Beazley impresses on underwriting despite investment losses

Beazley (BEZ) had foreshadowed difficulties on the investment front, but the market still took fright at full-year figures that detailed a 14 per cent hike in gross premiums to $5.27bn (£4.36bn). Admittedly, the insurer did reveal investment losses of around $180mn compared with a profit of $116mn in the prior year. But given that value for most asset classes fell through 2022, it was probably the severity of the reversal that spooked investors.

The group’s underwriting performance was in line with expectations, although net premiums written – which factors premiums ceded to reinsurers – grew at a slower clip than the unadjusted measure. The claims ratio pulled back by four percentage points despite the impact of Hurricane Ian and the worsening geopolitical backdrop. Despite these impediments, another positive feature of the core business was the decline in the combined ratio – claims and costs as a proportion of premiums – from 93 to 89 per cent year on year.

Management was at pains to highlight the performance of the cyber risks division, where gross premiums have risen by 42 per cent since 2021 to $1.16bn. Rates continued to improve through the year, “albeit at a more conservative pace following the much-needed price correction of the previous two years”. At any rate, this part of the business has the potential to drive premiums across multiple geographies as the corporate world becomes increasingly aware of the cyber threat.

Despite macroeconomic uncertainties, it’s unlikely that Beazley’s investment portfolio will suffer to the same degree this year. It may even open some knockdown opportunities on the property front. Analysts are guiding for a combined ratio in the high 80s, but the nature of the business renders this wholly indicative. We retain our long-term buy call based on the growth potential of global cyber and professional indemnity markets. Buy.   

Last IC View: Buy, 521p, 22 Jul 2022