An absence of big catastrophe claims and hefty reserve releases resulted in robust earnings growth for Lloyd's insurer Beazley (BEZ) in 2013. That drove a seven percentage point improvement in its combined ratio (comparing claims to premiums) to an impressively profitable 84 per cent - Beazley's best underwriting performance since its 2002 listing.
Some of Beazley's business classes are seeing premium rates soften. Reinsurance rates, for example, fell 3 per cent and management says that reinsurance pricing at January's renewals slumped about 15 per cent. Yet reinsurance only generates 11 per cent of gross premiums and other business lines are looking more resilient. Property and specialty rates, for example, both rose 3 per cent and, overall, Beazley's average premium rates rose 1 per cent last year.
The return on Beazley's investment portfolio, which is focused on bonds and cash, did halve to just 1 per cent - significantly reflecting rising bond yields. Moreover, growth prospects are slowing and Beazley is planning for an unspectacular 5-10 per cent growth in premiums written in 2014. That, however, has left the company with more capital than it needs, which explains the 16.1p special dividend. Finance director Martin Bride says this payout represents the "surplus over the [capital] buffer" needed by Beazley to support its growth plans.
Broker Numis Securities expects adjusted EPS of 25.8p for 2014 (31p in 2013) and net tangible assets (NTA) of 146p a share.
BEAZLEY (BEZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 268p | MARKET VALUE: | £1.4bn | |
| TOUCH: | 267.9-268p | 12-MONTH HIGH: | 283p | LOW: 180p |
| DIVIDEND YIELD: | 3.3%* | PE RATIO: | 8 | |
| NET ASSET VALUE: | 257¢ | COMBINED RATIO: | 84% | |
| Year to 31 Dec | Net premiums ($bn) | Pre-tax profit ($m) | Investment income ($m) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.33 | 158 | 88.1 | 7.0 |
| 2010 | 1.40 | 251 | 37.5 | 7.5* |
| 2011 | 1.37 | 63 | 39.3 | 7.9 |
| 2012 | 1.54 | 251 | 82.6 | 8.3* |
| 2013 | 1.68 | 313 | 43.3 | 8.8* |
| % change | +9 | +25 | -48 | +6 |
Ex-div: 26 Feb Payment: 28 Mar £1=$1.63 *Excludes special dividends: 2.5p (2010), 8.4p (2012) & 16.1p (2013) Capacity owned: 82 per cent | ||||
