Beazley joins the buyback club

Lloyd’s insurer Beazley (BEZ) unveiled a record set of results, albeit one where comparisons were hard to make because of IFRS 17 changes. The headline increase in profits reflected the buoyant insurance market where hardening rates have been a feature of the results season, as well as Beazley’s increasingly important presence in property risk insurance underwriting. The confidence generated by the results was enough for the company to announce a new $325mn (£255mn) buyback.

While cyber insurance has grabbed the headlines, it was property insurance risk that drove the year’s performance as investments made during the soft part of the rate cycle paid off handsomely, with a 64 per cent increase in written premiums to $1.35bn (2022: $823.2mn) during the year.

The return of activity in this part of the market reflects the willingness of insurers to underwrite risks again in awkward property markets like Florida which have regular large loss events. Management made clear that Beazley would be leaning into the property risk market during the current cycle. By contrast, after a three-year bull run in cyber security risk, the market for this product moderated during 2023 and written premiums here were largely flat at $1.18bn.  

The company also benefited from an exceptional investment income figure of $480mn, more than double the previous year’s result as higher interest rates returned.

Numis said it had changed its forecasts to account for higher non-underwriting costs, but based on the new projections, the shares are currently valued at a price/earnings ratio of 7.3, with a price to net tangible assets of 1.32. Buy.

Last IC view: Buy, 525p, 7 Sep 2023