An absence of catastrophic events supported yet another strong underwriting result at Lloyd’s insurer Beazley (BEZ). Its combined ratio (of claims to premiums) at the half-year stage remained virtually unchanged year-on-year at an impressively profitable 90 per cent.
But premium rates are under pressure. An influx of new capital into the reinsurance market, for instance, depressed Beazley’s reinsurance premium rates by a hefty 20 percentage points in the half, while its marine account saw rates fall seven percentage points. Elsewhere, the pressure isn’t quite so severe. In fact, the group’s specialty lines account - its largest operation - delivered a two percentage-point rate rise in the half, and average rates dipped by a fairly modest two percentage points across the book.
The return on Beazley’s bond-focused investment book, meanwhile, recovered to 1.1 per cent from nil a year earlier, when performance was hit by unrealised losses in the bond book. To improve returns, management plans to reallocate around 5 per cent of the small higher-yielding book away from hedge funds and into illiquid investments.
Broker Numis Securities expects full-year pre-tax profit of $259m, giving EPS of 25.9p (from $313m and 31p), with net tangible book value of 151p.
BEAZLEY (BEZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 264p | MARKET VALUE: | £1.38bn | |
| TOUCH: | 264-265p | 12-MONTH HIGH: | 270p | LOW: 187p |
| DIVIDEND YIELD*: | 3.4% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 242¢ | COMBINED RATIO: | 90% | |
| Half-year to 30 Jun | Net premiums ($bn) | Pretax profit ($m) | Investment income ($m) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 758 | 82 | 0.3 | 2.9 |
| 2014 | 889 | 133 | 46.8 | 3.1 |
| % change | +17 | +61 | +15500 | +7 |
Ex-div: 30 Jul Payment: 29 Aug *Excludes 2013's special dividend of 16.1p Capacity owned: 82 per cent £1=$1.71 | ||||
