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Beazley boosts profits

RESULT: Higher gross premiums and releases from reserves offset Chilean earthquake losses
July 27, 2010

Lloyd's insurer Beazley reported figures in US dollars for the first time, but even taking into account a resulting one-off foreign exchange gain of $33.7m (£21.7m), adjusted pre-tax profits of $82m were comfortably ahead of Numis Securities forecasts of $59m.

IC TIP: Hold at 122p

Gross written premiums rose by 5 per cent to $940m, reflecting strong growth in reinsurance and specialty line work. And while there was a 2 per cent decline in premium rates overall, the insurer's combined ratio (of claims to premiums) still improved from 90 per cent to 89 per cent. Beazley has also benefited from a cautious stance on releasing reserves from catastrophe exposed accounts until premiums are substantially earned. This means that underwriting reserves from 2009 of $65.9m were available for release to meet claims arising from the Chilean earthquake.

Inevitably, though, investment income took a knock, providing an annualised return of just 0.5 per cent against 2.9 per cent a year earlier, with a bulk of the portfolio parked in cash and fixed-income securities. Still, as a result of strong underwriting earnings, Numis is upgrading its full-year pre-tax profit estimate by $49m to $263m.

BEAZLEY(BEZ)
ORD PRICE:122pMARKET VALUE:£644m
TOUCH:122-123p12-MONTH HIGH:126pLOW: 95p
DIVIDEND YIELD:5.8%PE RATIO:5
NET ASSET VALUE:128pCOMBINED RATIO:89%

Half-year to 30 JunNet premiums ($m)Pre-tax profit ($m)Investment income ($m)Dividend per share (p)
200851230.140.52.3
2009625115.58.52.4
% change+22+285-79+4

Ex-div: 4 Aug

Payment: 3 Sep

Capacity owned: 81% £1:$1.55

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