Beazley delivers improved COR but profits down on investment returns

Despite the improvement pre-tax profit slumped to $22.3m (£18.7m) compared to $167.3m for the start of 2021.

The provider explained that it faced a net investment loss in 2022 of $193m versus a profit of $83.6m last year.

Gross written premiums were up 26% year-on-year to $2.55bn.

Adrian Cox, CEO of Beazley commented: “We have maintained the momentum of the second half of 2021 with gross premiums increasing by 26% alongside better than expected claims experience. A challenging investment environment has impacted profit; however I’m delighted that we have achieved our best combined ratio at a half year since 2015.

“We continue to manage actively for inflation and recession and our estimate for the war in Ukraine remains unchanged. Given the positive experience in the first half of this year we are in a position to update our combined ratio guidance to high 80s for 2022 assuming average claims experience for the second half of the year.”

SME

The breakdown of the figures showed that the digital division, an end-to-end business unit that focuses on small specialist business, grew GWP by 17% to $98m but the COR deteriorated from 79% to 85%.

Cox commented: “The market outlook for this is strong. Brokers are beginning to digitise their SME portfolios which is essentially what is driving our behaviour. In addition there is good underlying demand growth from SMEs. We are bullish about the long-term outlook for growth.”

The unit deals with all digital or digitisable business across Beazley including the likes of relevant cyber, management liability, tech E&O, PI, med mal & healthcare, contingency and pleasure craft. The COR deteriorated from 79% to 85%.

The division takes business from UK, US, Canada, France, Germany and Spain.

Cox told Insurance Age that the UK numbers would be similar to what was seen overall. The bulk of the digital book came from North America he noted, but added that Beazley had a growing book of UK business particularly in management liability, cyber and pleasure craft.

“The brokers are very intrigued and excited by what we have done on digital,” he said. “They are very much trying to figure out how to digitise their own business particularly the SME bit and get more efficient and streamlined. As part of that they are trying to figure out how they structure themselves as well.

“The experience that we have done to put all the capabilities in one team – IT, operations, underwriting and everything they need to do the whole thing end to end – is a bit a different and they are keen to see if it works and engage.”

Asked what brokers will see next from the provider the CEO continued: “If we digitise well, the whole frictional cost of placing and administering insurance should go down and that is good for everyone.

“We want as much of our product set digitised in the SME world as we can so our ambition is to do that. Where we are seeing demand from our brokers tends to be on the financial lines and cyber products to start with but we expect it to broaden out.”

Cyber

Beazley’s cyber book grew by 77% to $472.7m in the period with the COR improving to 74% (H1 2021: 96%).

Cox detailed that premium growth had been much stronger than exposure growth and highlighted that frequency of loss by policy count and premium continued to decrease.

“We are increasingly confident that our cyber eco system is materially helping in our risk selection,” he said.

Concluding: “We expect strong demand growth to continue because the risk remains elevated and obvious.

“We expect the market to move back to equilibrium gradually over the next year or so. Rate changes have begun to moderate from the plus 100 we were getting at the end of last year and the first few months of this year.”

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