases mitigate catastrophes 16.0% 210 190 14.0% 170 12.0% 150 10.0% 130 $m 110 8.0% 90 6.0% 70 50 4.0% 30 2.0% 10 -10 2007 2008 2009 2010 2011 0.0% Specialty lines Political risks and contingency Life accident and health Marine Property Reinsurance % of NEP 13
Slide 14: Whole account reserve strength within our target range
Whole account reserve strength within our target range Surplus in net held reserves Preferred upper end 8.2% 7.9% 7.5% % above actuarial estimate 7.4% 7.4% 6.7% 6.7% 6.4% 6.1% Preferred lower end 2003 2004 2005 2006 2007 2008 2009 2010 2011 Financial year 14
Slide 15: Strong capital position
Strong capital position Sources of funds Year Ended 31 Dec 2011 Year Ended 31 Dec 2010 Shareholders funds ($m) 1,071.0 1,082.9 Debt ($m) 249.0 248.8 1,320.0 1,331.7 Uses of funds Lloyd’s underwriting ($m) 742.9 776.9 US Insurance Company ($m) 107.7 107.7 850.6 884.6 Surplus ($m) 469.4 447.1 Unavaila
Slide 16: Solvency II – Beazley is on track
Solvency II – Beazley is on track • We are already getting benefits from programme • We remain alert for any growth opportunities SII might create • We have a good understanding of our capital requirement using the SII model Capital on Solvency II balance sheet increased by 40% Capital requirement c
Slide 17: Underwriting review
Generic title white Underwriting review
Slide 18: Underwriting review
Underwriting review • Combined ratio of 99% in line with earlier guidance reflecting benefits of our diversified portfolio • Worst year on record for natural catastrophes: Our share $215m • No deterioration on large loss estimates from the first half of 2011 • We continue to reserve consistently, ma
Slide 19: Underwriting review
Underwriting review Year Ended 31 Dec 2011 Year Ended 31 Dec 2010 Gross premiums written ($m) 1,712.5 1,741.6 Net premiums written ($m) 1,374.0 1,402.1 Net earned premiums ($m) 1,385.0 1,405.2 Expenses ratio 37% 36% Claims (excl catastrophe claims) 46% 44% Catastrophe related claims ratio 16% 8% Com
Slide 20: Recent catastrophe events in context
Recent catastrophe events in context 120 100 80 insured losses ($bn) 60 40 20 0 2005 2011 *Principally hurricanes Katrina, Rita and Other Australian Floods Wilma New Zealand Earthquake Japan Earthquake US Tornadoes Hurricane Irene Thailand Floods Source: Munich Re 20
Slide 21: Portfolio management achieves consistent combined ratio through market cycles
Portfolio management achieves consistent combined ratio through market cycles 180 Combined Ratio % 160 140 120 100 80 60 40 2006 2007 2008 2009 2010 2011 Year 21
Slide 22: 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 Development Year 6 5 140% 4 3 120% 114% 2 ULR 100% Net incurred loss ratio 84% 80% 74% 56% 54% 60% 48% 45% 41% 42% 41% 40% 31% 20% 16% 0% 1993-1996 1997-2000 2001 2002 2003 2004 2005 200
Slide 23: Cumulative rate changes since 2001
Cumulative rate changes since 2001 220% 200% 180% 160% Rate Change 140% 120% 100% 80% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Underwriting Year Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All Depts. 23
Slide 24: Outlook
Outlook • Seeing positive rate movements in aggregate • Premium growth of 5-10% is planned in 2012 • We continue to explore organic and acquisition-driven growth opportunities • We will maintain our dividend strategy • Finance in place for known opportunities • We wish the Olympic fencing team good
Slide 25: Any questions?
Questions? Any questions?
Slide 26: Appendix
Generic title white Appendix
Slide 27: US originated business delivers $366.2m
US originated business delivers $366.2m GWP by Product 150 140 130 120 110 100 90 80 $m 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 Architects and Engineers Technology and Media Management Liability Healthcare and Lawyers High Value Homeowners Other Property Commercial Property Politic
Slide 28: Zoom on rate changes since 2008
Zoom on rate changes since 2008 110% 105% Rate Change 100% 95% 90% 2008 2009 2010 2011 Underwriting Year Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All Depts. 28
Slide 29: Recession planning: frequency has reverted to normal levels
Recession planning: frequency has reverted to normal levels Claims Frequency - Rolling 12 month average 170% 160% 150% 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% US Lawyers US Architects & Engineers US D&O* US Employment Practices Liability UK Prof. Indemnity *US D&O statistics are market-wide 29
Slide 30: Life accident & health
Life accident & health Year Ended 31 December 2011 2010 • Combined ratio 95% despite Gross premiums written ($m) 86.9 78.1 investment in business in US and Australia Net premiums written ($m) 80.3 71.4 • Beazley opened a Minneapolis office in 2011 where we will begin writing Net earned premiums ($m)
Slide 31: Marine
Marine Year Ended 31 December 2011 2010 Gross premiums written ($m) 274.2 261.7 • Gross premiums increased due to strong performance in energy Net premiums written ($m) 245.1 235.6 • Delivery of combined ratio of 72% and achieved an average combined ratio of Net earned premiums ($m) 231.7 233.9 77%
Slide 32: Political risks and contingency
Political risks and contingency Year ended 31 December 2011 2010 Gross premiums written ($m) 102.5 100.9 • Combined ratio of 79% despite losses incurred in Libya on the political book Net premiums written ($m) 85.2 79.9 • Continued expansion of our global presence, with underwriters in the US, Net e
Slide 33: Property
Property Year ended 31 December 2011 2010 Gross premiums written ($m) 359.4 382.5 • Rate improvements follow the restructuring of our US portfolio to Net premiums written ($m) 273.9 283.8 focus on excess and surplus lines business Net earned premiums ($m) 283.7 285.9 • All teams saw rate increases i
Slide 34: Reinsurance
Reinsurance Year ended 31 December 2011 2010 Gross premiums written ($m) 178.3 174.4 • Multiple events impacted the performance during the worst year on Net premiums written ($m) 130.4 134.4 record for natural catastrophes Net earned premiums ($m) 131.7 131.6 • Beazley’s reinsurance team has impleme
Slide 35: Specialty lines
Specialty lines Year Ended 31 December 2011 2010 • Reduction in premiums – mainly in A&E Gross premiums written ($m) 711.2 744.0 and healthcare PI insurance • Prior year releases of $61.8m (2010: Net premiums written ($m) 559.1 597.0 $56.9m) Net earned premiums ($m) 579.6 600.7 • Cycle management ex