Beazley's profits hint at strong Lloyd's

Chris Wheal

Feb 9th 2010

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Lloyd's insurer Beazley has reported pre-tax profit up 15% to more than £100m. It claimed underlying profit was up 259% to £147m on a 27% rise in gross written premiums to more than £1bn.

The recently redomiciled to Dublin firm said average rate increase for the year were 3% compared with a 6% fall in prices last year. Beazley is the first Lloyd's insurer to report in what is expected to be boom year for the 300-year old insurance market.

Financial highlights (2008 in brackets)

Gross premiums written £1,115.5m (£875.7m)
Net premiums written £848.0m (£740.4m)
Profit before income tax £100.7m £87.2m
Underlying profit before income tax £147.3 (£41.0m)
Claims ratio 55% 56%
Expense ratio 35% 34%
Combined ratio 90% 90%
Rate increase/reduction 3% (-6%)
Investment income £56.1m (-£25.8m)
Investment return 2.7% (-1.5%)
Net tangible assets £548.1m (£360.2m)
Investment and cash balances £2,274.3m (£1,994.2m)

Beazley chief executive officer Andrew Horton said: "Our underwriters delivered again in 2009, recording a very strong underwriting result, particularly in our marine and reinsurance accounts.

That's good news, but even Beazley admits the low catastrophe claims bear some responsibility.

Fortunate

"In 2010 insurers and reinsurers will be fortunate to experience a repeat of the past year's low incidence of catastrophe losses. Rates for catastrophe exposed business have fallen but remain relatively high," Horton said.

"In the specialty lines market, mainly comprising professional indemnity business, we expect rates to rise modestly in 2010, driven by recession-related losses in some areas, low investment income and inflationary threats.

"Our diverse book of business in this class and strong track record in cycle management enabled us to navigate a challenging market in 2009 and we are well placed to benefit from any rate rises that occur."

Three-year plan

Lloyd's itself yesterday published a three-year plan admitting the over-concentration in the market on large, particularly US catastrophe risks. It wants to diversify in both what it insurers and where it insures.

That sounds like common sense to me.

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