Mentioned in I/C yesterday.
Fc P/E in 2010 of 5 looks attractive plus a full year dividend of around 7%.
Meanwhile, Beazley's investment book has returned to profitability after making a £25.8m loss in 2008. The book is mainly focused on safe-looking cash and bonds - representing 92.7 per cent of the portfolio - and generated a decent enough 2.7 per cent return in the year.
Collins Stewart expects pre-tax profits of £128m for 2010 (£101m in 2009), giving EPS of 20.1p (18.4p in 2009).
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There was a similarly bullish view from the Times recently - http://business.timesonline.co.uk/tol/business/markets/article7021186.ece
Shares in Beazley, the Lloyd’s of London underwriter, have gone nowhere since they were recommended here six months ago.
That seems harsh in the light of yesterday’s figures, which show the company — the first in its sector to file 2009 numbers — continuing to move in the right direction.
At £100.7 million, pre-tax profits were up 15 per cent on the year and firmly ahead of forecasts — despite the £33 million hit from trade credit insurance losses in Bahrain, Ukraine and Kazakhstan. Beazley’s return on equity on underlying profits was an encouraging 25 per cent and premium rates are now nudging higher — up an average 3 per cent in 2009, against a 6 per cent fall the previous year. So, too, are the returns on Beazley’s £2.2 billion investment portfolio, which was heavily reweighted towards government bonds in the course of the year. Finally, the full-year dividend was raised 6 per cent to 7p a share, giving a 6.7 per cent yield — a welcome consolation, given the lack of capital growth.
At first glance, there is little in Beazley’s outlook to excite. Premium rates are expected to remain flat in 2010, with rises in specialty lines, such as professional indemnity, offset by weakness in catastrophe-related business. Short-term investment returns should also be modest.
However, the nature of Beazley’s specialty business — whereby claims typically are paid out five years after the risk is underwritten — means that it will gain from rising interest rates. Further, its ability to maintain a combined ratio (a measure of underwriting profitability) at 90 per cent over the past four years conveys a lack of volatility for which it should be rewarded.
At 103½p, or five times 2010 earnings, the shares remain a buy.
For those who don't follow closely, it is worth mentioning that BEZ changed its tax domicile from the UK to ireland last year and this reduced their tax rate
The interims said:-
We previously announced that the group had redomiciled to Ireland and changed our corporate structure by putting in place a new parent company, Beazley plc, incorporated in Jersey. This will have the benefit of providing the group with a European base, from which we can develop our European insurance operations; it has also lowered the group's effective tax rate from 1 January 2009 to 19% (compared to an effective tax rate of 28% for the same period in 2008).
So the nifty footwork reduces tax from 28% to 19% which increases profit after tax from 72% to 81% - in other words an increase in net profits of 12.5% and that boost to net profits will continue indefinitely.
What is crazy is that as far as I know Beazley's staff have not moved - Head Office staff are still in London - the laws that govern corporate domicile are completely nonsensical
Not that I'm complaining.
I noticed the CEO bought shares in the open market last year at about 92p and took that as a buy signal. I was fortunate to get in at 88p so things are ticking along quite nicely thank you very much.
