Slide 1: Results for the period ended 30th June 2023
Results for the period ended 30th June 2023 7th September 2023
Slide 2: Adrian Cox, CEO; Sally Lake, CFO; Jahan Anzsar, Chief Actuary
Adrian Cox, CEO Sally Lake, CFO Jahan Anzsar, Chief Actuary
Slide 3: Contents
Contents 05 Highlights 07 IFRS 17 13 Financial performance 17 Platform strength 20 Our underwriting 29 Capital strategy 37 Outlook 39 Questions 3
Slide 4: 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 5: Highlights HY23
Highlights HY23 • Record half year profit of $366.4m • On track to achieve full year guidance • Leaning into the property opportunity • Momentum continues in cyber – strong growth in Europe • Platform strength continues to be built out – US E&S carrier • Deployment of raised capital continues in 202
Slide 6: Key financials
Key financials • Gross insurance written premiums - $2,921.1m (2022HY: $2,574.3m) • Insurance service result - $342.2m (2022HY: $540.6m) • Discounted combined ratio - 84% (2022HY: 71%) • Undiscounted combined ratio - 88% (2022HY: 74%) • IFRS 4 combined ratio - 88% (2022HY: 87%) • Profit before tax -
Slide 7: IFRS 17
IFRS 17 Adrian Cox 7
Slide 8: Reserving under IFRS 17
Reserving under IFRS 17 100% • Preferred confidence level is between the 80th to 90th percentile 90% 89% • Risk Adjustment is estimated using 85% 85% the Cost of Capital Approach 80% • IFRS 17 reserves are underpinned by best estimates 70% HY2022 FY2022 HY2023 8
Slide 9: Reserving under IFRS 17
Reserving under IFRS 17 If we materially grow lines of business that are expected to have higher returns, then this will initially contribute to a higher risk adjustment On our Property Risks business, we currently have a combination of the following effects driving the claims ratio: • Rapid and mat
Slide 10: IFRS 4 to IFRS 17 HY2023 discounted COR bridge
IFRS 4 to IFRS 17 HY2023 discounted COR bridge IFRS 4 COR Impact of Rebased Expenses Onerous Other Undiscounted Discounting IFRS 17 IFRS 17 on COR contracts COR COR claims ratio 10
Slide 11: Discounting YE2022 to HY2023
Discounting YE2022 to HY2023 • Increases profit by $85m in H12023 • Continued increase in discounting credit to half year 2023 • Driven by the change in discount rates during 2023 YE 2022 Unwind New and change Change in HY 2023 in undiscounted discount estimates rates 11
Slide 12: Discount Rate Sensitivity Analysis
Discount Rate Sensitivity Analysis We have conducted sensitivity analysis on the yield curves as at HY23 and YE22 on both the assets and liabilities. The below table shows the net of reinsurance impact on Profit after Tax (“PAT”) of each scenario considered. USD(m) Assets Liabilities Total PAT Impac
Slide 13: Financial performance
Financial performance — beazley 13
Slide 14: Financial performance
Financial performance HY ended HY ended 30 June 2023 30 June 2022 % movement Gross Insurance Written Premiums ($m) 2,921.1 2,574.3 13% Net Insurance Written Premiums ($m) 2,349.6 1,808.2 30% Net Insurance Revenue ($m) 2,089.5 1,857.8 12% Insurance Service Result ($m) 342.2 540.6 (37%) Profit before
Slide 15: Investment return
Investment return 300.0 5.0% 4.0% 93.4 200.0 3.0% 104.1 2.0% 100.0 33.8 170.3 143.9 Investment return Investment result 1.0% 84.0 82.6 0.0 13.3 0.0% 2019 2020 2021 2022 2023 (1.0%) (100.0) (193.0) (2.0%) (3.0%) (200.0) (4.0%) (300.0) (5.0%) 1st half 2nd half Investment Return 15
Slide 16: Investment Portfolio
Investment Portfolio 60% 56% Portfolio: $9,644.1m (31 Dec 2022: $8,998.1m) 50% 49% 40% 30% 26% 23% 20% 10% 10% 7% 6% 6% 4% 3% 3% 2% 2% 2% 1% 0% 0% Sovereign Debt Investment Grade Debt Hedge Funds Cash and Cash High Yield Debt Equities Illiquid Credit Assets Other Equivalents Q4 2022 Q2 2023 16
Slide 17: Platform strength
beazley Ay Platform strength aA
Slide 18: Three platform strategy update
Three platform strategy update • Our US, European and global wholesale platforms allow us to access business in locations where there is demand for our specialist products and expertise • We plan to begin writing on new US Beazley E&S carrier (subject to regulatory approval) from 1/1/2024 • We expec
Slide 19: Platform strength – cycle management and delivering growth
Platform strength – cycle management and delivering growth Europe North America Global Wholesale Via Lloyd’s Long term Long-term growth typically Growth at same rate as the Multi decade growth journey trajectory above market trend market Currently fast moving due to demand in Short/medium Fast growi
Slide 20: Our underwriting
Our underwriting 20
Slide 21: Cyber Risks - continued momentum
Cyber Risks - continued momentum • IWP $541.4m (2022HY $473.7m) • Undiscounted COR 78% (2022HY 48%) • Rate change (3%) (2022HY: 71%) • Rates 2.8x higher than end of 2019 • Increasing frequency of ransomware has not impacted our book yet • War wording uncertainty continues to dissipate • Prior invest
Slide 22: Cyber risks - platform premium split
Cyber risks - platform premium split Europe North America Global Wholesale Via Lloyd’s 50% % premium share 18% 32% 22% 78% Admitted business Non admitted business Growth HY23 v HY22 34% 22% 4% 22
Slide 23: Property Risks – capitalising on opportunity
Property Risks – capitalising on opportunity • IWP $805.2m (2022HY: $487.4m) • Undiscounted COR 84% (2022HY: 88%) • Rate change 22% (2022HY: 9%) • Property reinsurance in line with expectations and growth plan • Property insurance growth slightly higher • 1 in 250 risk appetite as a percentage of sh
Slide 24: Property risks - platform premium split
Property risks - platform premium split Europe North America Global Wholesale Via Lloyd’s 37% % premium share 3% 60% 0% 100% Admitted business Non admitted business Growth HY23 v HY22 -11% 127% 48% 24
Slide 25: Specialty risks – balancing our portfolio
Specialty risks – balancing our portfolio • IWP $941.3m (2022HY: $950.9m) • Undiscounted COR 91% (2022HY: 70%) • Rate change (1%) (2022HY: 4%) • Growth focused on niches – such as and M&A and specialty casualty • D&O will be a lower share and reduced growth driver • Continued caution on areas expose
Slide 26: Specialty risks - platform premium split
Specialty risks - platform premium split Europe North America Global Wholesale Via Lloyd’s 39% % premium share 8% 53% 41% 59% Admitted business Non admitted business Growth HY23 v HY22 -14% 7% -4% 26
Slide 27: MAP Risks – Leveraging specialism
MAP Risks – Leveraging specialism • IWP $522.4m (2022HY: $551.0m) • Undiscounted COR 102% (2022HY: 100%) • Rate change 6% (2022: 5%) • Economic recovery and complex geopolitical environment generated increasing demand for our specialist products e.g. marine, aviation, war, contingency, political ris
Slide 28: MAP risks - platform premium split
MAP risks - platform premium split Europe North America Global Wholesale Via Lloyd’s 10% % premium share 5% 85% 79% 21% Admitted business Non admitted business Growth HY23 v HY22 50% 7% -8% * *Gross premium has reduced due to the portfolio underwriting business now being written by syndicate 5623 wh
Slide 29: Capital strategy
Capital strategy 29
Slide 30: Our capital strategy
Our capital strategy • Focus is on maintaining a balanced portfolio, resilience and deploying capital to profitable classes • Moving to internationally comparable SCR model from Lloyd's focused ECR model • Capital raised in Nov 22 is being actively deployed in 2023 and 2024 • Approach to capital man
Slide 31: Active capital management
Active capital management 25.0 50% 45% 20.0 40% 35% 36% 35% 1 in 250 risk to SHE 35% 15.0 Dividend (p) 30% 25% 20% 10.0 20% 12% 11% 15% 15% 5.0 7% 10% 6% 4% 3% 3% 5% 0.0 0% 2012* 2013 2014 2015 2016 2017 Special dividend Interim and second interim ordinary dividend Surplus over ECR post Dividend Act
Slide 32: New capital framework
New capital framework Old basis New basis • Capital position representative of a global specialty insurer • Consistent basis for comparison vs. peers Surplus over Lloyd’s ECR Group SCR Coverage in the UK and Europe • Capital position is point in time at date reported Calculated as: Calculated as: •
Slide 33: YE surplus over ECR shows capital actively deployed for growth in 2023/2024
YE surplus over ECR shows capital actively deployed for growth in 2023/2024 • Our estimated surplus over Lloyd’s ECR at YE2023 is 23% above Lloyd’s ECR which anticipates 2024 growth • Surplus position currently contemplates around 20% growth net of reinsurance for 2024 Year ended Year ended 31 Dec 2
Slide 34: HY capital position group solvency ratio
HY capital position group solvency ratio • The latest view of our group solvency capital ratio as at HY2023 is 273% • Half year position does not include following years business plan and is therefore typically expected to be higher than year end position 30th June 2023 31st Dec 2022 $m $m Eligible
Slide 35: Capital seasonality
Capital seasonality Illustrative example of SCR ratio movements between HY and FY 29% Strong underwriting performance drives significant own funds generation – delivering positive HY SCR • We typically expect HY SCR ratio to be higher than FY 273% SCR as HY only includes current year capital 244%
Slide 36: Resilient capital position can withstand external shocks
Resilient capital position can withstand external shocks Coverage remains strong even in the event of Cyber, Natural Catastrophe and Interest rate scenarios happening simultaneously (based on Solvency Capital Ratio as at 30 June 2023 ) SCR ratio estimate as at HY 2023 273% Scenario Impact on solvenc
Slide 37: Outlook
Outlook 37
Slide 38: Outlook
Outlook • Platform strength to deliver stable and consistent growth • Continue to build on cyber opportunity in Europe and Property in US E&S • Cyber war concerns dissipate and growth persists • We reiterate year end growth of mid 20s net and mid-teens gross • We expect a low 80s combined ratio on a
Slide 39: Questions
Questions 39
Slide 40: Appendices
Appendices 40
Slide 41: Discounting YE2022 to HY2023
Discounting YE2022 to HY2023 Discounting figures are calculated at a granular class level, by currency and updated quarterly. The key components driving the $85m increase in profit as a result of discounting are shown below. Category Amount: HY23 vs HY22 Calculation approach P&L line item Unwind $(1
Slide 42: Other Key Information
Other Key Information Discount rates & Liability Mean Terms • Risk Free Rates derived using Moody’s government bond yields by currency (USD/CAD/GBP EUR) • Illiquidity premium also sourced from Moody’s and adjusted to reflect the Group’s own asset portfolio • Discount rates as at HY23 and YE23 are sh