- Dividend restored and raised 5 per cent, but frequency reduced to annual payment
- Management expects double-digit growth in 2022
Consensus-beating profits and premium growth brought insurer Beazley (BEZ) to a turning point in its pandemic recovery: restoring the dividend. The speciality insurer has introduced a payout 5 per cent above 2019 levels, having decided to pay on an annual basis from now on.
A heavy burden of Covid-related insurance claims swung the Lloyd’s of London insurer to a $50mn (£36.8mn) loss before tax in 2020, and dividends were suspended.
Beazley is now safely back in the black, with gross premiums rising 30 per cent to $4.6bn in the year to the end of December, and net claims retreating by 7 per cent to a more manageable $1.8bn thanks to fewer marine, property and contingency claims.
Premiums were driven mostly by rising rates across the speciality insurer’s markets, especially in its fastest-growing division, Cyber and Executive Risk. Cyber made up a third of all premiums written in 2021, and rates more than doubled in the second half of 2021 on the back of more claims.
However, claims from cyber crimes and ransomware attacks are going up worryingly quickly, which could be storing up problems for the future. Broker Peel Hunt said cyber remains an “area of concern”, but this is currently “being absorbed by the improvements across most other underwriting classes thanks to ongoing rate rises at Lloyd’s”.
Chief executive Adrian Cox remains “confident” in delivering double-digit growth in 2022. The earnings beat and strong investment portfolio growth in 2021 reaffirmed broker Numis’s view that Beazley is the “top pick” in the sector, moving the insurer from ‘add’ to ‘buy’ at a 655p target price.
For now, Beazley appears to be out of the woods after Covid-19, and the insurer has already started to pull back on cyber, writing lower exposure at higher premiums. This bodes well for future income and dividend growth. Buy.
Last IC View: Buy, 382p, 23 July 2022
BEAZLEY (BEZ) | ||||
ORD PRICE: | 501p | MARKET VALUE: | £3.1bn | |
TOUCH: | 500-501p | 12-MONTH HIGH: | 516p | LOW: 292p |
DIVIDEND YIELD: | 1.9% | PE RATIO: | 6 | |
NET ASSET VALUE: | 350p | COMBINED RATIO: | 93% |
Year to 31 Dec | Net written Premiums ($bn) | Pre-tax profit ($mn) | Investment Income ($mn) | Dividend per share (p) |
2017 | 1.98 | 168 | 138 | 11.1 |
2018 | 2.25 | 76.4 | 41.1 | 11.7 |
2019 | 2.50 | 268 | 264 | 12.3 |
2020 | 2.92 | -50.4 | 188 | nil |
2021 | 3.51 | 369 | 116 | 12.9 |
% change | +20 | - | -38 | - |
Ex-div: | 17 Feb | |||
Payment: | 30 Mar | |||
*£1=$1.36 |