REG - Beazley PLC - Beazley plc results for year end 31 December 2021
10/02/2022 07:00
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RNS Number : 2682B Beazley PLC 10 February 2022
Press Release
Welcome return to profitable growth
London, 10 February 2022
Beazley plc results for year ended 31 December 2021
· Profit before tax of $369.2m (2020: Loss $50.4m)
· Return on equity of 16% (2020: (3%))
· Gross premiums written increased by 30% to $4,618.9m (2020:
$3,563.8m)
· Combined ratio of 93% (2020: 109%)
· Rate increase on renewal portfolio of 24% (2020: 15%)
· Prior year reserve releases of $209.8m (2020: $93.1m)
· Net investment income of $116.4m (2020: $188.1m)
· Interim dividend declared of 12.9p for the full year of 2021
(2020: nil)
Year ended Year ended % movement
31 December 2021
31 December 2020
Gross premiums written ($m) 4,618.9 3,563.8 30%
Net premiums written ($m) 3,512.4 2,917.0 20%
Profit / (Loss) before tax ($m) 369.2 (50.4)
Earnings per share (pence) 37.0 (6.3)
Net assets per share (pence) 265.8 219.1 21%
Net tangible assets per share (pence) 250.4 203.8 23%
Dividend per share (pence) 12.9 -
Adrian Cox, Chief Executive Officer, said:
"I'm delighted with Beazley's performance in 2021 where we have delivered GWP
growth of 30% and a combined ratio of 93%, which has resulted in a robust
profit of $369.2m. We saw good growth across all our lines of business but
were particularly encouraged by the opportunity in the cyber market where we
continue to see significant rate improvement. We maintain our disciplined
approach to cyber and remain excited about the opportunities for Beazley in
this market and continue to invest in our cyber infrastructure.
We are confident in delivering continued double-digit growth in 2022 and our
strong capital levels support both our growth prospects and the reinstatement
of our dividend where we have proposed 12.9p per share with respect to the
whole of 2021. I approach the end of my first year as CEO of Beazley with
confidence about the future."
For further information, please contact:
Beazley plc Beazley plc
Sarah Booth Sam Whiteley
Tel: +44 (020) 7674 7582 Tel: +44 (020) 7674 7484
Note to editors:
Beazley plc (BEZ.L), is the parent company of specialist insurance businesses
with operations in Europe, North America, Latin America and Asia. Beazley
manages seven Lloyd's syndicates and, in 2021, underwrote gross premiums
worldwide of $4,618.9 million. All Lloyd's syndicates are rated A by A.M.
Best.
Beazley's underwriters in the United States focus on writing a range of
specialist insurance products. In the admitted market, coverage is provided by
Beazley Insurance Company, Inc., an A.M. Best A rated carrier licensed in all
50 states. In the surplus lines market, coverage is provided by the Beazley
syndicates at Lloyd's.
Beazley's European insurance company, Beazley Insurance dac, is regulated by
the Central Bank of Ireland and is A rated by A.M. Best and A+ by Fitch.
Beazley is a market leader in many of its chosen lines, which include
professional indemnity, cyber liability, property, marine, reinsurance,
accident and life, and political risks and contingency business.
For more information please go to: www.beazley.com (http://www.beazley.com)
Statement of the Chair
Beazley performed strongly in 2021, delivering pre-tax profits of $369.2m
(2020 pre-tax loss of $50.4m). The business continued to optimise risk and
return, taking advantage of ongoing rate strengthening across most lines of
business and delivered strong growth with gross premiums rising 30% to
$4,618.9m (2020: $3,563.8m). The Board are also pleased to reinstate the
dividend, declaring a dividend of 12.9p.
2021 was a year of uncertainty for everyone as the health impacts of the
pandemic, and its economic and geopolitical effects, continued to reverberate
around the world.
Once again, I would like to pay tribute to our clients, brokers and colleagues
for their commitment and the effective way they have worked together to deal
with these challenges over a sustained period. I am confident this resilience
will serve us well as we move forward into 2022, notwithstanding further
ongoing uncertainty. Beazley's focus throughout 2021 has been to support our
clients as they faced challenging times. This year those efforts have included
helping clients deal with the impact of climate related natural catastrophes,
face the many challenges arising from COVID-19, and avoid or recover from the
scourge of ransomware attacks on their systems
An expert team
2021 was also a year of significant change at Beazley as Andrew Horton our
Chief Executive Officer of 12 years departed and Adrian Cox was appointed in
his place. I would like to thank Andrew for all he did for Beazley over the
years. His track record in delivering first class performance was excellent
and he built the outstanding team at all levels which allowed the business to
move forward seamlessly on his departure.
Succession planning is an important responsibility for a Board, and we had
been planning for this eventuality for some time.
We adopted the rigorous and transparent appointment process in place for all
our senior executive team and Adrian Cox emerged as the ideal successor. You
can read more about our succession planning processes in the Nomination
Committee Report.
Adrian understands our business inside out and has the skill, drive and
determination to take us forward. He is committed to profitable growth and to
delivering first class financial performance. Perhaps most importantly he
brings outstanding cultural leadership to our team with a focus on developing
high performing, industry leading teams. In his two years as Chief
Underwriting Officer and before that as Head of Specialty Lines, Adrian built
out Beazley's underwriting talent pool, championed the use of new data and
technology and drove the growth of our Specialty Lines business, making a very
substantial contribution to our development as a leading specialty insurer. He
has a compelling vision for how we will leverage this approach across our
entire business to both improve risk selection, but also to innovate for the
benefit of our clients.
Beazley's strong culture of employing experts committed to professional
delivery has allowed us both to fill senior roles internally and to attract
talent to the Group capable of delivering the new perspectives and skills sets
required to execute our strategy. Further details are provided in the Chief
Executive Officer's report that follows.
At the Board level we were delighted to recruit Raj Agrawal to the plc Board.
Raj is the Chief Financial Officer of The Western Union Company, and his
appointment further strengthens the Board's global business experience,
knowledge of the US market and financial management skills. We also took steps
to add additional Non-Executive Directors to our insurance subsidiary Boards
to ensure we have the right talent and diversity of thought to oversee
delivery of our strategy and plans. I am therefore delighted to welcome Laura
Santori, Noemi Wall, Patricia Ruane, Michelle Moore and Soraya Wright to the
Group.
One of the biggest lessons from the pandemic has been that when a highly
skilled, committed and motivated team is faced with a significant set of
challenges, they will respond incredibly. As I said last year, I am immensely
proud of how our team has stepped up and supported clients at a time of great
difficulty and I want to thank them all once again for their dedication to
doing the right thing for all our stakeholders. A true example of living
Beazley's business values.
Doing the right thing means actions not words at Beazley. Therefore I am
particularly pleased that in March 2021 we made a commitment to improve
further the ethnic diversity of our team, targeting 25% of our staff to be
people of colour by 2023, with a sub-target of 6% black representation. We
hope to make the same impact that we've seen on gender, where we have made
meaningful progress. As of today 38% of our senior executive team are women,
with a target of 45% by 2025. Despite setting ourselves challenging goals and
timeframes on gender and ethnic diversity, the Board is committed to seeing
further improvement. Access to the best talent and development of an
empowering and high performance culture is the ultimate source of competitive
advantage. As such, the Board is determined to ensure we are a truly inclusive
business where all colleagues can be their true selves and perform to their
absolute best.
Responsible business
2021 was another year that the reality of climate change was felt with
multiple large scale natural catastrophes, from the big freeze in Texas in
February, to the floods in Europe during the summer, and wildfires across the
globe. Beazley is absolutely focused on how we can play our part in addressing
the climate crisis. In April 2021 we published our first annual Responsible
Business Strategy, outlining how we are building a more sustainable,
responsible company, embedding ESG principles firmly into the infrastructure
of our business. This includes our underwriting and investment strategies.
From a corporate perspective, a future in which financial metrics alone are
the measure of success is an outdated concept that will quickly become
unsustainable as businesses that fail to appreciate the importance of their
environmental, social, cultural and governance performance are left behind.
On 1 January 2022 we delivered a bold statement of our intent with the launch
of our managed Syndicate 4321, Lloyd's first ESG syndicate, which provides
additional capacity to responsible risks that perform well against ESG
metrics. At the same time across our business, we are engaged in a wide range
of activities to improve our impact on the environment. These include our
normalised carbon emissions to 50% of 2019 levels by 2023, and receiving
approval of our Impact Investment Fund which will see $100m of our investment
portfolio focused on businesses and social enterprises that produce a
positive, measurable social or environmental outcome as well as a financial
return.
A complex risk environment
Although vaccines are at least providing a partial solution to the pandemic,
we are nonetheless facing the prospect of an uncertain economic and
geopolitical environment for many decades. Economic uncertainties surrounding
the impact of inflation on growth, labour markets and the increasingly visible
supply chain problems also look likely to dominate for the medium-term.
Technological change and the impact of advances in artificial intelligence and
data science will revolutionise whole industries.
Astute risk management therefore becomes central to business success. One area
where insurance can play an important role in helping businesses to navigate
uncertainty is in protecting against the proliferation of cyber-crime. For any
business owner nothing can be more traumatic than waking up to find your
systems are locked, and we have made it our mission to support our clients in
the prevention of and recovery from a cyber-attack.
Beazley is a market leader in the provision of cyber insurance and we see
significant opportunity to support our clients further. However, to be
successful in this field requires the development of new capabilities and the
creation of an advanced cyber services eco-system. We believe our efforts have
created real, long-lasting capability and expertise around cyber risk which is
not only having a positive material impact on claims and shareholder returns
but most critically will better protect our policyholders.
Dividend
The Board are pleased to be able to reinstate a dividend for the year ending
2021. Beazley will operate a progressive dividend policy going forwards,
intending to grow dividend each year but recognising that some earnings
fluctuations are to be expected. When determining the level of dividend, the
Board considers the Group's capital position, future investment and growth
opportunities and our ability to generate cash flows. To the extent that our
capital levels are significantly in excess of what we need to invest in
profitable growth, we will look to return capital to shareholders.
Going forward, we intend to align our dividend payments more closely to our
capital planning cycle. Given the strong growth opportunities we see across
our business over the medium term, we intend to declare dividends annually
with an announcement on a dividend with respect to the prior financial year as
a whole at our full year results and with payment in March. This aligns with
our annual capital planning cycle with Lloyd's and enables us to assess our
dividend capacity more accurately.
As such the Board have approved the declaration of an interim dividend of
12.9p for the full year of 2021.
Insurance in time of change
The insurance industry is not immune to the impact of the technology and data
revolution and it too is undergoing transformation. We will continue to look
to leverage this technology to streamline process around claims and renewals,
and to improve the underwriting process. Beazley Digital is at the forefront
of our efforts to streamline and simplify and will offer increasingly straight
forward, error free access to Beazley for our insureds and brokers as well as
productivity and cost savings for Beazley.
The last few years have seen a hardening phase in the insurance market cycle
as rates have risen. However, this market dynamic is not present across all
lines, and in certain classes we are now seeing a tailing off or flattening
out of those price rises as more capacity comes into the market. We pride
ourselves on taking a disciplined approach to underwriting, being selective
about risk selection and pricing, and even in the market conditions of recent
years we have been prepared to walk away from mis-priced risk. This market
cycle discipline will be even more important in 2022 given the many
uncertainties faced by our clients.
Insurance is first and foremost about helping clients to manage and mitigate
risks and to provide protection. Our commitment to delivering on that promise
is demonstrated in Beazley's participation in a renewed contingency insurance
market to support the events industry's recovery.
Perhaps the biggest learning of the pandemic is that we have to be our own
fiercest critics. Always striving for better and asking ourselves what we can
learn from our success and failure, so that we can improve for the future. In
2020 our business was challenged by an unprecedented year that saw us make a
loss for the first time in our history. We have considered carefully the
lessons from this experience and have made changes where we needed to do so. I
am pleased the underlying strength and quality of our business has once again
come to the fore and our performance has recovered strongly. As such we look
forward to the coming year with confidence.
David Roberts
Chair
Q&A with the Chief Executive
You've been Chief Executive Officer for less than a year, what have been the
highlights?
Looking back, it's impossible to pinpoint just one or two highlights as there
is so much that I am proud of and have really enjoyed. For me the place to
start is with the team. I am extremely grateful to and proud of the Beazley
team - every single person has dug deep over the past year and delivered
outstanding results for our clients' partners and shareholders and it's really
been an honour for me to work with such talented people. The creation of a new
management team and renewed strategy was an extra challenge but one everyone
involved leant into - it's quite something to have been able to recruit and
promote such exceptionally talented individuals to both our leadership team
and Board in such a short space of time. Coupled with our return to profit and
improvement in share price - important signals that we've been doing the right
thing for our shareholders, clients and wider stakeholders - on reflection I
think these both hit my highlight list. On top of that, one of the things I
have really enjoyed has been getting back to working with the team face to
face, initially at our inspiring new office at 22 Bishopsgate in London.
Leading through change is hard, what has been your key learning?
I'm optimistic about what change can bring us, and I believe that you can
harness change to drive real opportunity. Whilst
I understand that the last couple of years have been tough for everyone on
personal and professional levels for a myriad of different reasons, we have
all learnt a lot about what can be achieved, when we pull together in the face
of adversity. To take advantage of the lessons learnt, I sincerely believe we
need to take time to listen and reflect, feedback and check - with the team,
our clients, investors and shareholders. Our investment into hybrid working,
which we pioneered at Beazley in 2017, has certainly paid off for us as an
organisation as we were able overnight to switch seamlessly to remote working.
As we start returning to the office, we continue to check in and ask for
feedback from staff about our new hybrid lives to ensure we have the right
support in place to enable an effective and productive working environment.
The importance of listening is one of the key reasons why in 2021 we started
our Risk & Resilience Research, in which we asked 1,000 clients about the
biggest risks they face and how prepared they are to manage them. We'll
continue this research in 2022 and beyond as gaining a close understanding of
the wants, needs, concerns and blind spots of clients is, I believe, vital to
developing the progressive insurance and risk management solutions on
which our business is built.
Beazley has ambitious growth plans; how do you plan to successfully deliver
them?
Beazley has been a growing business throughout our 35+ years in business.
Today the opportunity for a specialist insurance company to expand is
significant and, we will see this growth across our geographies due to our
platform strategy which allows us to utilise both wholesale and domestic
opportunities. Additionally our product set has the potential for significant
growth from natural demand alongside opportunities to increase market share
given our relative size.
Is the Underwriting Room at Lloyd's still relevant after the success of remote
working?
There is little doubt that meeting people face to face makes a difference. A
space like the Underwriting Room creates a marketplace where different people
can explore ideas. All of which brings significant benefits to the end client.
What remote working has taught us is that we can underwrite and administer
insurance electronically - driving greater efficiency and effectiveness. This
is something we will continue to develop and build.
The insurance industry talks a lot about helping clients transition to net
zero but what is Beazley actually doing about it?
It's inevitable that we will need to talk about how we transition, but it's
also right that we lay out a clear strategy with specific milestones that we
will meet. As a business we've made a commitment to cut our normalised carbon
by 50% from 2019 levels by 2023, once we've achieved that we'll reassess how
we set a new target to go further. And in terms of our underwriting, Syndicate
4321, which started underwriting in January 2022, is a significant investment
which will see us offer additional capacity to clients, existing or new, that
meet ESG rating criteria. Just as importantly we will use the data we gather
to not only better inform our underwriting but to enable us to create new
insurance products and services to help our clients manage their transition to
a low carbon economy.
How is climate change impacting profitability and our long-term outlook? What
are you doing to manage that risk?
Today, there can be few people who doubt that climate change is having a
demonstrable impact. Starting with the 2017 wildfires moving through a range
of secondary perils and coming starkly into focus in 2021 with the Winter
freeze in Texas and European floods, climate change is altering the
predictability of natural catastrophe risk. As an insurer committed to
offering protection to our clients against these perils, take stock of our
practices towards these risks and adapt our backwards looking loss history
approach to a more forward-looking predictive model. We are committed to
learning all we can about this and have taken on Board the lessons learnt from
the Prudential Regulatory Authority Climate Biennial Exploratory Scenario work
we undertook in 2021. I believe that ultimately a more future focused approach
will make our business stronger, more resilient and able to deliver better for
clients.
You are still keen to expand in cyber, why are you able to swim against the
tide of market opinion?
As a business we are data and expertise driven, making decisions based on
facts. We understand cyber very well and have invested over the last year in
our cyber ecosystem. This is focused on helping clients to improve their
resilience with better risk management via pre-underwriting of their risks, to
help them avoid a cyber-attack. This approach has seen us reduce our cyber
exposure to focus on the higher quality risks while achieving significant
premium growth. We believe that a collaborative approach focused on mitigating
the threat will help to counter the sophisticated challenge to business
everywhere that cyber criminals pose.
In your first year in the job you have changed the company's purpose,
strategy, and vision - what led to these changes?
We always review these in a three-year cycle and as 2021 developed and the
implications of the changes the pandemic had brought began to be seen, it
became clear that this was the right time to renew our purpose, refine our
strategy and align our vision. These give firm roots to our core business
principles and direction of travel, but are agile enough to evolve and respond
as economic, social or environmental conditions change and opportunities
emerge, allowing us to achieve the ambitious growth plans we have set
ourselves for the coming years.
How concerned are you about the potential for high inflation and the impact it
will have on the economy and on Beazley?
There is no doubt that the world faces significant economic uncertainty around
a range of issues such as changing labour markets, utility prices and supply
chain challenges all of which are feeding into an inflationary environment.
Alongside this economic inflation, insurers are also wrestling with the
re-emergence of social inflation in the courts as the pandemic recedes. How
long lasting these inflationary pressures will be is a subject that splits
economic opinion, but as a business we take it seriously and manage it across
our underwriting, claims and investments and have taken action to ensure that
its impact is minimised, through embedding inflation assumptions into our
pricing models and claim reserves and product diversification.
Chief Executive's statement
Beazley returned a profit in 2021 of $369.2m (2020 $50.4m loss) through a
combination of targeted underwriting expansion in areas where rates and growth
opportunities were attractive and a steady investment performance. For the
fourth year in a row, Beazley achieved double-digit premium growth, with gross
premiums written up by 30% to $4,618.9m (2020: $3,563.8m).
Our combined ratio improved to 93% (2020: 109%) aided by the subsiding of the
pandemic related claims spike of the previous year.
Return to profits
Our financial performance is testament to our people's considerable resilience
throughout a period of continued change and their readiness to step up and
embrace the opportunities presented by the positive market conditions of 2021.
We have continued to deliver against our long-held strategy of applying
skills, experience and problem-solving to excel in providing differentiated
insurance solutions for selected areas of specialist risk.
Exploring our purpose
The COVID-19 crisis has dominated the last two years and it is right that
Beazley has used the experience to step back and assess what we can do
differently to become a stronger partner for our clients and stakeholders in
the post-pandemic world.
We have challenged ourselves to look differently at the complexities of risk
and to increase our ability to assist our customers to manage and mitigate
their complex risk exposures.
As a company grounded in designing innovative solutions for clients through
technical underwriting in specialist risk, attracting and nurturing great
talent is one of the key reasons why our culture is so important for ensuring
we are a place where people from all backgrounds and experience want to work
and develop their careers. Of course, in today's digital era, being a market
leader in insurance requires a host of skills, knowledge and ways of thinking
beyond the traditional scope of underwriting.
As our company evolves, expands geographically, and adopts new technologies to
improve our processes, products and services, we must also have a strong
purpose and vision to help guide us. To ensure this, we review our strategy
every three years and given the significant change of the past two years, it
was particularly important to look at this closely during 2021.
Through a collaborative process across the company we have defined our purpose
and long term strategy and aligned our vision together with adopting more
effective descriptors that better reflect the vital role of clients at the
core of our decision-making.
Beazley's mission is to enable our stakeholders to explore, create and build
the future of their business. We do this by investing in understanding the
complexity of the risks they face and deploying our expertise to support them
in managing those risks. This is how we create value.
To deliver this renewed purpose we will leverage five key elements that are
the foundations of our business. Firstly, clients where it's about ensuring we
keep our finger on the client pulse and use our expertise to develop
progressive and innovative solutions that enable them to thrive. Secondly,
Protection. As risk becomes more complex this means going beyond just
traditional risk transfer and delivering a more holistic approach through risk
management underpinned by expert underwriting. Our People are the third
element, they are responsible for making everything happen at Beazley and
creating a culture that supports and inspires our people is vital. Fourth, we
must have the Tools to deliver, whether in the form of new technologies or
processes, a fast and frictionless service. Finally, and the newest pillar of
our strategy, is being a Responsible Business, which is seeing us invest in
and measure our progress towards deploying our underwriting and investments,
and managing our operations, in ways which mitigate climate change and support
social inclusion. Together these five pillars will hold up and support our
clients to explore new ideas, create value and build a better future.
Team transformation
April 2021 was an exhilarating point at which to become Chief Executive
Officer to say the least, although ambition and evolution have been
characteristic of Beazley during every year I have been here. As well as pride
in the performance of our people, I have been excited by the fresh thinking
within our executive team over the past year. I am also delighted with the key
appointments and structural changes we have made.
In 2021 Rob Anarfi joined the Executive team as Chief Risk Officer having led
our global compliance function for 6 years and bringing many years of audit,
risk management and leadership experience to the role. Rachel Turk also
stepped up to become Group Head of Strategy and a member of the Executive
Committee. Rachel was previously a focus Group leader and Head of Corporate
Development.
We also welcomed Troy Dehmann as Chief Operating Officer following our
longstanding COO Ian Fantozzi's move to oversee our digital business within
Beazley. In a move that is a first for us but reflects our mix of business we
appointed Bob Quane as Chief Underwriting Officer; he is based in New York,
underlining both our commitment to the US market and our approach to hiring
the person who is best for the job rather than limiting ourselves to people
located near our headquarters in London.
Being bold: creating underwriting innovation
Beazley Digital began underwriting on 1 January 2022 and under the leadership
of Ian Fantozzi, it has adopted a clear client-centric approach that segments
business by the channels that clients choose and uses technology and expert
multi-skilled teams to create and build insurance solutions for them and their
brokers.
I was proud to see Beazley managed syndicate 4321, Lloyd's first ESG
syndicate, begin underwriting in January 2022. Working through a consortium
led by syndicates 623/2623 it embodies our commitment to doing the right
thing, by providing additional capacity to clients with high ESG performance
scores. Syndicate 4321 is a progressive step forward in our commitment to
embedding ESG right across our organisation, including into our underwriting.
For the past three years we have been investing in our cyber ecosystem, which
puts emphasis on pre-underwriting risk management that assists clients to
better understand the nature of the cyber threat they face. Armed with this
information clients are able to improve their resilience with better risk
management and hopefully avoid the trauma of a cyber-attack. We will continue
to do all we can to highlight the cyber threat and work across our industry
and externally to share information and offer support to the development of
greater cyber resilience.
Striving for better: delivering against our ESG targets
Even before the pandemic, we had seen seismic shifts in thinking about the
urgency of tackling climate change, the rise of organised and effective social
justice movements and far higher expectations that organisations should be
better corporate citizens. Beazley believes we should demonstrate leadership
and take measurable and ambitious steps to incorporate ESG measures into every
aspect of our business. You'll be able to read more about the challenging
targets we have set ourselves and the tangible steps we are taking to meet
them in the Responsible Business section of this report on page 30 or in our
accompanying responsible business report published on our website. During 2021
we also produced our first Responsible Business Strategy which is also
available on our website. The senior leadership team and I are absolutely
determined to meet the goals we have set and then to set ourselves ever
greater challenges. We are supported in this by our outstanding colleagues at
Beazley who are committed, and demanding of the business, to do the right
thing on these issues.
Our new benefits package
Listening to our staff is a driving force behind everything we do and in 2021
it informed our update to our benefits offering, which better reflects the
needs of our more diverse team and the move to activity-based working that we
pioneered pre-pandemic and has proved to be a powerful working model. For the
first time in our Annual Report on page 44 you will be able to read about the
work of our Culture & People team.
Doing the right thing: claims
How we integrate technology and data into the claims process has advanced in
2021 enabling us to manage process, costs and service more effectively. We
supported clients caught up in litigation as courts closed and used the latest
satellite and drone technology to speed the claims process for clients
impacted by a number of devastating natural catastrophes that occurred in
2021.
As courts have reopened, we have seen the claims trends apparent before the
pandemic re-emerge. We are well prepared for this and have in place the
capital, resources and strategic determination to ensure that we accurately
reflect the trend in our underwriting. We will also work across our industry
to help clients mitigate the risks and protect their organisations from
escalating and disproportional damages.
As we enter 2022 it is pleasing to be able to say that first-party pandemic
related claims have almost entirely been paid and fully accounted for. The
contingency portfolio in which we insure major global events through to small
local fetes, bore the brunt of our COVID-19 losses in 2020. During 2021, we
saw a general recovery of the contingency market, and worked with the UK
Government and wider insurance industry, to create a COVID-19 specific
cancellation scheme. Both give us cause for optimism about the future of the
events sector and the economy.
Building Beazley
There has been much to be proud of at Beazley in 2021. We have strengthened
our foundations through a refreshed purpose and strategy, set ourselves
challenging targets to measure our success as a responsible business and
maintained a solid capital base to enable us to achieve our growth ambitions.
As we move forward, adapting to hybrid working models and actively
implementing responsible business practices into our culture, we will continue
to support and empower our people, to build on the opportunities and take on
new challenges. We are continuing to expand and develop our specialist risk
appetite in newer territories including Europe, Asia and Latin America, and to
build on our successes in North America. With a strengthened capital base and
the people, tools and resources in place to achieve success we look forward
with confidence to the opportunities that 2022 will bring and helping our
clients
to explore, create and build the future together.
Adrian Cox
Chief Executive Officer
Chief Underwriting Officer's report
Beazley achieved gross premiums written growth of 30% as the challenge of
COVID-19 claims receded and the loss reserves remained robust. We saw
significant natural catastrophe losses during the year, driven in part, we
believe, by the impact of climate change. Our combined ratio improved to 93%.
Having recently joined Beazley I feel a genuine sense of excitement to be
taking up the role of Chief Underwriting Officer at an important moment for
our business. I'd first of all like to thank Tim Turner, Head of Marine and
Bethany Greenwood, Head of Cyber &Executive Risk (CyEx) for their
stewardship of underwriting during most of 2021. It is testament to the
strength of the underwriting strategy, diligence of our underwriters and our
open culture of empowered underwriting, that at a time of significant
management change, we have achieved strong premium growth and underwriting
profit.
Beazley's underwriting reputation was the compelling factor in my decision to
join the business and my interactions with the team have borne out my belief
in how important this unique way of underwriting is. The people I have met at
Beazley clearly demonstrate that collaboration is at the heart of our
business, our culture is of wanting everyone to succeed and offering help and
support to do the best job for all.
I see my role as bringing a fresh perspective and insight to add to our
already strong underwriting toolbox by looking at it through a different lens.
Our underwriting is already exceptional but there is the opportunity to
explore new approaches, for instance further sharpening our pricing models to
ensure we remain on the cutting edge. By striving for better via a process of
constantly learning and believing that there must always be a better way, we
will do the right thing for our underwriting talent, brokers and clients.
Modelling review
2021 saw us underwriting against a backdrop of reducing COVID-19 claims and
while the magnitude of losses related to natural catastrophes was in a managed
range, it is clear that climate change is impacting event strength and
frequency and leading to larger losses. As an insurer it is our role to find
underwriting solutions that allow our clients to protect themselves against
the threat of natural catastrophes in a sustainable way. That is why we are
re-examining our natural catastrophe models and going forward we will be
looking at them with a future forecasting rather than an historic loss
experience eye. This is particularly true of secondary perils but amongst
primary perils we also need to look again to reassess the full potential that
a changing climate will have on loss patterns.
A similar process of review began in earnest in our Cyber book in 2020 as we
moved to a pre-underwriting approach, which has already delivered tangible
results by building out a cyber ecosystem that better protects our clients and
ensures our underwriting remains sustainable.
Underwriting for managed growth
Constantly improving and strengthening our underwriting process will be vital
as we engage on a growth path across
our business particularly in the US market and in Europe, where we see
exciting opportunities.
Lloyd's remains the bedrock of our business and we are absolutely committed to
underwriting in the market which offers outstanding flexibility, expertise,
brand recognition and market access. Where our ambitions step outside of those
of Lloyd's, Beazley's flexible business structure allows us to move nimbly
into markets as needed.
Underwriting data
Data has always been at the heart of the insurance business, but we are
beginning to see an inflection point where the smart use of data has the
potential to inform and ultimately transform our underwriting decision making.
Our focus is on using our judgement and experience and layering over objective
tools to drive our difference and deliver better results and value for clients
and shareholders.
We will work closely across the business with our operations and risk
management colleagues to build ever greater use of predictive modelling and
leveraging our understanding of claims trends. Other innovation will come in
the shape of the digital transformation of underwriting, pioneered by our
Beazley Digital colleagues and the adoption of emerging techniques such as
parametrics.
ESG information will also become an increasing data point in our underwriting,
and we expect to build on the lessons learnt from syndicate 4321 across all
our underwriting activities overtime. While the most important element of our
investment into understanding ESG and supporting clients to transition is
striving to make the environment and society a better place,
I believe it will also positively inform our underwriting as well.
Our clients, team and shareholders know they can rely on Beazley to execute
our business plan in a stable and consistent manner and our strong return to
profit in 2021 is an active demonstration of that. Going forward the
underwriting process will evolve to meet the needs of a changing environment
and I look forward to playing my part, confident that Beazley has a bright
future of growth and innovation ahead delivered by the market's most committed
and inspiring underwriting team.
The senior leaders of each underwriting division segment has set out in detail
below how their area performed in 2021 and what they expect across 2022 and I
hope you will be encouraged, as I am, by their thoughts.
Cyber & Executive Risk
Cyber & Executive Risk saw premiums written grow in 2021 up 49% to
$1,515.6m (2020: $1,020.1m). Rate has increased across the portfolio,
averaging 49% and the process of re-underwriting the book continues to deliver
results in terms of profitability as the combined ratio improved to 93% (2020:
101%).
We have continued to invest in our Cyber business and ecosystem to ensure we
are on the front foot of the evolving threat landscape and helping clients on
their quest to be more resilient to cyber-attacks. The appointment of Raf
Sanchez as our Global Head of Cyber Services will enable us to enhance this
further as we move into 2022.
The proactive underwriting remediation action we took on our book, in response
to ransomware (as reported at the half year), continues to pay dividends and
we are seeing positive claims trends across our portfolio since October 2020.
For our clients, this continued investment in our Cyber ecosystem, which puts
emphasis on risk management measures and services, is helping them build a
deeper understanding of evolving threats, building greater resilience,
minimising the likelihood of a successful attack and thus contributing to a
safer and more secure society.
The hardening market conditions combined with our underwriting actions have
resulted in us writing less cyber exposure than previous years but with
increased premium. We have seen rate more than doubling for the second half of
2021. As we move in to 2022 we will continue to grow the Cyber business as
long as we see continued positive developments with loss trends, market
conditions and clients adopting our risk managed based approach.
We were also pleased to be able to expand our Lodestone operations with the
introduction of a UK branch. Lodestone, established in 2016, is a wholly owned
cyber security firm which is an integral part of our cyber ecosystem and cyber
services offering.
Rates across the Directors & Officers portfolio allowed us to continue
executing on our strategy to strengthen our existing relationships with core
partners by taking a larger share of both primary and lower excess layers. As
we grow, we continue to focus on ensuring we maintain a balanced portfolio
that delivers against our focused underwriting strategy whilst continuing to
leverage data sources to refine the portfolio mix and equip our clients with
the education, tools and resources that enable them to take positive action in
this area.
Our Safeguard product continues to grow market share. By leveraging the
success we've had with our service led approach in cyber we have been able to
offer a product that helps institutions become safer environments for all,
through a combination of investment in strong risk prevention services,
support and training coupled with risk transfer.
Our Mergers & Acquisition book remains well diversified across geography
and deal size and is performing well. We are pleased with the remediation of
our employment practices liability book and we are confident with the
portfolio mix we now have. We will continue to maintain a watchful eye on this
book as the post COVID-19 landscape evolves and as liability claims around the
return to work including potential litigation against vaccination requirements
may escalate. To date we see no major recession risk from the pandemic.
The outlook for next year is positive. We are prepped for growth in the areas
where we can add significant value and the opportunity exists. As always, we
remain focused on portfolio optimisation and being agile in real time decision
making to ensure the book is always responsive to change and the needs of our
clients.
Marine
The Marine division achieved premiums written of $376.5m (2020: $337.4m) with
a profit of $97.4m (2020: $45.0m) and a combined ratio of 72% (2020: 90%). The
result was largely driven by our Cargo, Aviation, Liability, Hull and War
portfolios which have seen strong rate rises across the board. In some areas,
we have benefitted from a relatively benign claims period due to the ongoing
restrictions caused by the pandemic.
The combination of experience, flexibility and client focus shown by our
underwriting teams continues to differentiate us, contributing to our
outperformance. By focusing on our strong underwriting framework, risk
selection and clarity of terms and conditions, we have remained true to our
core ethos of underwriting where it makes sense to do so and this is reflected
in our results.
From a claims perspective we believe our Hurricane Ida exposure, which is
largely driven by shipyards in and around Louisiana, will be limited. Our
exposure to other market headlining events, including the Ever Given, is also
limited in line with our expectations.
Climate change remains a key area of focus and we are committed to working
with our insureds and the industry to help clients transition to a more
sustainable future. As an organisation we work hard to ensure we maintain a
tight focus and balance managing our climate risk exposure with our
responsibilities. We are very mindful of the impact of what we do and the need
to underwrite responsibly.
Whilst relatively small, our Satellite portfolio continues to perform well and
has seen positive growth this year. A robust and expanding space industry,
fuelled by demand for mobility, data and broadband applications, supports our
long term growth prospects.
Across the Marine book we are hopeful of rates continuing on their positive
trajectory, although the speed of change has undoubtedly slowed. With new
entrants, including MGAs and start-ups the market has become more competitive,
however, we remain confident of our market leading position and the growth
opportunities that lie ahead for a specialist such as ourselves.
Market Facilities
Our Market Facilities division had two dominant focuses in 2021, the creation
of Syndicate 4321, our ESG consortium, and the ongoing success of Beazley
Smart Tracker, which reported premiums written of $198.2m (2020: $133.4m) and
achieved a combined ratio of 98% (2020: 106%).
Beazley Smart Tracker's fourth year in business saw ongoing success, both in
achieving its business plan and delivering strong results. Smart Tracker works
by designing and selecting approved leaders into a bespoke facility that meets
the needs of brokers and their clients and there is a strong pipeline of
brokers asking for support. Syndicate 5623 continued to see its acquisition
costs fall as it grew, delivering an expense ratio of 23% in 2021,
demonstrating the success of its low-cost tracker model. Due to Syndicate
5623's performance, it is significantly oversubscribed by third party capital.
Looking forward we hope to continue to be able to offer opportunities to
existing investors and to new ones.
Syndicate 4321, launched on 1 January 2022, and established under the Lloyd's
Syndicate In A Box framework, operates a consortium arrangement led by
Syndicates 623/2623. It is an innovative and tangible way to support those
businesses that invest in ESG by offering additional capacity to eligible
clients that can meet the standards of the ESG rating scoring criteria. The
syndicate focuses exclusively on offering additional capacity on a multi-line
basis, to ensure diversification and balance. All premiums received will be
invested responsibly, in line with Beazley's Responsible Investment Strategy.
Our growth trajectory continues in the right direction, and in 2021 this meant
we could expand and add dedicated actuarial and underwriting resource to our
team. The outlook remains strong, and we look forward to reporting continued
success for the smart tracker next year as well as a positive first year for
Syndicate 4321.
Political, Accident & Contingency
2021 saw a positive recovery for Political, Accident & Contingency with
premiums written of $322.8m (2020: $273.0m) and a combined ratio of 98% (2020:
212%). The profit of $69.2m (2020: loss $223.7m) was boosted by $54.4m gain on
the sale of Beazley Benefits, which was non-core to the specialist, Global
Life & Health.
Unsurprisingly we saw rate increases in the contingency book as events got
under way again. We continue to be a leader in this market and over the last
12 months have re-shaped the team adding both depth and breadth of expertise
and are pleased to have appointed Andrew Duxbury as head of Contingency.
Committing to finding progressive solutions for clients, we're proud to have
worked in partnership with the UK Government and the wider insurance market to
create a scheme to provide COVID-19 specific cancellation cover for the events
industry. Although initially limited in scope, we are a big supporter of the
scheme having drafted policy wordings and as a leading capacity provider. By
creating an insurance scheme like this we are contributing to the restart of
the events industry and providing a much needed kick start to the traditional
contingency market.
We remain vigilant about ongoing losses related to the pandemic, but the risk
has reduced significantly, most exposed events have taken place or were
cancelled, and we are confident that our exposure is limited.
Our Political Risk portfolio is performing well. To date there has been no
unexpected loss activity however our outlook is one of cautious optimism as
the world gets back on its feet. The Terrorism book saw relatively flat
ratings despite a challenging loss environment. Growth in this book was
largely driven through our deadly weapons protection product and our
expectation is that this will continue through 2022. Growth in Accident &
Health was also positive throughout the year with the PA Direct portfolio
performing particularly well mainly due to increasing the involvement with
existing clients.
After a year of re-building, moving forward we plan to continue to expand and
grow the business and with a strong team in place, we aim to take advantage of
the positive market conditions.
Property
2021 saw us navigate a very dynamic marketplace in which we continued our
focus on better risk selection and supporting our clients to improve their
risk management. The results of the corrective action taken over the past
three years began to be delivered in 2021 premiums written grew to $586.5m
(2020: $470.5m) and we posted a combined ratio of 99% (2020: 120%).
We are pleased to have successfully navigated our way through the challenging
environment by focusing diligently on delivering strong bottom-line results
through better risk selection. Through the stable and consistent execution of
this strategy we have carefully and purposefully grown our book. Our strategy
has also included a shift in our approach to distribution to ensure a balanced
pipeline from both wholesale and retail brokers and we've taken advantage of
the changes in team to build significant bench strength across our
geographies. Most recently we appointed Simon Wilson as head of our UK Open
Market business to accelerate this process further.
We have also continued to grow and develop our Jewellery, Fine Art, and Specie
(JFAS) business by further diversifying the portfolio both geographically and
by class. We have deployed underwriters in Shanghai, Singapore, Paris, and
Miami supported by the London platform and continue to enhance our private
client offerings in Europe and the US. This coverage dovetails well with our
existing large risk and commercial JFAS business as well as complementing our
product offerings in the High Value Homeowners segment. This increased
diversification of business, coupled with consistent rate increases and
careful risk selection has enabled the JFAS team to grow profitably in 2021.
Whilst overall the hurricane season saw no unexpected loss activity, the Texas
Winter storms during the first quarter of 2021 had an impact on our results.
Whilst maintaining a responsive approach to portfolio diversification has
helped shield us for the most part, we do however, continue to remind brokers
and clients that the threat of climate change continues, and these unusual
patterns of loss are a threat we must prepare and price for.
As an organisation, we continue to use data and analytics to deliver product
innovation. In Property, this includes exploring and developing parametric
product offerings where clients have limited access to cover as climate
related risk increases. Our first parametric product being a wind product was
recently launched to protect against cyclone for a specific region in
the world.
We are also continuing to embed new tools, API's, and analytics into our
systems that will enable our underwriters to analyse risks with a deeper
understanding and make informed decisions that will increase the diversity and
profitability of the book. This continuous improvement will enhance our
underwriting processes which will enable us to be responsive to the macro
environment pivoting resource and focus as required.
We remain focused on profitability, while diversifying and evolving our book
to manage volatility. Next year we will continue our growth trajectory and
seek out progressive solutions that help us respond to and help clients better
manage the challenge of a changing climate.
Reinsurance
2021 saw rates across our reinsurance division rise, by 14%, delivering
premiums written of $226.1m (2020: $194.5m). It was an active year from a
catastrophe perspective contributing to a loss of $27.0m (2020: $7.4m profit)
and combined ratio of
126% (2020: 105%).
Having effectively managed the potential impact of wildfire and specific
geographic risk appetite changes in areas such as the US and Caribbean, we
continue to recalibrate our approach to secondary perils including flood, hail
and freeze. Hurricane Ida demonstrated that primary perils also remain a
significant threat as it delivered an impactful loss as its strength continued
once it had made landfall leading to flooding in New York and New Jersey.
However, by executing against our strategy of moving away from frequency and
seek higher attachments we limited the overall potential loss from this event.
Climate related risk is clearly on our radar. Given the unpredictable nature
of these losses, the potential protection gap is significant, for example only
50% of 2021's European flood damage is estimated to have been insured. As a
responsible reinsurance provider we are looking at how the growing loss
potential of secondary perils might be addressed whilst delivering sustainable
reinsurance capacity to a marketplace that needs it. This could include moving
towards an affirmative coverage process of underwriting, with perils
specifically included rather than excluded, which would deliver greater
security and transparency to our clients.
The rating environment going into 2022 is strong and we will maintain our
current portfolio mix. Our exposure management team will continue to leverage
sophisticated data sources, coupled with our own information to provide a view
of the likely future probable maximum loss of both primary and secondary
perils. This approach is enabling us to determine appropriate pricing and
terms and conditions as we enter a phase of climate variability which the
events of 2021 so dramatically highlighted.
Specialty Lines
Specialty Lines is seeing the benefits of its hard work and investment of
recent years in re-underwriting and re-pricing across the book, writing
premiums written of $1,393.2m (2020: $1,134.9m). The rating environment
remains strong with an average increase of 13% contributing to a profit of
$141.1m (2020: $151.6m) and the achievement of a combined ratio of 92% (2020:
94%).
In 2021 we continued to benefit from the hardening market, particularly across
the International Financial Lines and Financial Institutions markets. In the
second half we saw a deceleration of rate increases in these two sectors,
after four years of material increases and expect a stable market in 2022. In
classes where rate increase has been less extreme, we expect to continue
firming through 2022.
The claims environment was relatively benign during the pandemic. However, as
anticipated litigation and the size of demands has increased as courts
re-opened. We remain appropriately reserved and are keeping a close eye on
COVID-19 litigation, social justice matters and recession related claims,
noting recessional exposure is decreasing, as the world returns to growth.
Social inflation remains in sharp focus. We have seen both a generational
shift in expectations of corporate behaviour and a heightened expectation of
the value of bodily injury claims which adds complexity to achieving fair
settlement of related claims. We have been expecting this, have planned for it
and it has been the focus of our underwriting actions over the last two years.
The evolving footprint of our Speciality Lines products continues. This year
we've continued the roll-out of our Virtual Care product portfolio to all
territories taking advantage of a growing opportunity and need in the market.
Our Product Recall capabilities have expanded from the US into Canada and
Asia, and we have continued to evolve our Management Liability suite of
products. The international book has continued its successful expansion across
our chosen territories and we will continue to focus on building out wider and
enhanced solutions where possible, whilst growing market share where
appropriate.
We are immensely proud of the work we did to build out our small digital
business via the myBeazley platform and are thrilled that it has now found a
new home within our newly formed Beazley Digital team under the stewardship of
Ian Fantozzi. Our digital proposition is competitive and the opportunity
exciting for this business segment.
The work we have done over the past several years on optimising our portfolio
and pricing strategy to grow our risk exposure is bearing fruit. Our focus on
core products, coupled with stringent underwriting appetite and guidelines
gives us confidence that even with the challenges of social inflation and the
macro-economic environment we are positioned well for the future.
Cumulative Rate Change
2015 2016 2017 2018 2019 2020 2021
Cyber & Executive Risk 100% 100% 100% 99% 104% 122% 182%
Marine 100% 93% 90% 93% 103% 120% 130%
Market Facilities 100% 100% 103% 123% 143%
Political, Accident & Contingency 100% 96% 92% 91% 91% 95% 102%
Property 100% 96% 96% 106% 117% 135% 149%
Reinsurance 100% 96% 94% 100% 105% 118% 135%
Speciality Lines 100% 101% 102% 102% 107% 122% 138%
All Divisions 100% 98% 97% 100% 106% 122% 151%
Bob Quane
Chief underwriting officer
Financial Review
Beazley returned a strong profit before tax in 2021 of $369.2m and a return on
equity of 16% as the strength of our core business emerged from the shadow of
COVID-19.
Result
Profit before tax in 2021 was $369.2m (2020: $50.4m loss). This includes a one
off impact to profit of $54.4m from the sale of our Beazley Benefits business.
The Group's combined ratio improved to 93% (2020: 109%). Our investment team
achieved an investment return of 1.6% (2020: 3.0%).
Premiums
Gross premiums written have increased by 30% in 2021 to $4,618.9m (2020:
$3,563.8m). Rates on renewal business on average increased by 24% across the
portfolio (2020: increased by 15%). Every one of our seven divisions saw
double digit growth with Cyber & Executive risk and Market Facilities
achieving 49% growth each. Property and Specialty Lines all also achieved
strong growth of 25% and 20% respectively.
Our net premiums written have increased by 20% in 2021 to $3,512.4m (2020:
$2,917m). The slower growth in net premium compared to gross is due to an
increase in reinsurance purchased during the period. The main driver of our
additional reinsurance purchasing were in areas of significant growth,
particularly CyEx and Specialty Lines.
Statement of profit or loss
2021 2020 Movement
$m $m %
Gross premiums written 4,618.9 3,563.8 30
Net premiums written 3,512.4 2,917.0 20
Net earned premiums 3,147.3 2,693.4 17
Net investment income 116.4 188.1 (38)
Other income 28.2 29.8 (5)
Gain from sale of business 54.4 - -
Revenue 3,346.3 2,911.3 15
Net insurance claims 1,826.2 1,958.3 (7)
Acquisition and administrative expenses 1,104.8 974.4 13
Foreign exchange (gain)/loss 7.2 (11.2)
Expenses 2,938.2 2,921.5 30
Finance costs (38.9) (40.2)
Profit before tax 369.2 (50.4)
Income tax expense (60.5) 4.3
Profit after tax 308.7 (46.1)
Claims ratio 58% 73%
Expense ratio 35% 36%
Combined ratio 93% 109%
Rate increase 24% 15%
Investment return 1.6% 3.0%
The Group is of the view that some of the above metrics constitute alternative
performance measures (APMs). Further information on our APMs can be found in
the key performance indicators on page 5 and in the glossary on page 212.
Reinsurance purchased
Reinsurance is purchased for a number of reasons:
· to mitigate the impact of natural catastrophes such as hurricanes and
non-natural catastrophes such as cyber attacks;
· to enable the Group to put down large lead lines on the risks we
underwrite; and
· to manage capital to lower levels.
The amount the Group spent on reinsurance in 2021 was $1,106.5m (2020:
$646.8m). As a percentage of gross premiums written it increased to 24% from
18% in 2020.
Combined ratio
The combined ratio of an insurance company is a measure of its operating
performance and represents the ratio of its total costs (including claims and
expenses) to total net earned premium.
A combined ratio under 100% indicates an underwriting profit. Consistent
delivery of operating performance across the market cycle is clearly a key
objective for an insurer. Beazley's combined ratio improved in 2021 to 93%
(2020: 109%). Our expectation is that for 2022 a combined ratio of around 90%
will be achievable subject to a 'normalised' claims experience.
Claims
With the spike in claims seen in 2020 due to the COVID-19 pandemic, 2021
delivered a claims environment which was more in line with our long term
average. The claims ratio for 2021 reduced to 58% (2020: 73%) with our
estimate for first party COVID-19 claims remaining at $340m. This assumption
was always based on a resumption to some form of normality in the second half
of 2021, and it is pleasing to see this assumption holding. Whilst there is a
small amount of exposure to the ongoing pandemic in 2022 and beyond, where
cover was bought well in advance, these are discrete policies and are taken
account of within all guidance.
Reserve releases
Beazley has a consistent reserving philosophy, with initial reserves being set
to include risk margins that may be released over time as and when any
uncertainty reduces. Historically these margins have given rise to held
reserves within the range of 5-10% above our actuarial estimates, which
themselves include some margin for uncertainty. The margin held above the
actuarial estimate was 6.4% at the end of 2021 (2020: 6.3%). Reserve
monitoring is performed at a quarterly 'peer review', which involves a
challenge process contrasting the claims reserves of underwriters and claim
managers, who make detailed claim-by-claim assessments, and the actuarial
team, who provide statistical analysis. This process allows early
identification of areas where claims reserves may need adjustment. During
years where we experience large losses we tend to see the margin we monitor
being lowered as often we hold the same estimates within both the actuarial
and held reserve estimates.
Prior year reserve releases in 2021 totalled $209.8m (2020: $93.1m) which
represented 6.7% of earned premium. This represents our highest release ever
in monetary value, but the percentage of earned premium is subdued due to the
large growth we have seen in premiums in 2021.
It was promising to see all of the divisions releasing in total off the prior
years with our Specialty Lines and Marine divisions contributing the most at
$67.3m and $50.8m respectively (albeit Marine's contribution representing a
higher percentage of earned premium at 16% compared to 6% for Specialty
Lines). Our Property, Cyber & Executive Risk, Political, Accident &
Contingency, Reinsurance and Market Facilities divisions' contributions were
$40.4m, $20.4m $11.0m, $18.7m and $1.2m respectively.
Prior year reserve adjustments
2017 2018 2019 2020 2021 5 year
$m $m $m $m $m average
$m
Cyber & executive risk 32.5 25.7 9.4 (4.4) 20.4 16.7
Marine 10.7 12.5 (6.4) 8.9 50.8 15.3
Market facilities n/a n/a - 0.9 1.2 1.0
Political, accident & contingency 3.9 14.8 16.8 4.6 11.0 10.2
Property 13.2 (47.3) (17.1) 4.4 40.4 (1.3)
Reinsurance 54.7 23.8 (30.1) 20.7 18.7 17.6
Specialty lines 88.9 85.5 36.9 58.0 67.3 67.3
Total 203.9 115.0 9.5 93.1 209.8 126.9
Releases as a percentage of net earned premium 10.9% 5.5% 0.4% 3.5% 6.7% 5.4%
Acquisition costs and administrative expenses
Business acquisition costs and administrative expenses increased during 2021
to $1,104.0m from $974.4m in 2020. The breakdown of these costs is shown
below.
Brokerage costs are the premium commissions paid to insurance intermediaries
for providing business. As a percentage of net earned premiums they have
decreased to 22% in the current year (2020: 23%). Brokerage costs are deferred
and expensed over the life of the associated premiums in accordance with the
Group's accounting policy. Other acquisition costs comprise costs that have
been identified as being directly related to underwriting activity (e.g.
underwriters' salaries and Lloyd's box rental). These
costs are also deferred in line with premium earning patterns.
2021 2020
$m $m
Brokerage costs 707.5 628.4
Other acquisition costs 114.3 110.5
Total acquisition costs 821.8 738.9
Administrative expenses 283.0 235.5
Total acquisition costs and administrative expenses 1,104.8 974.4
Beazley focuses on improving our expense ratio during times of strong growth.
This in conjunction with the effects of COVID-19 on travel and entertainment,
has meant that the overall expense ratio improving from 36% in 2020 to 35%.
Foreign exchange
The majority of Beazley's business is transacted in US dollars, which is the
currency we have reported in since 2010 and the currency in which we hold the
company's net assets. Changes in the US dollar exchange rate with sterling,
the Canadian dollar and the euro do have an impact as we receive premiums in
those currencies and a material number of our staff receive their salary in
sterling. Beazley's foreign exchange loss taken through the statement of
profit or loss in 2021 was $7.2m (2020: $11.2m gain).
Investment performance
Recent rapid growth in our financial assets continued in 2021 as the business
grew significantly, as the value of our investments, cash and cash equivalents
increased to $7,875.3m by year end (2020: $6,671.5m). We generated an
investment return of $116.4m, or 1.6% (2020: $188.1m, 3.0%) on these assets
during the year. This outcome is modestly ahead of our expectations at the
beginning of the period and reflects differing fortunes for the different
elements of our portfolio.
The global economy continued to recover strongly from the initial shock of the
COVID-19 pandemic throughout the year, despite the fact that COVID-19 has
remained very much in focus. Monetary and fiscal policies have remained
generally accommodative, helping to support an ongoing rally in global
equities, but also adding to the growing inflationary pressures generated by
global supply chain disruptions. Bond yields rose from the very low levels
prevailing at the beginning of the year, as markets began to discount future
normalisation in interest rates, resulting in poor conditions for fixed income
returns during this period.
Our core fixed income investments returned just 0.1% in 2021, as mark to
market capital losses, generated by rising yields, offset most of the modest
income from these investments. We maintained reduced duration in our portfolio
for much of the year, limiting capital losses, and made increasing use of
inflation-linked debt securities, which performed well as inflation concerns
grew. These actions helped ensure a positive, though modest, return from our
fixed income investments. Our capital growth investments returned 11.9%, led
by the very strong performance of global equities in the period. Overweight
exposure to US markets and our focus on solutions tracking ESG indices both
helped our equity portfolio outperform the global equity universe. Our other
capital growth exposures, including hedge funds and illiquid credit
investments, also performed well.
Looking ahead, yields rose from 0.6% in December 2020 to 0.9% as at the end of
2021, suggesting that the outlook for fixed income returns has improved, but
remains modest. However, yields may rise further as monetary policy tightens
in 2022, creating further headwinds for fixed income returns. It may be that
we are again reliant on our capital growth investments to generate good
returns, but there is no guarantee of this, particularly to shorter horizons.
Overall our expectations for investment returns remain modest, with the
returns at the start of 2022 showing signs of the aforementioned headwinds.
The table below details the breakdown of our portfolio by asset class:
31 Dec 2021 31 Dec 2020
$m % $m %
Cash and cash equivalents 591.8 7.5 309.5 4.6
Fixed and floating rate debt securities
- Government issued 4,008.1 50.9 2,723.7 40.8
- Corporate bonds
- Investment grade 1,861.9 23.6 2,444.9 36.7
- High yield 402.3 5.1 251.1 3.8
Syndicate loans 37.9 0.5 40.6 0.7
Derivative financial instruments 7.6 0.1 28.5 0.4
Core portfolio 6,909.6 87.7 5,798.3 87.0
Equity funds 209.6 2.7 203.2 3.0
Hedge funds 478.2 6.1 442.1 6.6
Illiquid credit assets 277.9 3.5 227.9 3.4
Total capital growth assets 965.7 12.3 873.2 13.0
Total 7,875.3 100.0 6,671.5 100.0
Comparison of return by major asset class:
31 Dec 2021 31 Dec 2020
$m % $m %
Core portfolio 7.2 0.1 160.0 2.9
Capital growth assets 109.2 11.9 28.1 3.5
Overall return 116.4 1.6 188.1 3.0
Tax
Beazley is liable to corporation tax in a number of jurisdictions, notably the
UK, the US and Ireland. Beazley's effective tax rate is thus a composite tax
rate mainly driven by the Irish, UK and US tax rates. The weighted average of
the statutory tax rates for the year was 17.2% (2021: (2.0%)). The tax rate of
17.2% is higher than last year due to this year's composition of profits and
losses across the Group.
Notwithstanding the overall profit before tax, some jurisdictions, notably
with higher tax rates, were profitable. The effective tax rate has decreased
in 2021 to 16.4% (2020: 8.5%). The increase has been a result of the higher
weighed average of the statutory tax rates, which was partly offset/reduced by
higher favourable prior year tax adjustments in 2021 as compared to 2020.
A Tax Act (the Tax Cuts and Jobs Act) was signed into law in the US in
December 2017. The Tax Act includes base erosion anti avoidance tax (the
'BEAT') provisions. We have performed an BEAT purposes. Although the
application of this BEAT legislation is still not fully certain for some types
of transactions we believe that the BEAT impact on the Group is not
significant. For the year 2021 no amount was provided in the Group accounts
for BEAT liabilities (for 2020 the Group provided $1.1m for BEAT tax). The
ultimate outcome may differ and if any additional amounts did fall within the
scope of the BEAT, incremental tax at 10% might arise on some or all of those
amounts. In addition, if BEAT encourages other governments to introduce
similar legislation impacting cross-border transactions, Beazley's tax
liability could consequently increase in those countries. We continue to
assess the future impact of BEAT and other tax changes (including OECD's
Pillar 1 and Pillar 2 proposals) on our business.
Balance sheet management
Summary statement of financial position
2021 2020 Movement
$m $m %
Intangible assets 123.5 126.3 (2)
Reinsurance assets 2,386.4 1,684.7 42
Insurance receivables 1,696.1 1,467.9 16
Other assets 726.1 637.3 14
Financial assets at fair value and cash and cash equivalents 7,875.3 6,671.5 18
Total assets 12,807.4 10,587.7 21
Insurance liabilities 8,871.8 7,378.4 20
Financial liabilities 554.7 558.5 (1)
Other liabilities 1,250.1 841.3 49
Total liabilities 10,676.6 8,778.2 22
Net assets 2,130.8 1,809.5 18
Net assets per share (cents) 351.6c 299.0c 18
Net tangible assets per share (cents) 331.2c 278.0c 19
Net assets per share (pence) 265.8p 219.1p
Net tangible assets per share (pence) 250.4p 203.8p 21
Number of shares(1) 606.1m 605.2m 23
(1) Excludes shares held in the employee trust and treasury shares.
Intangible assets
Intangible assets consist of goodwill on acquisitions of $62.0m (2020:
$62.0m), purchased syndicate capacity of $10.7m (2020: $10.7m), US admitted
licences of $9.3m (2020: $9.3m), renewal rights of $0.7m (2020: $8.7m) and
capitalised expenditure on IT projects of $41.0m (2020: $35.6m).
Reinsurance assets
Reinsurance assets represent recoveries from reinsurers in respect of incurred
claims of $1,829.4m (2020: $1,305.6m), and the unearned reinsurance premiums
reserve of $557.0m (2020: $379.1m). The reinsurance receivables from
reinsurers are split between recoveries on claims paid or notified of $371.4m
(2020: $262.2m), an actuarial estimate of recoveries on claims that have not
yet been reported of $1,458.0m (2020: $1,034.4m), and in 2021 there was no
unexpired risk reserve (2020: $9.0m).
The Group's exposure to reinsurers is managed through:
· minimising risk through selection of reinsurers who meet strict
financial criteria (e.g. minimum net assets, minimum 'A' rating by S&P).
These criteria vary by type of business (short vs medium tail). The chart
below shows the profile of these assets (based on their S&P rating) at the
end of 2021;
· timely calculation and issuance of reinsurance collection notes
from our ceded reinsurance team; and
· regular monitoring of the outstanding debtor position by our
reinsurance security committee and credit control committee. We continue to
provide against impairment of reinsurance recoveries and at the end of 2021
our provision in respect of reinsurance recoveries totalled $11.5m (2020:
$14.8m).
Insurance receivables
Insurance liabilities of $8,872.0m (2020: $7,378.4m) consist of two main
elements, being the unearned premium reserve (UPR) and gross insurance claims
liabilities. Our UPR has increased by 20% to $2,472.7m (2020: $1,924.3m). The
majority of the UPR balance relates to current year premiums that have been
deferred and will be earned in future periods. Current indicators are that
apart from the specific provisions made in respect of the unexpired risk
reserves, the business is profitable.
Gross insurance claims reserves are made up of claims which have been notified
to us but not yet paid of $1,627.5m (2020: $1,507.3m), an estimate of claims
incurred but not yet reported (IBNR) of $4,771.8m (2020: $3,855.3m), in 2021
there was no unexpired risk reserve (2020: $91.5m). These are estimated as
part of the quarterly reserving process involving the underwriters and Group
actuary. Gross insurance claims reserves have increased 17% from 2020 to
$6,399.1m (2020: $5,454.1m).
Insurance liabilities
Insurance liabilities of $8,872.0m (2020: $7,378.4m) consist of two main
elements, being the unearned premium reserve (UPR) and gross insurance claims
liabilities. Our UPR has increased by 20% to $2,472.7m (2020: $1,924.3m). The
majority of the UPR balance relates to current year premiums that have been
deferred and will be earned in future periods. Current indicators are that
apart from the specific provisions made in respect of the unexpired risk
reserves detailed in note 24, the business is profitable.
Gross insurance claims reserves are made up of claims which have been notified
to us but not yet paid of $1,627.5m (2020: $1,507.3m), an estimate of claims
incurred but not yet reported (IBNR) of $4,771.8m (2020: $3,855.3m), in 2021
there was no unexpired risk reserve (2020: $91.5m). These are estimated as
part of the quarterly reserving process involving the underwriters and Group
actuary. Gross insurance claims reserves have increased 22% from 2019 to
$6,399.3m (2020: $5,454.1m).
Financial liabilities
Financial liabilities comprise borrowings and derivative financial
liabilities. The Group utilises two long term debt facilities:
· in November 2016, Beazley Insurance dac issued $250m of 5.875%
subordinated tier 2 notes due in 2026; and
· in September 2019, Beazley Insurance dac issued $300m of 5.5%
subordinated tier 2 notes due in 2029.
A syndicated short term banking facility led by Lloyds Banking Group plc
provides potential borrowings up to $450m. Under the facility $450m may be
drawn as letters of credit to support underwriting at Lloyd's, and up to $225m
may be advanced as cash under a revolving facility. The cost of the facility
is based on a commitment fee of 0.4725% per annum and any amounts drawn are
charged at a margin of 1.35% per annum.
The cash element of the facility will expire on 23 July 2024, whilst letters
of credit issued under the facility can be used to provide support for the
2021, 2022, 2023 underwriting years. In 2021 $225m has been placed as a letter
of credit as Funds at Lloyd's (FAL).
Other assets
Other assets are analysed separately in the notes to the financial statements.
The items included comprise:
· deferred acquisition costs of $477.8m (2020: $384.9m); and
· deferred tax assets available for use against future taxes
payable of $16.3m (2020: $26.8m).
Judgement is required in determining the policy for deferring acquisition
costs. Beazley's policy assumes that variable reward paid to underwriters
relates to prior years' business and is not an acquisition cost. As a result,
the quantum of costs classified as acquisition is towards the lower end of the
possible range seen across the insurance market. Costs identified as related
to acquisition are then deferred in line with premium earnings.
Capital structure
Beazley aims to hold capital in excess of regulatory requirements in order to
be best placed to swiftly take advantage of growth opportunities arising
outside of our business plan, as well as to provide additional protection
against downside events.
The Group actively seeks to manage its capital structure. Our preferred use of
capital is to deploy it on opportunities
to underwrite profitably.
However, there may be times in the cycle when the Group will generate excess
capital and not have the opportunity to deploy it. At such points in time the
Board will consider returning capital to shareholders.
Beazley has a number of requirements for capital at a Group and subsidiary
level. Capital is primarily required to support underwriting at Lloyd's, the
US and through our European branches and is subject to prudential regulation
by local regulators (Prudential Regulation Authority, Lloyd's, Central Bank of
Ireland, and the US state level supervisors). Beazley is subject to the
capital adequacy requirements of the European Union (EU) Solvency II regime
(SII). We comply with all relevant SII requirements.
Further capital requirements come from rating agencies who provide ratings for
Beazley Insurance Company, Inc and Beazley Insurance dac. We aim to manage our
capital levels to obtain the ratings necessary to trade with our preferred
client base.
Beazley holds a level of capital over and above its regulatory requirements.
The amount of surplus capital held is considered on an ongoing basis in light
of the current regulatory framework, opportunities for organic or acquisitive
growth and a desire to maximise returns for investors.
2021 2020
$m $m
Shareholders' funds 2,130.8 1,809.5
Tier 2 subordinated debt (2026) 249.1 249.0
Tier 2 subordinated debt (2029) 298.3 298.1
Drawdown of letter of credit 225.0 225.0
2,903.2 2,581.6
During 2021 we maintained a strong capital base to achieve our underwriting
plan. Our funding comes from a mixture of our own equity alongside $547.4m
($550.0m gross of capitalised borrowing costs) of tier 2 subordinated debt. We
also have a banking facility of $450m (31 December 2020: $450m) of which,
$225m has been utilised and placed as a letter of credit at Lloyd's to support
our Funds at Lloyd's (FAL).
The following table sets out the Group's capital requirement selected for our
internal measure of the Group's capital
surplus position:
2021 2020
$m $m
Lloyd's economic capital requirement (ECR) 2,225.3 2,116.5
Capital for US insurance companies 247.8 246.3
2,473.1 2,362.8
The final Lloyd's economic capital requirement (ECR) at year end 2021, as
confirmed by Lloyd's, reflects the business we expect to write through to the
end of 2022 as per our business plan. Furthermore, rather than taking a one
year view of this business, it assumes that all risks run to ultimate.
Finally, Lloyds apply a 35% uplift to this number. These three factors make
the ECR requirement considerably more onerous than the standard Solvency II
measure which considers a one year time horizon and contains no uplift.
In general we expect our capital requirement to grow broadly in line with the
net written premiums in our business plan, which in the short-term should be
double digit growth, however premium growth due to rate change has a more
limited impact on the capital requirement, as the amount of risk stays broadly
the same.
At Beazley we aim to hold excess capital over the Lloyd's ECR and US capital
requirement, expressed as a % of Lloyd's ECR, and have a preferred range of
15-25%. Given the stringent nature of the Lloyd's ECR as noted above, our
Group surplus capital ratio is not directly comparable to the standard
Solvency II capital ratio which is based on a one year time horizon.
At 31 December 2021, we have surplus capital (on a solvency II basis) of 27%
of ECR, slightly above our current preferred range of 15% to 25% of ECR.
Following payment of the proposed interim dividend of 12.9p, this surplus
reduces to 22%,which is within our preferred range.
In addition to the surplus above, we have two further capital levers which may
be called upon. Firstly, the remaining undrawn banking facility of $225m may
be utilised and is not included within the capital stack used in the capital
surplus calculation. Secondly, we continue to use reinsurance as a tool to
manage our capital position.
To ensure capital efficiency is maintained for our operations in the US, we
continue to use a captive arrangement through Beazley NewCo. Captive Company,
Inc that we set up in 2020.
Both Tier 2 subordinated debt issuances issued by Beazley Insurance dac in
2016 and 2019 were assigned and maintain an Insurer Financial Strength (IFS)
rating of 'A+' by Fitch.
Solvency II
The Solvency II regime came into force on 1 January 2016. Beazley continue to
provide quarterly Solvency II pillar 3 reporting to both Lloyd's for the
Beazley managed syndicates and the Central Bank of Ireland for Beazley
Insurance dac and Beazley plc. During 2021 the fifth annual solvency financial
condition report (SFCR) of Beazley plc was published.
Under Solvency II requirements, the Group is required to produce a Solvency
Capital Requirement (SCR) which sets out the amount of capital that is
required to reflect the risks contained within the business. Lloyd's reviews
the syndicates' SCRs to ensure that SCRs are consistent across the market.
The current SCR has been established using our Solvency II approved internal
model approved by Central Bank of Ireland (CBI) which has been run within the
regime as prescribed by Lloyd's. In order to perform the capital assessment:
· we use sophisticated mathematical models that reflect the key
risks in the business allowing for probability of occurrence, impact if they
do occur, and interaction between risk types. A key focus of these models is
to understand the risk posed to individual teams, and to the business as a
whole, of a possible deterioration in the underwriting cycle; and
· the internal model process is embedded so that teams can see the
direct and objective link between underwriting decisions and the capital
allocated to that team. This gives a consistent and comprehensive picture of
the risk/reward profile of the business and allows teams to focus on
strategies that improve return on capital.
IFRS 17
The implementation of the IFRS 17: Insurance contracts standard is currently
scheduled for accounting periods commencing on or after 1 January 2023.
Applying this standard is a major undertaking and so the company has
established a multi-disciplinary project Group to oversee this activity.
The project has made good progress throughout 2021, moving from the
planning/build phase into the implementation phase of the project. Throughout
2022 the company will be carrying out several dry runs and parallel runs
ensuring that systems, resources and data production processes are all working
as expected.
The company plans to increase the level of engagement with stakeholders
throughout 2022, ensuring that there is an understanding of how the new
standard impacts the presentation of the company's financials going forward.
Group structure
The Group operates across Lloyd's, Europe, Asia, Canada and the US through a
variety of legal entities and structures. As at 31 December 2021, the main
entities within the legal entity structure are as follows:
· Beazley plc - Group holding company and investment vehicle, quoted on the
London Stock Exchange;
· Beazley Ireland Holdings plc - intermediate holding company;
· Beazley Underwriting Limited - corporate member at Lloyd's writing
business through syndicates 2623, 3622 and 3623;
· Beazley Furlonge Limited - managing agency for the six syndicates managed
by the Group 623, 2623, 3622, 3623, 6107, and 5623;
· Beazley Insurance dac - insurance company based in Ireland that accepts
non-life reinsurance premiums ceded by the corporate member Beazley
Underwriting Limited, and also writes business directly from Europe;
· Syndicate 2623 - corporate body regulated by Lloyd's through which the
Group underwrites its general insurance business excluding accident, life and
facilities. Business is written in parallel with syndicate 623;
· Syndicate 623 - corporate body regulated by Lloyd's which has its capital
supplied by third party names;
· Syndicate 6107 - special purpose syndicate writing reinsurance business,
and from 2017 cyber, on behalf of third party names;
· Syndicate 3622 - corporate body regulated by Lloyd's through which the
Group underwrites its life insurance and reinsurance business;
· Syndicate 3623 - corporate body regulated by Lloyd's through which the
Group underwrites its personal accident, BICI reinsurance business and, from
2018, Market Facilities business;
· Syndicate 5623 - special purpose syndicate writing Market Facilities
ceded from syndicate 3623;
· Beazley America Insurance Company, Inc. (BAIC) - insurance company
regulated in the US. In the process of obtaining licenses to write insurance
business in all 50 states;
· Beazley Insurance Company, Inc. (BICI) - insurance company regulated in
the US. Licensed to write insurance business in all 50 states;
· Beazley USA Services, Inc. (BUSA) - managing general agent based in
Farmington, Connecticut. Underwrites business on behalf of Beazley syndicates,
2623 and 623, BICI and BAIC; and
· Beazley NewCo Captive Company, Inc - provides internal reinsurance to
BICI for adverse development on older accident years.
Consolidated statement of profit or loss for the year ended 31 December 2021
2021 2020
$m $m
Gross premiums written 4,618.9 3,563.8
Written premiums ceded to reinsurers (1,106.5) (646.8)
Net premiums written 3,512.4 2,917.0
Change in gross provision for unearned premiums (545.0) (331.7)
Reinsurer's share of change in the provision for unearned premiums 179.9 108.1
Change in net provision for unearned premiums (365.1) (223.6)
Net earned premiums 3,147.3 2,693.4
Net investment income 116.4 188.1
Other income 28.2 29.8
Gain from sale of business 54.4 -
199.0 217.9
Revenue 3,346.3 2,911.3
Insurance claims 2,734.3 2,589.3
Insurance claims recoverable from reinsurers (908.1) (631.0)
Net insurance claims 1,826.2 1,958.3
Expenses for the acquisition of insurance contracts 821.8 738.9
Administrative expenses 283.0 235.5
Foreign exchange loss/(gain) 7.2 (11.2)
Operating expenses 1,112.0 963.2
Expenses 2,938.2 2,921.5
Results of operating activities 408.1 (10.2)
Finance costs (38.9) (40.2)
Profit/(loss) before income tax 369.2 (50.4)
Income tax (expense)/credit (60.5) 4.3
Profit/(loss) for year attributable to equity shareholders 308.7 (46.1)
Earnings per share (cents per share):
Basic 50.9 (8.0)
Diluted 50.3 (8.0)
Earnings per share (pence per share):
Basic 37.0 (6.3)
Diluted 36.5 (6.3)
Statement of comprehensive income for the year ended 31 December 2021
2021 2020
$m $m
Group
Profit/(loss) for the year attributable to equity shareholders 308.7 (46.1)
Other comprehensive income
Items that will never be reclassified to profit or loss:
Gain /(loss) on remeasurement of retirement benefit obligations 13.0 (2.0)
Income tax on defined benefit obligation (1.8) (0.5)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences (5.9) 2.8
Total other comprehensive income 5.3 0.3
Total comprehensive income/(loss) recognised 314.0 (45.8)
Statement of comprehensive income for the year ended 31 December 2021
2021 2020
$m $m
Company
Profit for the year attributable to equity shareholders 37.2 47.9
Total comprehensive income recognised 37.2 47.9
Statement of changes in equity for the year ended 31 December 2021
Share Share premium Foreign Other Retained Total
capital $m currency reserves earnings $m
$m translation $m $m
reserve
$m
Group
Balance at 1 January 2020 38.1 3.2 (94.1) 3.6 1,674.5 1,625.3
Total comprehensive - - 2.8 - (48.6) (45.8)
(loss)/income recognised
Dividends paid - - - - (50.2) (50.2)
Issue of shares - 2.1 - - - 2.1
Equity raise(1) 4.8 - - - 287.8 292.6
Equity settled share based payments - - - 2.8 - 2.8
Acquisition of own shares in trust - - - (13.6) - (13.6)
Tax on share option vestings - - - (5.4) 1.2 (4.2)
Transfer of shares to employees - - - 3.2 (2.7) 0.5
Balance at 31 December 2020 42.9 5.3 (91.3) (9.4) 1,862.0 1,809.5
Balance at 1 January 2021 42.9 5.3 (91.3) (9.4) 1,862.0 1,809.5
Total comprehensive - - (5.9) - 319.9 314.0
(loss)/income recognised
Equity settled share based payments - - - 11.0 - 11.0
Tax on share option vestings - - - (3.9) - (3.9)
Transfer of shares to employees - - - (1.7) 1.9 0.2
Balance at 31 December 2021 42.9 5.3 (97.2) (4.0) 2,183.8 2,130.8
1 During the financial year ended 31 December 2020, the group raised $292.6m
through a share issuance via a cash box structure. Merger relief under the
Companies Act 2006, section 612 was available, and thus no share premium was
recognised. As the redemption of the cash box entity's shares was in the form
of cash, the transaction was treated as qualifying consideration and the
premium is therefore considered to be immediately distributable and can be
recognised within retained earnings. The funds raised are net of issuance
costs.
Statement of changes in equity for the year ended 31 December 2021
Share Merger reserve(2) Foreign Retained
capital $m currency earnings Total
$m Share premium $m translation Other $m $m
reserve reserves
$m $m
Company
Balance at 1 January 2020 38.1 3.2 55.4 0.7 (9.3) 621.3 709.4
Total comprehensive income recognised - - - - - 47.9 47.9
Dividends paid - - - - - (50.2) (50.2)
Issue of shares - 2.1 - - - - 2.1
Equity raise(1) 4.8 - - - - 287.8 292.6
Equity settled share based payments - - - - 2.8 - 2.8
Acquisition of own shares in trust - - - - (13.6) - (13.6)
Transfer of shares to employees - - - - 3.2 (2.7) 0.5
Balance at 31 December 2020 42.9 5.3 55.4 0.7 (16.9) 904.1 991.5
Balance at 1 January 2021 42.9 5.3 55.4 0.7 (16.9) 904.1 991.5
Total comprehensive income recognised - - - - - 37.2 37.2
Equity settled share based payments - - - - 11.0 - 11.0
Transfer of shares to employees - - - - (1.7) 1.9 0.2
Balance at 31 December 2021 42.9 5.3 55.4 0.7 (7.6) 943.2 1,039.9
1 During the financial year ended 31 December 2020, the group
raised $292.6m through a share issuance via a cash box structure. Merger
relief under the Companies Act 2006, section 612 was available, and thus no
share premium was recognised. As the redemption of the cash box entity's
shares was in the form of cash, the transaction was treated as qualifying
consideration and the premium is therefore considered to be immediately
distributable and can be recognised within retained earnings. The funds raised
are net of issuance costs.
2 A merger reserve was created through a scheme of
arrangement on 13 April 2016, in which Beazley plc became the parent company
of the group.
Statements of financial position as at 31 December 2021
2021 2020
Group Group Group Company
$m $m $m $m
Assets
Intangible assets 123.5 - 126.3 -
Plant and equipment 19.2 - 19.7 -
Right of use assets 75.5 - 86.4 -
Deferred tax asset 16.3 - 26.8 -
Investment in subsidiaries - 724.6 - 724.6
Investment in associates 0.6 - 0.3 -
Deferred acquisition costs 477.8 - 384.9 -
Retirement benefit asset 18.1 - 4.8 -
Reinsurance assets 2,386.4 - 1,684.7 -
Financial assets at fair value 7,283.5 - 6,362.0 -
Insurance receivables 1,696.1 - 1,467.9 -
Other receivables 106.7 315.0 86.5 -
Current income tax asset 11.9 0.7 27.9 1.1
Cash and cash equivalents 591.8 0.3 309.5 -
Total assets 12,807.4 1,040.6 10,587.7 725.7
Equity
Share capital 42.9 42.9 42.9 38.1
Share premium 5.3 5.3 5.3 3.2
Merger reserve - 55.4 - 55.4
Foreign currency translation reserve (97.2) 0.7 (91.3) 0.7
Other reserves (4.0) (7.6) (9.4) (9.3)
Retained earnings 2,183.8 943.2 1,862.0 621.3
Total equity 2,130.8 1,039.9 1,809.5 709.4
Liabilities
Insurance liabilities 8,871.8 - 7,378.4 7,378.4
Financial liabilities 554.7 - 558.5 558.5
Lease liabilities 84.3 - 90.1 90.1
Deferred tax liabilities - - 0.6 0.6
Current income tax liability 24.5 - 16.7 16.7
Other payables 1,141.3 0.7 733.9 16.3
Total liabilities 10,676.6 0.7 8,778.2 16.3
Total equity and liabilities 12,807.4 1,040.6 10,587.7 725.7
Statements of cash flows for the year ended 31 December 2021
20 21 2020
Group Company Group Company
$m $m $m $m
Cash flow from operating activities
Profit/(loss) before income tax 369.2 36.4 (50.4) 46.1
Adjustments for:
Amortisation of intangibles 20.5 - 16.7 -
Equity settled share based compensation 11.0 11.0 2.8 2.8
Net fair value gain on financial assets (45.8) - (83.0) -
Depreciation of plant and equipment 4.9 - 3.2 -
Depreciation of right of use assets 15.0 - 13.0 -
Impairment of reinsurance assets recognised (3.3) - 1.1 -
Increase/(decrease) in insurance and other payables 1,900.8 (3.1) 1,486.9 (12.5)
Increase in insurance, reinsurance and other receivables (950.1) (47.1) (782.1) (268.7)
Increase in deferred acquisition costs (92.9) - (34.2) -
Financial income (76.5) (40.0) (110.9) (55.5)
Financial expense 38.9 3.6 40.2 5.6
Income tax paid (22.2) - (26.5) -
Net cash from/(used in) operating activities 1,169.5 (39.2) 476.8 (282.2)
Cash flow from investing activities
Purchase of plant and equipment (4.5) - (12.9) -
Expenditure on software development (17.7) - (20.5) -
Purchase of investments (7,979.1) - (6,126.6) -
Proceeds from sale of investments 7,037.1 - 5,443.8 -
Interest and dividends received 54.4 40.0 104.3 55.5
Net cash from/(used in) investing activities 70.6 40.0 (611.9) 55.5
Cash flow from financing activities
Acquisition of own shares in trust - - (13.6) (13.6)
Payment of lease liabilities (12.8) - (15.3) -
Equity raise - - 292.6 292.6
Finance costs (35.2) (3.6) (37.8) (5.6)
Issuance of shares - - 2.1 2.1
Dividend paid - - (50.2) (50.2)
Net cash (used in)/from financing activities (48.0) (3.6) 177.8 225.3
Net increase/(decrease) in cash and cash equivalents 282.3 (2.8) 42.7 (1.4)
Cash and cash equivalents at beginning of year 309.5 0.9 278.5 -
Effect of exchange rate changes on cash and cash equivalents - 2.2 (11.7) 2.3
Cash and cash equivalents at end of year 591.8 0.3 309.5 0.9
1 Statement of accounting policies
Beazley plc (registered number 09763575) is a company incorporated in England
and Wales and is resident for tax purposes in the United Kingdom. The
company's registered address is 22 Bishopsgate, London, EC2N 4BQ, United
Kingdom. The principal activity of the company and its subsidiaries (the
'group') is to participate as a specialist insurer which transacts primarily
in commercial lines of business through its subsidiaries and through Lloyd's
syndicates. The group financial statements for the year ended 31 December 2021
comprise the parent company, its subsidiaries and the Group's interest in
associates.
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2021 or 2020 but is derived
from those accounts. Statutory accounts for 2020 have been delivered to the
registrar of companies, and those for 2021 will be delivered in due course.
The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
In the current year, the Group have applied amendments to IFRS issued by the
International Accounting Standards Board (IASB) that are mandatorily effective
for an accounting period that begins on or after 1 January 2021. The new
effective amendments are:
· Interest Rate Benchmark Reform (IBOR) - Phase 2 (Amendments to
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (effective date: 1 January 2021);
and
· IFRS 16: COVID-19-Related Rent concessions (2021).
None of the amendments issued by the IASB have had a material impact to the
Group.
A number of new standards and interpretations adopted by the UK Endorsement
Board (UKEB) which are not mandatorily effective, as well as standards and
interpretations issued by the IASB but not yet adopted by the UKEB, have not
been applied in preparing these financial statements. The Group does not plan
to adopt these standards early; instead it expects to apply them from their
effective dates as determined by their dates of UKEB endorsement. The Group is
still reviewing the upcoming standards to determine their impact:
· IFRS 9: Financial Instruments (UKEB effective date: 1 January
2018, deferred in line with implementation of IFRS 17);
· IFRS 9: Amendment: Prepayment Features with Negative Compensation
(UKEB effective date: 1 January 2019, deferred in line with implementation of
IFRS 17);
· IFRS 17: Insurance Contracts (IASB effective date: 1 January
2023);1 and
· IFRS 10 and IAS 28: Amendment: Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
· (IASB effective date: optional).
1 Have not been endorsed by UKEB.
Of the upcoming accounting standard changes that we are aware of, we
anticipate that IFRS 17 and IFRS 9 will have the most material impact on the
financial statements' presentation and disclosures. The accounting
developments and implementation timelines of IFRS 17 and IFRS 9 are being
closely monitored and the impacts of the standards themselves are being
assessed
and prepared for. A brief overview of each of these standards is provided
below:
· IFRS 17 will change the way insurance contracts are accounted for
and reported. On initial assessment the major change will be on the
presentation of the statement of profit or loss, with premium and claims
figures being replaced with insurance contract revenue, insurance service
expense and insurance finance income and expense. Revenue will no longer be
equal to premiums earned but instead reflect a change in the contract
liability on which consideration is expected. The impact of the new standard
is still being fully assessed but current indications are that the timing of
profit recognition will be altered. Any change in profit recognition on
transition to IFRS 17 will result in a one off transaction being reflected in
equity. The Group are currently assessing the impact of IFRS 17 on several
areas such as reserving strategy, operating model and data. The Group are also
intending to start to review their reserve margin using IFRS 17 concepts such
as confidence level rather than the current concept of holding reserves within
a range above the actuarial estimates.
During 2021, the Group continued to undertake a number of tasks in preparation
for IFRS 17. These tasks included:
· Concluding on writing and presenting technical papers to
governance committees of how the standard will be applied;
· Sourcing and landing the remaining data required for IFRS 17;
· Developing a calculation engine to allow the population of IFRS
17 results;
· Begin the recruitment of IFRS 17 target operating model
resources; and
· Develop the working day timetable, control framework, target
operating model and additional processes required to allow the effective
operation of IFRS 17.
Currently the project to implement IFRS 17 and IFRS 9 has made good progress
during 2021. As was stated in the 2017 annual report, the Group chose to apply
the temporary exemption permitted by IFRS 4 from applying IFRS 9: Financial
Instruments. The Group qualifies for this exemption because, as at 31 December
2015, $5,040.7m or 95% of its total liabilities were connected with insurance.
There has been no material change in the Group's activities since 31 December
2015, therefore the exemption still remains. The Group has also disclosed
information in relation to specific types of financial instruments to ensure
the comparability with the entities applying IFRS 9. As such, fair values are
disclosed separately for the Group's financial assets which are managed and
evaluated on a fair value basis and those which meet the solely payments of
principal and interest (SPPI) test under IFRS 9. Beazley plc as a standalone
company adopted IFRS 9 from 1 January 2018. However, as the standalone
company has no financial investments the adoption had an immaterial impact on
its financial statements. Below is a table outlining the fair value of assets
which are managed and evaluated on a fair value basis and those which meet the
SPPI test under IFRS 9. The Group have made the decision not to restate prior
year comparatives on adoption of IFRS 9, nor apply the overlay approach.
On 25 June 2020, the International Accounting Standards Board (IASB) issued
amendments to IFRS 17 Insurance Contracts, which included the deferral of the
effective date of IFRS 17 and IFRS 9 (for qualifying insurers) to 1 January
2023.
2021 2020
$m $m
Financial assets managed and evaluated on a fair value basis
Fixed and floating rate debt securities:
- Government issued 4,008.1 2,723.7
- Corporate bonds
- Investment grade 1,861.9 2,444.9
- High yield 402.3 251.1
Syndicate loans 37.9 40.6
Equity funds 209.6 203.2
Hedge funds 478.2 442.1
Illiquid credit assets 277.9 227.9
Derivative financial assets 7.6 28.5
Total financial assets managed and evaluated on a fair value basis 7,283.5 6,362.0
Financial assets meeting the SPPI test
Cash and cash equivalents 591.8 309.5
Other receivables 106.7 86.5
Total financial assets meeting the SPPI test 698.5 396.0
Basis of presentation
The Group financial statements are prepared using the historical cost
convention, with the exception of financial assets and derivative financial
instruments which are stated at their fair value. All amounts presented are in
US dollars and millions, unless stated otherwise.
In accordance with the requirements of IAS 1 the financial statements' assets
and liabilities have been presented in order of liquidity which provides
information that is more reliable and relevant for a financial institution.
Going Concern
The financial statements of Beazley plc have been prepared on a going concern
basis. In adopting the going concern basis, the Board has reviewed the Group's
current and forecast solvency and liquidity positions for the next 12 months
from the date that the financial statements are authorised for issue. The
Group's business activities, together with the factors likely to affect its
future development, performance, and position, are set out in the Strategic
report contained in the Group's Annual Report & Accounts. In addition, the
risk report and financial review includes the Group's risk management
objectives and the Group's objectives, policies and processes for managing its
capital.
In assessing the Group's going concern position as at 31 December 2021, the
directors have considered a number of factors, including the current statement
of financial position, the Group's strategic and financial plan, taking
account of possible changes in trading performance and funding retention, and
stress testing and scenario analysis.
This included, among other analysis, a best estimate forecast with scenario
analysis covering the impact of reserve releases, attritional, large and
catastrophe loss events alongside optimistic and pessimistic investment return
scenarios. To further stress the financial stability of the Group, additional
scenario testing was performed. This included modelling the breakeven capital
requirements of our regulators and rating agencies, the impact of potential
management actions to reduce the Group's exposure to climate change-related
risks, global events and counterparty credit risk, the occurrence of a number
of high severity loss events impacting our underwriting platforms in 2022 and
a reverse stress test scenario designed to render the business model unviable.
The testing identified that even under the more severe but plausible stress
scenarios, the Group had more than adequate liquidity and solvency headroom.
As a result of the assessment, no material uncertainty in relation to going
concern has been identified. As at its most recent regulatory submission, the
Group's capital ratios and its total capital resources are comfortably in
excess of regulatory solvency requirements, and internal stress testing
indicates the Group can withstand severe economic and competitive stresses.
Based on the going concern assessment performed, the directors have a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence over a period of at least 12 months from
the date of this report and therefore believe that the Group is well placed to
manage its business risks successfully. Accordingly, they continue to adopt
the going concern basis in preparing the consolidated financial statements.
Part VII transfer
On 30 December 2020, the Group transferred all relevant policies (and related
liabilities) underwritten by the Group's syndicates to Lloyd's Insurance
Company S.A. ('Lloyd's Brussels'), in accordance with Part VII of the
Financial Services and Markets Act 2000. On the same date, the Group entered
into a 100% Quota Share Reinsurance Agreement whereby Lloyd's Brussels
reinsured all risks on the same policies back to the Group. The purpose of
these transactions were to ensure these policies could be serviced after
Brexit on the 31 December 2020.
Following the sanction of the scheme by the High Court on 25 November 2020,
the scheme took effect on 30 December 2020 and the Group transferred the
impacted EEA policies and related liabilities to Lloyd's Brussels, together
with cash of $229.2m. On the same date, under the Reinsurance Agreement,
Lloyd's Brussels reinsured the same risks back, together with an equal amount
of cash of $229.2m. The combined effect of the two transactions had no
economic impact for the Group, and accordingly there is no impact on the
Group's financial statements
Use of estimates and judgements
The preparation of financial statements requires the use of certain critical
accounting estimates and judgements that affect the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from those
on which management's estimates are based. Estimates and assumptions are
continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be
reasonable. Estimates which are sensitive to changes in future economic
conditions could be impacted by significant changes in the economic and
regulatory environment, such as COVID-19, climate change, US legislation and
Brexit.
Specific to climate change, since responses to it are still developing, it is
not possible to consider all possible future outcomes when determining asset
and liability valuations, and timing of future cash flows, as these are not
yet known. Nevertheless, the current management view is that reasonably
possible changes arising from climate risks would not have a material impact
on asset and liability valuations at the year-end date
a) Estimates
Estimates are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised and in any
future periods affected.
Provision & claims
The most critical estimate included within the Group's financial position is
the estimate for insurance losses incurred but not reported (IBNR), which is
included within total insurance liabilities and reinsurance assets in the
statement of financial position. This estimate is critical as it outlines the
current liability for future expenses expected to be incurred in relation to
claims. If this estimation was to prove inadequate then an exposure would
arise in future years where a liability has not been provided for. The total
estimate for insurance losses incurred but not reported gross of reinsurers'
share as at 31 December 2021 is $4,711.8m (2020: $3,855.3m). The total
estimate for insurance losses incurred but not reported net of reinsurers'
share as at 31 December 2021 is $3,313.8m (2020: $2,820.9m) and is included
within total insurance liabilities and reinsurance assets in the statement of
financial position.
The best estimate of the most likely ultimate outcome is used when calculating
notified claims. This estimate is based upon the facts available at the time,
in conjunction with the claims manager's view of likely future developments.
Another critical estimate within insurance liabilities is the estimation of an
unexpired risk reserve (URR) for the expected value of net claims and expenses
attributable to the unexpired periods of policies in force at the balance
sheet date which exceeds the unearned premium reserve. Any deficiency
resulting from this liability adequacy test is recognised in the statement of
profit and loss and additional liability as required is recognised as URR in
the statement of financial position. In 2020, the Group recognised a loss due
to this test and established a URR. If this estimation was to prove
inadequate, the unexpired risk reserve provision could be understated. As at
31 December 2021 no URR provision has been included on either a gross basis
(2020: $91.5m) or net of reinsurance basis (2020: $82.5m).
Financial assets & liabilities
Another critical area of estimation is the Group's financial assets and
liabilities. Information about estimation uncertainty related to the Group's
financial assets and liabilities is described in this statement of accounting
policies and note 16: financial assets and liabilities (valuations based on
models and unobservable inputs) of the 2021 Annual Report and Accounts.
Premium estimates
Other critical estimates contained within our close process are premium
estimates and the earning pattern of recognising premium over the life of the
contract. In the syndicates the premium written is initially based on the
estimated premium income (EPI) of each contract. Where premium is sourced
through binders, the binder EPI is pro-rated across the binder period. This is
done on a straight-line basis unless the underlying writing pattern from the
prior period indicates the actual underlying writing pattern is materially
different. The underwriters adjust their EPI estimates as the year of account
matures. As the year of account closes premiums are adjusted to match the
actual signed premium. An accrual for estimated future reinstatement premiums
is retained. Premiums are earned on a straight-line basis over the life of
each contract. At a portfolio level this is considered to provide a reasonable
estimate for the full year of the pattern of risk over the coverage period.
Estimation techniques are necessary to quantify the future premium on all
syndicate business written and are commonly used within the Lloyd's insurance
market. The majority of the estimation arises within the binder and lineslip
estimates where the premium amounts are dependent on the volume of policies
that are insured under the binder/lineslip over the coverage period. In these
cases underwriters estimate an initial premium volume and then adjust
throughout the life of the binder/lineslip as and when new information becomes
available. The process of determining the EPI is based on a number of factors,
which can include:
· Coverholder business plan documents supplied prior to binding;
· Historical trends of business written;
· Current and expected market conditions for this line of business;
and
· Life to date bordereaux submissions versus expectation
Due to the nature of the Lloyd's business and the settlement patterns of the
underlying business it is also not uncommon for some contracts to take a
number of years to finalise and settle, and a receivable on the balance sheet
remains. The amount of estimated future premium that remains in insurance
receivables relating to years of account that are more than three years
developed at 31 December 2021 is $15.4m (2020: $13.7m).
Goodwill
Another estimate used by Beazley is based on the key assumptions underlying
the recoverable amounts used in assessing the impairment of goodwill. The key
assumptions used in the preparation of future cash flows are: premium growth
rates, claims experience, discount rates, retention rates and expected future
market conditions as per note 12 of the 2021 Annual Report and Accounts.
2 Segmental analysis
a) Reporting segments
Segment information is presented in respect of reportable segments. These are
based on the group's management and internal reporting structures and
represent the level at which financial information is reported to the
Executive Committee, being the chief operating decision-maker as defined in
IFRS 8.
The operating segments are based upon the different types of insurance risk
underwritten by the group, as described below:
Cyber & Executive Risk
This segment underwrites management liabilities such as employment practices
risks and directors and officers, alongside cyber and technology, media and
business services.
Marine
This segment underwrites a broad spectrum of marine classes including hull,
energy, cargo and specie, piracy, satellite, aviation,
kidnap & ransom and war risks.
Market Facilities
This segment underwrites entire portfolios of business with the aim of
offering a low cost mechanism for placing follow business within the Lloyd's
market.
Political, Accident & Contingency
This segment underwrites terrorism, political violence, expropriation and
credit risks as well as contingency and risks associated with contract
frustration. In addition, this segment underwrites life, health, personal
accident, sports and income protection risks.
Property
The Property segment underwrites commercial and high-value homeowners'
property insurance on a worldwide basis.
Reinsurance
This segment specialises in writing property catastrophe, property per risk,
casualty clash, aggregate excess of loss and
pro-rata business.
Specialty Lines
This segment underwrites a wide portfolio of business, including architects
and engineers, healthcare, lawyers and environmental liability and
international financial institutions. Segment results, assets and liabilities
include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Those items that are allocated on a
reasonable basis are split based on each segment's capital requirements which
is taken from the group's most up to date business plan. The reporting
segments do not cross-sell business to each other. There are no individual
policyholders who comprise greater than 10% of the group's total gross
premiums written.
b) Segment information
2021 Cyber & Marine Market Political, Property Reinsurance Specialty Total
Executive Risk $m Facilities Accident & $m $m Lines $m
$m $m Contingency $m
$m
Gross premiums written 1,515.6 376.5 198.2 322.8 586.5 226.1 1,393.2 4,618.9
Net premiums written 1,150.6 345.6 55.0 270.9 439.7 133.4 1,117.2 3,512.4
Net earned premiums 951.6 316.8 45.3 251.2 386.8 134.9 1,060.7 3,147.3
Net investment income 31.9 8.3 0.6 8.1 15.0 7.6 44.9 116.4
Other income 4.1 1.1 (0.3) 1.9 6.9 0.6 13.9 28.2
Gain from sale of business - - - 54.4 - - - 54.4
Revenue 987.6 326.2 45.6 315.6 408.7 143.1 1,119.5 3,346.3
Net insurance claims 622.1 105.8 10.6 136.1 212.4 123.0 616.2 1,826.2
Expenses for the acquisition 205.9 89.0 33.1 84.7 118.3 31.1 259.7 821.8
of insurance contracts
Administrative expenses 56.6 33.4 0.7 25.1 51.3 15.6 100.3 283.0
Foreign exchange (gain) 2.3 0.6 0.3 0.5 0.9 0.4 2.2 7.2
Expenses 886.9 228.8 44.7 246.4 382.9 170.1 978.4 2,938.2
Segment result 100.7 97.4 0.9 69.2 25.8 (27.0) 141.1 408.1
Finance costs (38.9)
Profit before income tax 369.2
Income tax expense (60.5)
Profit for the year attributable 308.7
to equity shareholders
Claims ratio 65% 33% 23% 54% 55% 91% 58% 58%
Expense ratio 28% 39% 75% 44% 44% 35% 34% 35%
Combined ratio 93% 72% 98% 98% 99% 126% 92% 93%
Segment assets and liabilities
Segment assets 3,953.7 761.8 339.8 698.3 1,351.1 814.1 4,888.6 12,807.4
Segment liabilities (3,253.6) (655.6) (316.9) (605.9) (1,086.5) (685.9) (4,072.2) (10,676.6)
Net assets 700.1 106.2 22.9 92.4 264.6 128.2 816.4 2,130.8
Additional information
Capital expenditure 7.3 1.1 0.2 1.0 2.8 1.3 8.5 22.2
Amortisation and depreciation (10.8) (2.5) (0.3) (1.4) (4.0) (2.0) (19.4) (40.4)
Net cash flow 92.7 14.1 3.0 12.2 35.1 17.0 108.2 282.3
2020 Cyber & Marine Market Political, Property Reinsurance Specialty Total
Executive Risk $m Facilities Accident & $m $m Lines $m
$m $m Contingency $m
$m
Gross premiums written 1,020.1 337.4 133.4 273.0 470.5 194.5 1,134.9 3,563.8
Net premiums written 864.6 309.4 37.3 227.1 389.9 126.9 961.8 2,917.0
Net earned premiums 787.2 297.1 27.9 213.8 360.7 124.3 882.4 2,693.4
Net investment income 53.6 12.8 0.5 10.6 21.4 11.9 77.3 188.1
Other income 2.8 1.7 0.1 4.1 5.1 1.7 14.3 29.8
Revenue 843.6 311.6 28.5 228.5 387.2 137.9 974.0 2,911.3
Net insurance claims 557.7 160.5 8.3 354.1 291.3 86.8 499.6 1,958.3
Expenses for the acquisition 180.0 82.2 19.3 75.9 105.4 32.0 244.1 738.9
of insurance contracts
Administrative expenses 54.4 25.1 1.9 23.1 36.4 12.2 82.4 235.5
Foreign exchange (gain) (3.3) (1.2) (0.1) (0.9) (1.5) (0.5) (3.7)
(11.2)
Expenses 788.8 266.6 29.4 452.2 431.6 130.5 822.4 2,921.5
Segment result 54.8 45.0 (0.9) (223.7) (44.4) 7.4 151.6 (10.2)
Finance costs (40.2)
Loss before income tax (50.4)
Income tax credit 4.3
Loss for the year attributable (46.1)
to equity shareholders
Claims ratio 71% 54% 30% 166% 81% 70% 57% 73%
Expense ratio 30% 36% 76% 46% 39% 35% 37% 36%
Combined ratio 101% 90% 106% 212% 120% 105% 94% 109%
Segment assets and liabilities
Segment assets 2,909.9 707.4 182.5 786.3 1,216.7 734.1 4,050.8 10,587.7
Segment liabilities (2,389.8) (612.2) (170.7) (678.4) (966.0) (591.2) (3,369.9) (8,778.2)
Net assets 520.1 95.2 11.8 107.9 250.7 142.9 680.9 1,809.5
Additional information
Capital expenditure 8.5 1.6 0.2 1.8 4.1 2.3 11.2 29.7
Amortisation and depreciation (3.4) (2.2) (0.1) (0.7) (1.6) (0.9) (11.0) (19.9)
Net cash flow 8.9 1.6 0.2 1.9 4.3 2.4 11.7 31.0
c) Information about geographical areas
The Group's operating segments are also managed geographically by placement of
risk. UK earned premium in the analysis below represents all risks placed at
Lloyd's; US earned premium represents all risks placed at the Group's US
insurance companies, Beazley Insurance Company, Inc. and Beazley America
Insurance Company, Inc; and Europe earned premium represents all risks placed
at the Group's European insurance company, Beazley Insurance dac..
2021 2020
$m $m
Net earned premiums
UK (Lloyd's) 2,550.6 2,214.6
US (Non-Lloyd's) 477.1 430.7
Europe (Non-Lloyd's) 119.6 48.1
3,147.3 2,693.4
2021 2020
$m $m
Segment assets
UK (Lloyd's) 11,267.5 9,433.1
US (Non-Lloyd's) 1,164.9 976.6
Europe (Non-Lloyd's) 375.0 178.0
12,807.4 10,587.7
Segment assets are allocated based on where the assets are located.
2021 2020
$m $m
Capital expenditure
Non-US 20.2 23.2
US 3.3 6.5
23.5 29.7
3 Net investment income
2021 2020
$m $m
Interest and dividends on financial investments at fair value through profit 76.5 110.7
or loss
Interest on cash and cash equivalents - 0.2
Net realised gains on financial investments at fair value through profit or 79.8 46.3
loss
Net unrealised fair value gains on financial investments at fair value through (34.0) 36.7
profit or loss
Investment income from financial investments 122.3 193.9
Investment management expenses (5.9) (5.8)
116.4 188.1
4a Other income
2021 2020
$m $m
Commissions received by Beazley service companies 19.4 23.6
Profit commissions from syndicates 3.8 (0.5)
Agency fees from syndicate 623 3.9 3.0
Other income 1.1 3.7
28.2 29.8
Profit commissions
There is an agreement between syndicate 623 and Beazley Furlonge Limited (the
managing agent) where the syndicate remunerates Beazley for writing business
in parallel with syndicate 2623. As such, profitability of 623 is a
performance criterion for this contract. The transaction price represents a
fixed percentage on profit by YOA. No other variable considerations (for
example: discounts, rebates, refunds, incentives) are attached. The value of a
transaction price is derived at each reporting period from
the actual profit syndicate 623 has made to date and therefore represents the
most likely amount of consideration at the reporting date.
Commissions received from service companies
Commission is payable to the Group by syndicate 623 due to Group service
companies writing business on behalf of the syndicate. While the commercial
purpose of the contract is to pass business to syndicate 623, the remuneration
is triggered by incurring expenses, irrespective of volume of business gained.
The performance criterion is deemed to be the realisation of expenses.
Other income
The Group has received $0.1m of government grants relating to COVID-19 for
wage relief for our Singapore employees
(31 December 2020: $0.2m). These grants are deemed to be tax free in the hands
of the employer. Under IAS 20: Government Grants, government grants are
recognised where there is reasonable assurance that the grant will be received
and all attached conditions will be complied with. When the grant relates to
an expense item, it is recognised as income on a systematic basis
over the periods that the related costs, for which it is intended to
compensate, are expensed.
4b Gain on sale of business
The Group has recognised a net gain on sale of $54.4m following the sale of
the Beazley Benefits business, which provides group supplemental health
benefits solutions through employers or affinity groups to employees. Beazley
Benefits sits within the Political, Accident & Contingency segment in
these financial statements. The sale was completed during 2021, and the
transaction transferred the renewal rights on the business beginning effective
1 August 2021, the Minneapolis office lease, and the associated office
furniture, fixtures and equipment. The transaction resulted in transfer of
$0.1m of lease and other assets, and $0.1m of lease liabilities. The Group
received closing proceeds of $56.7m and recognised closing costs of $2.3m.
5 Operating expenses
2021 2020
$m $m
Operating expenses include:
Amounts receivable by the auditor(1) and associates in respect of:
- audit services for the group and subsidiaries 2.7 2.4
- audit-related assurance services 1.1 1.0
- other non-audit services 0.6 0.5
4.4 3.9
Impairment loss recognised on reinsurance assets (3.3) 1.1
(1 )Other than the fees disclosed above, no other fees were paid to the
company's auditor.
6 Employee benefit expenses
2021 2020
m $m
Wages and salaries 199.1 179.6
Short term incentive payments 82.5 39.1
Social security 26.6 17.5
Share based remuneration 11.6 3.0
Pension costs (1) 15.7 13.0
335.5 252.2
Recharged to syndicate 623 (48.5) (33.2)
287.0 219.0
(1 Pension costs also include
contributions made under the defined contribution scheme)
The average number of employees for 2021 was 1,617 (2020: 1,497).
7 Finance costs
2021 2020
$m $m
Interest expense on financial liabilities 35.2 37.8
Interest expense on lease liabilities 3.7 2.4
38.9 40.2
8 Income tax expense
2021 2020
$m $m
Current tax expense
Current tax expense 64.0 12.9
Prior year adjustments (7.5) (6.5)
56.5 6.4
Deferred tax expense
Origination and reversal of temporary differences 4.4 (12.1)
Impact of change in UK/US tax rates (0.6) (0.4)
Prior year adjustments 0.2 1.8
4.0 (10.7)
Income tax (credit)/charge 60.5 (4.3)
Reconciliation of tax expense
The weighted average of statutory tax rates applied to the (losses)/profits
earned in each country in which the Group operates is 17.2% (2020: 2.0%),
whereas the tax charged for the year ending 31 December 2021 as a percentage
of (loss)/profit before tax
is 16.4% (2020: 8.5%). The reasons for the difference are explained below
2021 2021 2020 2020
$m % $m %
Profit/(loss) before tax 369.2 - (50.4) -
Tax calculated at the weighted average of statutory tax rate 63.3 17.2 (1.0) 2.0
Effects of:
- non-deductible expenses 3.5 1.0 2.1 (4.2)
- tax relief on share based payments - current and future years 1.6 0.4 (0.4) 0.8
- over provided in prior years (7.3) (2.0) (4.6) 9.1
- change in UK/US tax rates (1) (0.6) (0.2) (0.4) 0.8
Tax (credit)/charge for the period 60.5 16.4 (4.3) 8.5
(1) The Finance Act 2021, which provides for an increase in the UK corporation
tax rate from 19% to 25% effective from 1 April 2023 received Royal Assent on
10 June 2021. This tax rate change to 25% will increase the Group's future
current tax charge. It has also been reflected in the calculation of the
deferred tax balances as at 31 December 2021 for relevant temporary timing
differences expected to reverse on or after 1 April 2023.
The Tax Act (the Tax Cuts and Jobs Act) was signed into law in the US in
December 2017. The Tax Act includes base erosion anti-avoidance tax provisions
(the "BEAT"). We have performed an assessment for our intra-group transactions
potentially in scope of BEAT. The application of this new BEAT legislation is
still uncertain for some types of transaction and we are keeping developments
under review. With support from external advisors, we believe that the BEAT
impact on the Group is not significant. For the year 2021 no amount was
provided in the Group accounts for BEAT liabilities (for 2020 the Group
provided $1.1m for BEAT tax). The ultimate outcome may differ and if any
additional amounts did fall within the scope of the BEAT, incremental tax at
10% might arise on some or all of those amounts. The maximum exposure to BEAT
can not be quantified as it would be subject to differing interpretations.
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profits or loss or other comprehensive income but directly
debited or (credited) to equity:
2021 2020
$m $m
Current tax: share based payments - (1.2)
Deferred tax: share based payments 3.9 5.4
3.9 4.2
9 (Loss)/earnings per share
2021 2020
Basic (cents) 50.9c (8.0)c
Diluted (cents) 50.3c (8.0)c
Basic (pence) 37.0p (6.3)p
Diluted (pence) 36.5p (6.3)p
Basic
Basic earnings/(loss) per share are calculated by dividing profit after tax of
$308.7m (2020: Loss $46.1m) by the weighted average number of shares in issue
during the year of 606.0m (2020: 573.8m). The shares held in the Employee
Share Options Plan (ESOP)
of 3.2m (2020: 3.8m) have been excluded from the calculation, until such time
as they vest unconditionally with the employees.
Diluted
Diluted earnings/(loss) per share are calculated by dividing profit after tax
of $308.7m (2020: Loss $46.1m) by the adjusted weighted average number of
shares of 614.3m (2020: 582.6m). The adjusted weighted average number of
shares assumes conversion of dilutive potential ordinary shares, being shares
from the equity settled compensation schemes. The shares held in the ESOP of
3.2m (2020: 3.8m) have been excluded from the calculation, until such time as
they vest unconditionally with the employees.
10 Dividends per share
After careful consideration the directors have concluded that after a year's
hiatus, they propose an interim dividend of 12.9p
for 2021 (2020: nil) which represents a 5% increase on the combined first and
second interim dividends declared in 2019 of 12.3p. The dividend will be
payable on 30 March 2022 to Beazley plc shareholders registered at 5.00pm on
18 February 2022. The company expects the total amount to be paid in respect
of the interim dividend to be approximately £78m. These financial statement
do not provide for the interim dividend as a liability.
11 Insurance liabilities and reinsurance assets
2021 2020
$m $m
Gross
Claims reported and loss adjustment expenses 1,627.4 1,507.3
Unexpired risk reserve 4,771.7 91.5
Claims incurred but not reported - 3,855.3
Gross claims liabilities 6,399.1 5,454.1
Unearned premiums 2,472.7 1,924.3
Total insurance liabilities, gross 8,871.8 7,378.4
Recoverable from reinsurers
Claims reported and loss adjustment expenses 371.4 262.2
Unexpired risk reserve 1,458.0 9.0
Claims incurred but not reported - 1,034.4
Reinsurers' share of claims liabilities 1,829.4 1,305.6
Unearned premiums 557.0 379.1
Total reinsurers' share of insurance liabilities 2,386.4 1,684.7
Net
Claims reported and loss adjustment expenses 1,256.0 1,245.1
Unexpired risk reserve 3,313.7 82.5
Claims incurred but not reported - 2,820.9
Net claims liabilities 4,569.7 4,148.5
Unearned premiums 1,915.7 1,545.2
Total insurance liabilities, net 6,485.4 5,693.7
The gross claims reported, the loss adjustment liabilities and the liabilities
for claims incurred but not reported are net of recoveries from salvage and
subrogation.
11.1 Movements in insurance liabilities and reinsurance assets
a) Claims and loss adjustment expenses
2021 2020
Gross Reinsurance Net Gross Reinsurance Net
$m $m $m $m $m $m
Claims reported and loss adjustment expenses 1,507.3 (262.2) 1,245.1 1,263.7 (223.7) 1,040.0
Claims incurred but not reported 3,855.3 (1,034.4) 2,820.9 3,196.6 (845.1) 2,351.5
Unexpired risk reserve 91.5 (9.0) 82.5 - - -
Balance at 1 January 5,454.1 (1,305.6) 4,148.5 4,460.3 (1,068.8) 3,391.5
Claims paid (1,718.5) 378.9 (1,339.6) (1,671.1) 404.7 (1,266.4)
Increase in claims
- Arising from current year claims 2,911.5 (875.5) 2,036.0 2,698.2 (646.8) 2,051.4
- Arising from prior year claims (177.2) (32.6) (209.8) (109.8) 16.7 (93.1)
Net exchange differences (70.8) 5.4 (65.4) 76.5 (11.4) 65.1
Balance at 31 December 6,399.1 (1,829.4) 4,569.7 5,454.1 (1,305.6) 4,148.5
Claims reported and loss adjustment expenses 1,627.4 (371.4) 1,256.0 1,507.3 (262.2) 1,245.1
Claims incurred but not reported 4,771.7 (1,458.0) 3,313.7 91.5 (9.0) 82.5
Unexpired risk reserve - - - 3,855.3 (1,034.4) 2,820.9
Balance at 31 December 6,399.1 (1,829.4) 4,569.7 5,454.1 (1,305.6) 4,148.5
b) Unearned premiums reserve
2021 2020
Gross Reinsurance Net Gross Reinsurance Net
$m $m $m $m $m $m
Balance at 1 January 1,924.3 (379.1) 1,545.2 1,598.7 (269.4) 1,329.3
Increase in the year 4,618.9 (1,122.8) 3,496.1 3,563.8 (655.7) 2,908.1
Release in the year (4,070.5) 944.9 (3,125.6) (3,238.2) 546.0 (2,692.2)
Balance at 31 December 2,472.7 (557.0) 1,915.7 1,924.3 (379.1) 1,545.2
11.2 Assumptions, changes in assumptions and claims reserve strength analysis
a) Process used to decide on assumptions
Beazley uses a quarterly dual track process to set its reserves:
· the actuarial team uses several actuarial and statistical methods
to estimate the ultimate premium and claims costs, with the most appropriate
methods selected depending on the nature of each class of business; and
· the underwriting teams concurrently review the development of the
incurred loss ratio over time, work with our claims managers to set reserve
estimates for identified claims and utilise their detailed understanding of
both risks underwritten and the nature of the claims to establish an
alternative estimate of ultimate claims cost, which is compared to the
actuarially established figures.
A formal internal peer review process is then undertaken to determine the
reserves held for accounting purposes which, in totality, are not lower than
the actuarially established figure.
The Group has a consistent reserving philosophy, with initial reserves being
set to include risk margins which may be released over time as uncertainty
reduces.
Actuarial assumptions
Chain-ladder techniques are applied to premiums, paid claims and incurred
claims (i.e. paid claims plus case estimates). The basic technique involves
the analysis of historical claims development factors and the selection of
estimated development factors based on historical patterns. The selected
development factors are then applied to cumulative claims data for each
underwriting year that is not yet fully developed to produce an estimated
ultimate claims cost for each underwriting year.
Chain-ladder techniques are most appropriate for classes of business that have
a relatively stable development pattern. Chain-ladder techniques are less
suitable in cases in which the insurer does not have a developed claims
history for a particular class of business, or for underwriting years that are
still at immature stages of development where there is a higher level of
assumption volatility.
The Bornhuetter-Ferguson method uses a combination of a benchmark/market-based
estimate and an estimate based on claims experience. The former is based on a
measure of exposure such as premiums; the latter is based on the paid or
incurred claims observed to date. The two estimates are combined using a
formula that gives more weight to the experience-based estimate as time
passes. This technique has been used in situations where developed claims
experience was not available for the projection
(e.g. recent underwriting years or new classes of business).
The expected loss ratio method uses a benchmark/market-based estimate applied
to the expected premium and is used for classes with little or no relevant
historical data.
The choice of selected results for each underwriting year of each class of
business depends on an assessment of the technique that has been most
appropriate to observed historical developments. In certain instances, this
has meant that different techniques or combinations of techniques have been
selected for individual underwriting years or groups of underwriting years
within the same class of business. As such, there are many assumptions used to
estimate general insurance liabilities.
We also review triangulations of the paid/outstanding claim ratios as a way of
monitoring any changes in the strength of the outstanding claim estimates
between underwriting years so that adjustments can be made to mitigate any
subsequent over/(under)reserving. To date, this analysis indicates no
systematic change to the outstanding claim strength across underwriting years.
Where significant large losses impact an underwriting year (e.g. first-party
COVID-19 losses, the events of 11 September 2001, the hurricanes in 2004,
2005, 2008, 2012, 2017, 2018 and 2019, the typhoons in 2018 and 2019, or the
earthquakes in 2010, 2011 and 2017), the development is usually very different
from the attritional losses. In these situations, the large loss total is
extracted from the remainder of the data and analysed separately by the
respective claims managers using exposure analysis of the policies in force in
the areas affected.
Further assumptions are required to convert gross of reinsurance estimates of
ultimate claims cost to a net of reinsurance
level and to establish reserves for unallocated claims handling expenses and
reinsurance bad debt.
b) Major assumptions
The main assumption underlying these techniques is that the Group's past
claims development experience (with appropriate adjustments for known changes)
can be used to project future claims development and hence ultimate claims
costs. As such these methods extrapolate the development of premiums, paid and
incurred losses, average costs per claim and claim numbers for each
underwriting year based on the observed development of earlier years.
Another assumption used within insurance liabilities is the estimation of an
unexpired risk reserve (URR) for the expected value of net claims and expenses
attributable to the unexpired periods of policies in force at the balance
sheet date which exceeds the unearned premium reserve.
Throughout, judgement is used to assess the extent to which past trends may or
may not apply in the future; for example, to reflect changes in external or
market factors such as economic conditions, public attitudes to claiming,
levels of claims inflation, premium rate changes, judicial decisions and
legislation, as well as internal factors such as portfolio mix, policy
conditions and claims handling procedures.
c) Changes in assumptions
As already discussed, general insurance business requires many different
assumptions.
Further information on the calculation of loss reserves and the risks
associated with them is provided in the risk disclosures section in note 2 of
the 2021 Annual Report and Accounts. The risks associated with general
insurance contracts are complex and do not readily lend themselves to
meaningful sensitivity analysis. Given the range of assumptions used, the
Group's profit or loss is relatively insensitive to changes to an individual
assumption used for an underwriting year/class combination.
The Group's profit or loss is potentially more sensitive to a systematic
change in assumptions that affect many classes, such as judicial changes or
when catastrophes produce more claims than expected. The impact of an
unreported event could lead to a significant increase in the Group's loss
reserves. The Group believes that the loss reserves established are adequate,
however a 20% increase in estimated losses would lead to a $1,279.8m (2020:
$1,090.8m) increase in gross loss reserves and a $913.9m (2020: $829.7m)
increase in net loss reserves. The Group uses a range of risk mitigation
strategies to reduce such volatility including the purchase of reinsurance. In
addition, the Group holds capital to absorb volatility.
d) Claims reserve strength analysis
The estimation of IBNR reserves for future claim notifications is subject to a
greater degree of uncertainty than the estimation of the outstanding claims
already notified. This is particularly true for the Specialty Lines and
executive risk business, which will typically display greater variations
between initial estimates and final outcomes as a result of the greater degree
of difficulty in estimating these reserves. The estimation of IBNR reserves
for other business written is generally subject to less variability as claims
are generally reported and settled relatively quickly.
As such, our reserving assumptions contain a reasonable margin for prudence
given the uncertainties inherent in the insurance business underwritten,
particularly on the longer tailed Specialty Lines and executive risk classes.
Since year end 2004, we have identified a range of possible outcomes for each
class and underwriting year combination directly from our internal model
(previously our individual capital assessment (ICA)) process. Comparing these
with our pricing assumptions and reserving estimates gives our management team
increased insight into our perceived reserving strength and the relative
uncertainties of the business written.
To illustrate the robustness of our reserves, the loss development tables
below provide information about historical claims development by the seven
segments - Cyber & Executive Risk, Marine, Market Facilities, Political,
Accident & Contingency, Property, Reinsurance and Specialty Lines. The
tables are by underwriting year which in our view provides the most
transparent reserving basis. We have supplied tables for both ultimate gross
claims and ultimate net claims.
The top part of the table illustrates how the Group's estimate of the claims
ratio for each underwriting year has changed at successive year ends. The
bottom half of the table reconciles the gross and net claims to the amount
appearing in the statement of financial position.
While the information in the table provides a historical perspective on the
adequacy of the claims liabilities established in previous years, users of
these financial statements are cautioned against extrapolating past
redundancies or deficiencies on current claims liabilities. The Group believes
that the estimate of total claims liabilities as at 31 December 2021 is
adequate. However, due to inherent uncertainties in the reserving process, it
cannot be assured that such balances will ultimately prove to be adequate.
Gross ultimate claims 2011 ae 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
% % % % % % % % % % %
Cyber & Executive Risk
12 months 71.6 71.0 66.0 64.3 61.9 59.5 61.1 61.8 73.2 65.8
24 months 71.8 71.3 66.2 64.3 61.9 61.4 62.3 72.0 78.7 -
36 months 69.1 71.1 63.6 59.0 58.5 56.8 61.5 73.4 - -
48 months 65.5 69.0 65.1 54.1 58.3 56.6 64.0 - - -
60 months 63.5 66.4 69.8 56.0 59.5 57.4 - - - -
72 months 61.1 62.9 68.4 57.5 57.6 - - - - -
84 months 60.6 63.0 69.1 58.5 - - - - - -
96 months 59.4 63.5 69.7 - - - - - - -
108 months 59.5 63.6 - - - - - - - -
120 months 62.0 - - - - - - - - -
Marine
12 months 56.1 56.7 57.7 56.7 59.5 68.0 61.9 60.1 57.8 52.9
24 months 46.4 52.1 46.9 54.0 70.2 62.4 68.1 56.8 52.1 -
36 months 34.7 44.4 47.2 47.3 65.4 61.6 66.2 47.9 - -
48 months 32.1 42.7 46.8 45.4 63.9 58.0 63.3 - - -
60 months 31.4 42.1 55.8 43.3 62.4 55.0 - - - -
72 months 30.6 41.5 53.0 42.7 62.1 - - - - -
84 months 29.9 40.3 51.9 42.2 - - - - - -
96 months 29.7 39.3 52.4 - - - - - - -
108 months 29.8 39.2 - - - - - - - -
120 months 29.9 - - - - - - - - -
Market Facilities
12 months - - - - - - 66.3 72.9 76.6 72.0
24 months - - - - - - 66.3 72.8 73.7 -
36 months - - - - - - 55.1 68.7 - -
48 months - - - - - - 55.2 - - -
60 months - - - - - - - - - -
72 months - - - - - - - - - -
84 months - - - - - - - - - -
96 months - - - - - - - - - -
108 months - - - - - - - - - -
120 months - - - - - - - - - -
Political, Accident & Contingency
12 months 60.0 59.5 59.7 60.5 61.9 58.2 59.4 57.0 111.4 57.3
24 months 56.0 50.9 52.4 59.9 55.8 50.0 55.4 143.9 120.0 -
36 months 53.0 46.4 48.5 58.5 50.8 46.8 92.4 143.8 - -
48 months 50.5 45.4 51.3 59.3 49.4 49.8 97.4 - - -
60 months 47.4 47.1 52.5 55.7 47.9 47.3 - - - -
72 months 46.6 46.8 53.5 54.6 45.2 - - - - -
84 months 45.6 46.6 54.3 54.6 - - - - - -
96 months 45.7 46.2 54.7 - - - - - - -
108 months 45.6 45.7 - - - - - - - -
120 months 45.1 - - - - - - - - -
Property
12 months 56.1 54.9 53.2 54.9 58.9 72.3 63.4 53.2 67.9 58.0
24 months 47.3 48.9 47.7 49.0 68.4 88.5 63.5 63.4 73.0 -
36 months 39.6 45.6 41.3 45.9 71.3 91.3 65.4 53.9 - -
48 months 36.5 45.6 40.6 44.8 71.8 91.4 64.2 - - -
60 months 35.9 45.5 39.6 43.7 71.8 91.1 - - - -
72 months 35.3 47.3 40.2 45.9 71.4 - - - - -
84 months 35.2 46.6 39.7 45.6 - - - - - -
96 months 36.5 47.0 40.0 - - - - - - -
108 months 37.6 47.2 - - - - - - - -
120 months 37.5 - - - - - - - - -
Reinsurance
12 months 62.8 58.6 61.3 65.8 68.4 122.5 99.0 101.5 79.9 115.1
24 months 37.1 44.8 33.3 33.7 41.8 117.6 125.0 69.2 80.5 -
36 months 31.7 42.3 30.7 25.7 40.6 129.4 123.5 68.6 - -
48 months 30.6 41.1 27.6 25.5 41.4 132.1 118.4 - - -
60 months 30.9 38.1 27.4 25.3 40.7 131.0 - - - -
72 months 30.6 37.9 26.9 25.1 40.3 - - - - -
84 months 30.6 37.0 26.9 24.4 - - - - - -
96 months 30.3 36.9 27.0 - - - - - - -
108 months 30.3 36.8 - - - - - - - -
120 months 28.6 - - - - - - - - -
Specialty Lines
12 months 74.9 74.6 69.8 69.3 67.6 65.9 68.5 66.9 68.3 65.7
24 months 75.0 74.2 69.5 69.9 67.5 66.0 69.0 68.6 69.6 -
36 months 73.6 73.9 65.8 68.2 65.4 66.0 65.9 60.9 - -
48 months 73.9 69.4 61.7 67.4 64.0 62.1 61.6 - - -
60 months 70.2 64.2 58.0 69.3 60.7 64.4 - - - -
72 months 69.1 62.1 55.7 78.2 61.8 - - - - -
84 months 68.7 61.4 53.9 82.8 - - - - - -
96 months 71.0 60.0 54.7 - - - - - - -
108 months 72.2 58.1 - - - - - - - -
120 months 72.2 - - - - - - - - -
Total
12 months 64.6 63.7 62.1 62.5 63.3 70.1 66.7 64.8 73.0 65.8
24 months 58.3 59.3 55.8 58.4 62.9 71.1 69.6 74.2 75.5 -
36 months 53.3 56.5 52.7 54.5 60.7 71.1 71.2 69.8 - -
48 months 51.4 54.5 51.7 52.7 60.1 69.8 70.1 - - -
60 months 49.5 52.5 53.2 52.8 59.2 70.0 - - - -
72 months 48.4 51.5 52.1 55.6 58.5 - - - - -
84 months 48.0 51.0 51.7 56.9 - - - - - -
96 months 48.5 50.6 52.2 - - - - - - -
108 months 49.1 50.1 - - - - - - - -
120 months 49.3 - - - - - - - - -
Estimated total ultimate losses ($m) 7,901.7 866.2 915.9 998.0 996.9 1,125.3 1,275.2 1,711.8 1,917.2 2,276.0 2,443.9 21,508.5
Less paid claims ($m) (7,740.5) (787.3) (833.3) (917.7) (942.8) (1,020.7) (1,222.1) (1,201.8) (961.9) (706.6) (100.7) (16,435.4)
Less unearned - - - - - - - - (8.7) (137.7) (1,502.5) (1,648.7)
portion of ultimate
losses ($m)
Gross claims liabilities ($m) 161.2 78.9 82.6 80.3 204.1 234.7 488.4 672.7 1,191.9 1,882.2 1,322.1 6,399.1
2011 ae 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Net ultimate claims % % % % % % % % % % %
Cyber & Executive Risk
12 months 68.2 66.5 63.2 60.4 59.2 57.9 58.3 59.9 71.9 64.1
24 months 68.5 66.7 63.8 60.4 59.2 59.0 60.6 68.1 69.2 -
36 months 65.6 65.1 62.4 56.0 56.2 55.5 62.5 67.7 - -
48 months 60.2 62.2 61.4 50.3 56.3 55.9 63.8 - - -
60 months 60.1 59.5 65.9 51.6 55.2 54.5 - - - -
72 months 57.5 56.9 65.0 49.8 53.4 - - - - -
84 months 57.0 56.4 65.6 50.7 - - - - - -
96 months 55.9 56.3 66.3 - - - - - - -
108 months 56.3 56.4 - - - - - - - -
120 months 58.9 - - - - - - - - -
Marine
12 months 55.2 56.1 56.5 56.6 56.6 57.4 59.3 56.5 54.2 50.9
24 months 45.8 53.2 48.5 52.4 62.4 61.3 67.6 55.2 49.9 -
36 months 37.1 47.3 46.6 47.0 61.4 61.7 68.6 46.6 - -
48 months 34.6 45.8 45.7 46.5 61.9 59.5 64.7 - - -
60 months 33.6 45.2 46.9 45.2 60.5 57.0 - - - -
72 months 32.9 44.6 45.0 44.7 60.0 - - - - -
84 months 32.5 42.5 44.3 43.9 - - - - - -
96 months 32.3 42.3 - - - - - - - -
108 months 32.4 42.3 - - - - - - - -
120 months 32.5 - - - - - - - - -
Market Facilities
12 months - - - - - - 36.5 24.6 28.3 27.3
24 months - - - - - - 36.5 24.2 27.6 -
36 months - - - - - - 30.3 23.9 - -
48 months - - - - - - 21.8 - - -
60 months - - - - - - - - - -
72 months - - - - - - - - - -
84 months - - - - - - - - - -
96 months - - - - - - - - - -
108 months - - - - - - - - - -
120 months - - - - - - - - - -
Political, Accident & Contingency
12 months 58.7 59.0 57.3 58.0 60.7 57.2 58.6 56.2 91.0 56.5
24 months 53.8 52.4 50.8 56.9 54.6 49.4 54.5 112.2 89.3 -
36 months 51.5 49.0 46.4 56.3 51.0 46.0 82.1 112.3 -
48 months 48.0 46.5 50.6 55.6 48.8 46.6 88.3 - -
60 months 44.9 46.5 50.9 52.9 47.5 44.6 - - -
72 months 44.0 46.6 51.8 52.2 45.4 - - - -
84 months 43.5 46.7 52.2 51.2 - - - - -
96 months 43.9 46.6 51.2 - - - - - -
108 months 43.7 46.2 - - - - - - -
120 months 43.6 - - - - - - - -
Property
12 months 59.4 56.2 54.6 55.0 57.5 76.1 64.4 56.4 67.9 58.4
24 months 53.0 56.1 51.5 50.6 69.5 93.6 66.9 66.2 76.7 -
36 months 46.4 52.2 44.8 47.2 71.3 95.6 68.1 57.6 - -
48 months 41.5 50.5 43.3 45.0 70.8 93.5 66.1 - - -
60 months 40.9 50.3 42.4 44.8 69.9 94.4 - - - -
72 months 40.4 52.0 43.5 46.5 70.0 - - - - -
84 months 40.1 52.1 43.0 45.3 - - - - - -
96 months 41.7 52.4 42.6 - - - - - - -
108 months 42.5 52.0 - - - - - - - -
120 months 41.7 - - - - - - - - -
Reinsurance
12 months 66.6 56.3 58.7 61.7 61.8 105.2 87.3 87.5 86.3 92.9
24 months 44.7 51.7 37.9 34.8 39.5 93.9 100.6 70.3 87.5 -
36 months 38.3 47.9 34.1 25.0 39.1 104.9 98.5 71.6 - -
48 months 36.6 46.6 31.5 24.6 40.6 108.3 92.7 - - -
60 months 36.9 43.0 31.2 24.8 41.6 108.1 - - - -
72 months 36.6 42.7 30.7 25.1 41.2 - - - - -
84 months 36.6 41.9 30.7 24.4 - - - - - -
96 months 36.2 41.8 30.9 - - - - - - -
108 months 36.2 41.7 - - - - - - - -
120 months 34.2 - - - - - - - - -
Specialty Lines
12 months 71.3 70.4 67.0 65.0 65.0 63.7 66.0 64.8 65.2 63.4
24 months 71.4 69.9 66.6 65.8 65.0 63.6 67.1 64.9 64.9 -
36 months 70.0 70.0 64.1 63.2 61.1 63.5 64.1 57.7 - -
48 months 68.4 64.1 59.1 58.5 56.9 58.2 59.0 - - -
60 months 65.8 59.2 55.8 58.8 52.0 59.5 - - - -
72 months 66.0 57.6 54.5 62.7 52.5 - - - - -
84 months 65.9 57.5 52.8 67.3 - - - - - -
96 months 67.1 56.3 53.8 - - - - - - -
108 months 67.9 54.7 - - - - - - - -
120 months 68.1 - - - - - - - - -
Total
12 months 63.8 61.9 60.4 59.8 60.6 65.8 63.4 61.7 69.0 61.6
24 months 58.3 60.1 56.1 56.6 60.9 67.6 66.1 68.9 68.6 -
36 months 53.9 57.3 52.8 52.8 58.8 67.6 68.1 64.4 - -
48 months 50.8 54.3 51.3 49.8 57.5 65.7 66.4 - - -
60 months 49.4 52.1 51.4 49.7 55.5 65.2 - - - -
72 months 48.7 51.5 50.8 50.5 54.7 - - - - -
84 months 48.4 50.9 50.4 51.4 - - - - - -
96 months 48.8 50.6 50.7 - - - - - - -
108 months 49.2 50.1 - - - - - - - -
120 months 49.4 - - - - - - - - -
Estimated total ultimate losses ($m) 5,810.4 715.5 779.5 832.0 874.3 990.6 1,340.1 1,482.1 1,678.0 1,990.9 2,120.0 18,613.4
Less paid claims ($m) (5,658.8) (658.5) (711.2) (769.4) (773.1) (845.7) (984.9) (970.4) (756.0) (529.3) (90.2) (12,747.3)
Less unearned portion - - - - - - - (5.3) (97.9) (1,193.1) (1,296.3)
of ultimate losses ($m)
Net claims liabilities (100% level) ($m) 151.8 57.0 68.3 62.6 101.2 144.9 355.2 511.7 916.8 1,363.7 836.5 4,569.7
Analysis of movements in loss development tables
We have updated our loss development tables to show the ultimate loss ratios
as at 31 December 2021 for each underwriting year. The impact of amounts
reported in respect of the unexpired risk reserve are embedded within the loss
ratios presented.
Cyber & Executive Risk
The 2019 and 2020 underwriting years have strengthened in response to cyber
ransomware activity. However, as these years are recovering under aggregate
excess of loss reinsurance programmes, the impact is reduced net of
reinsurance. The 2018 underwriting year has increased in response to greater
than expected claims development within executive risk.
Marine
Improvements have continued across underwriting years as the risks expire.
Market Facilities
The loss development tables are presented gross of acquisition costs. Due to
the Market Facilities division being significantly reinsured and this
reinsurance being ceded net of acquisition costs, the net of reinsurance loss
development values are much lower than those gross of reinsurance. The
improvements on the 2019 and 2020 underwriting year arise as the risk expires.
Political, Accident & Contingency
2021 South African civil unrest events have impacted the 2020 underwriting
year. Due to the benefit of reinsurance, the impact is less pronounced net of
reinsurance.
The COVID-19 claims within the contingency class have undergone a partial
re-allocation across underwriting years resulting in the increase seen on the
2018 underwriting year.
Property
The 2020 underwriting year has been impacted by weather related events in the
US during 2021. The improvement on the 2019 underwriting year occurs due to
expiry of risk.
Reinsurance
The 2021 underwriting year has been impacted by weather related events in the
US and Europe, and the impact is less pronounced net of reinsurance.
Favourable developments across established catastrophe events have led to
releases on older underwriting years.
Specialty Lines
The 2015 year continues to see claims development in excess of expectations,
predominately driven by the heath care book.
Other underwriting years continue to improve as the risk expires.
Claim releases
The below table analyses our net claims between current year claims and
adjustments to prior year net claims reserves. These have
been broken down by segment and underwriting year. Beazley's reserving policy
is to maintain catastrophe reserve margins either
until the end of the exposure period or until catastrophe events occur.
Therefore margins have been released from prior year
reserves where risks have expired during 2021.
The below table has been prepared on an underwriting year of account basis,
whereas the net loss development tables have been prepared on an accident year
basis in relation to our US admitted business. However, in aggregate the net
release or strengthening is consistent.
Reserve releases during the year totalled $209.8m (2020: $93.1m). The net of
reinsurance estimates of ultimate claims costs have improved on the 2020, 2019
and 2018 and earlier underwriting years, with releases of $28.6m, $97.6m and
$83.6m respectively. Our Marine, Property and Specialty Lines all saw large
releases overall the large releases seen on the 2019 underwriting year. Cyber
& Executive Risk saw a strengthening on the 2019 underwriting year of
$19.4m driven by the
Cyber book.
2021 Cyber & Executive Risk Marine Marine Political, Accident & Property Reinsurance Specialty Total
$m
$m $m Contingency $m $m Lines $m
$m $m
Current year 642.6 156.6 11.7 147.1 252.7 141.8 683.5 2,036.0
Prior year
- 2018 underwriting year and earlier (30.8) (18.1) (0.1) 2.6 (8.9) (10.6) (17.7) (83.6)
- 2019 underwriting year 19.4 (26.4) (0.2) (10.0) (28.1) (3.0) (49.3) (97.6)
- 2020 underwriting year (9.0) (6.3) (0.9) (3.6) (3.4) (5.1) (0.2) (28.6)
(20.4) (50.8) (1.2) (11.0) (40.4) (18.8) (67.3) (209.8)
Net insurance claims 622.2 105.8 10.6 136.1 212.4 123.0 616.2 1,826.2
2020 Cyber & Executive Risk Marine Marine Political, Accident & Property Reinsurance Specialty Total
$m
$m $m Contingency $m $m Lines $m
$m $m
Current year 553.3 169.4 9.2 358.7 295.7 107.5 557.6 2,051.4
Prior year
- 2017 underwriting year and earlier (28.3) (9.8) - (2.2) 2.1 2.4 (47.3) (74.7)
- 2018 underwriting year 26.7 1.9 (0.6) (1.9) 3.7 (3.0) (20.7) (2.3)
- 2019 underwriting year 6.0 (1.0) (0.3) (0.5) (10.2) (20.1) 10.0 (16.1)
4.4 (8.9) (0.9) (4.6) (4.4) (20.7) (58.0) (93.1)
Net insurance claims 557.7 160.5 8.3 354.1 291.3 86.8 499.6 1,958.3
13 Subsequent events
There are no events that are material to the operations of the group that have
occurred since the reporting date.
Aggregates/aggregations
Accumulations of insurance loss exposures which result from underwriting
multiple risks that are exposed to common causes of loss.
Aggregate excess of loss
The reinsurer indemnifies an insurance company (the reinsured) for an
aggregate (or cumulative) amount of losses in excess of a specified aggregate
amount.
Alternative performance measures (APMs)
The Group uses APMs to help explain its financial performance and position.
These measures, such as combined ratio, expense ratio, claims ratio,
investment return and underwriting profit, are not defined under IFRS. The
Group is of the view that the use of these measures enhances the usefulness of
the financial statements. Definitions of key APMs are included within the
glossary.
A.M. Best
A.M. Best is a worldwide insurance-rating and information agency whose ratings
are recognised as an ideal benchmark for assessing the financial strength of
insurance related organisations, following a rigorous quantitative and
qualitative analysis of a company's statement of financial position strength,
operating performance and business profile.
Binding authority
A contracted agreement between a managing agent and a coverholder under which
the coverholder is authorised to enter into contracts of insurance for the
account of the members of the syndicate concerned, subject to specified terms
and conditions.
Capacity
This is the maximum amount of premiums that can be accepted by a syndicate.
Capacity also refers to the amount of insurance coverage allocated to a
particular policyholder or in the marketplace in general.
Capital growth assets
These are assets that do not pay a regular income and target an increase in
value over the long term. They will typically have a higher risk and
volatility than that of the core portfolio. Currently these are the hedge
funds, equity funds and illiquid credit assets.
Catastrophe reinsurance
A form of excess of loss reinsurance which, subject to a specified limit,
indemnifies the reinsured company for the amount of loss in excess of a
specified retention with respect to an accumulation of losses resulting from a
catastrophic event or series of events.
Claims
Demand by an insured for indemnity under an insurance contract.
Claims ratio
Ratio, in percentage terms, of net insurance claims to net earned premiums.
The calculation is performed excluding the impact of foreign exchange. In
2021, this ratio was 58% (2020: 73%). This represented total claims of
$1,826.2m (2020: $1,958.3m) divided by net earned premiums of $3,147.3m (2020:
$2,693.4m).
Combined ratio
Ratio, in percentage terms, of the sum of net insurance claims, expenses for
acquisition of insurance contracts and administrative expenses to net earned
premiums. This is also the sum of the expense ratio and the claims ratio. The
calculation is performed excluding the impact of foreign exchange. In 2021,
this ratio was 93% (2020: 109%). This represents the sum of net insurance
claims of $1,826.2m (2020: $1,958.3m), expenses for acquisition of insurance
contracts of $821.8m (2020: $738.9m) and administrative expenses of $283.0m
(2020: $235.5m) to net earned premiums of $3,147.3m (2020: $2,693.4m). This is
also the sum of the expense ratio 35% (2020: 36%) and the claims ratio 58%
(2020: 73%).
Coverholder
A firm either in the United Kingdom or overseas authorised by a managing agent
under the terms of a binding authority to enter into contracts of insurance in
the name of the members of the syndicate concerned, subject to certain written
terms and conditions. A Lloyd's broker can act as a coverholder.
Deferred acquisition costs (DAC)
Costs incurred for the acquisition or the renewal of insurance policies (e.g.
brokerage, premium levy and staff related costs) which are capitalised and
amortised over the term of the contracts.
Earnings per share (EPS) - basic/diluted
Ratio, in pence and cents, calculated by dividing the consolidated profit
after tax by the weighted average number of ordinary shares issued, excluding
shares owned by the Group. For calculating diluted earnings per share the
number of shares and profit or loss for the year is adjusted for certain
dilutive potential ordinary shares such as share options granted to employees.
Economic Capital Requirement (ECR)
The capital required by a syndicate's members to support their underwriting.
Calculated as the uSCR 'uplifted' by 35% to ensure capital is in place to
support Lloyd's ratings and financial strength.
Excess per risk reinsurance
A form of excess of loss reinsurance which, subject to a specified limit,
indemnifies the reinsured company against the amount of loss in excess of a
specified retention with respect to each risk involved in each loss.
Expense ratio
Ratio, in percentage terms, of the sum of expenses for acquisition of
insurance contracts and administrative expenses to net earned premiums. The
calculation is performed excluding the impact of foreign exchange on
non-monetary items. In 2021, the expense ratio was 35% (2020: 36%). This
represents the sum of expenses for acquisition of insurance contracts of
$821.8m (2020: $738.9m) and administrative expenses of $283.0m (2020: $235.5m)
to earned premiums of $3,147.3m (2020: $2,693.4m).
Facultative reinsurance
A reinsurance risk that is placed by means of a separately negotiated contract
as opposed to one that is ceded under a reinsurance treaty.
Gross premiums written
Amounts payable by the insured, excluding any taxes or duties levied on the
premium, but including any brokerage and commission deducted by
intermediaries.
Group Surplus Capital Ratio
The group surplus capital ratio is the surplus of funds available to meet the
Group's ECR expressed as a percentage of the ECR. The funds available are
calculated on an economic basis, consistent with how the ECR is calculated.
Hard market
An insurance market where prevalent prices are high, with restrictive terms
and conditions offered by insurers.
Horizontal limits
Reinsurance coverage limits for multiple events.
Incurred but not reported (IBNR)
These are anticipated or likely claims that may result from an insured event
but which have not yet been reported.
International Accounting Standards Board (IASB)
An independent accounting body responsible for developing IFRS (see below).
International Accounting Standards (IAS)/International Financial Reporting
Standards (IFRS)
Standards formulated by the IASB with the intention of achieving
internationally comparable financial statements. Since 2002, the standards
adopted by the IASB have been referred to as International Financial Reporting
Standards (IFRS). Until existing standards are renamed, they continue to be
referred to as International Accounting Standards (IAS).
Investment return
Ratio, in percentage terms, calculated by dividing the net investment income
by the average financial assets at fair value, including cash. In 2020, this
was calculated as net investment income of $188.1m (2019: $263.7m) divided by
average financial assets at fair value, including cash, of $6,261.4m (2019:
$5,452.0m).
Lead underwriter
The underwriter of a syndicate who is responsible for setting the terms of an
insurance or reinsurance contract that is subscribed by more than one
syndicate and who generally has primary responsibility for handling any claims
arising under such a contract.
Line
The proportion of an insurance or reinsurance risk that is accepted by an
underwriter or which an underwriter is willing to accept.
Managing agent
A company that is permitted by Lloyd's to manage the underwriting of a
syndicate.
Managing general agent (MGA)
An insurance intermediary acting as an agent on behalf of an insurer.
Managed premiums
Managed premium refers to all gross premiums written by Beazley's
underwriters. In addition to gross premiums written on behalf of the Group
managed premium includes gross premiums written in syndicate 623 by Beazley's
underwriters on behalf of third party capital providers.
Medium tail
A type of insurance where the claims may be made a few years after the period
of insurance has expired.
Net assets per share
Ratio, in pence and cents, calculated by dividing the net assets (total
equity) by the number of shares issued.
Net premiums written
Net premiums written is equal to gross premiums written less outward
reinsurance premiums written.
Private enterprise
The private enterprise team offers specialised professional and general
liability coverage supported by a high service proposition, focusing on
meeting the needs of small businesses with assets up to $35.0m and up to 500
employees.
Provision for outstanding claims
Provision for claims that have already been incurred at the reporting date but
have either not yet been reported or not yet been fully settled.
Rate
The premium expressed as a percentage of the sum insured or limit of
indemnity.
Rate change
The percentage change in premium income charged relative to the level of risk
on renewals.
Reinsurance special purpose syndicate
A special purpose syndicate (SPS) created to operate as a reinsurance
'sidecar' to Beazley's treaty account, capitalising on Beazley's position in
the treaty reinsurance market.
Reinsurance to close (RITC)
A reinsurance which closes a year of account at Lloyd's by transferring the
responsibility for discharging all the liabilities that attach to that year of
account (and any year of account closed into that year), plus the right to buy
any income due to the closing year of account, into an open year of account in
return for a premium.
Retention limits
Limits imposed upon underwriters for retention of exposures by the Group after
the application of reinsurance programmes.
Retrocessional reinsurance
The reinsurance of the reinsurance account. It serves to 'lay off' risk.
Return on equity (ROE)
Ratio, in percentage terms, calculated by dividing the consolidated profit
after tax by the average daily total equity. In 2021, this was calculated as
profit after tax of $308.7m (2020: Loss $46.1m) divided by average equity of
$1,970.2m (2020: $1,792.7m).
Risk
This term may refer to:
a) the possibility of some event occurring which causes injury or loss;
b) the subject matter of an insurance or reinsurance contract; or
c) an insured peril.
Short tail
A type of insurance where claims are usually made during the term of the
policy or shortly after the policy has expired. Property insurance is an
example of short tail business.
Scope 1 GHG Emissions
GHG emissions are the emissions arising directly from Beazley's operations.
These are as follows; back up diesel generator fuel; company cars; and
refrigerant losses from air conditioning systems operated by Beazley.
Scope 2 GHG Emissions
Scope 2 GHG emissions are the indirect GHG emissions from the generation of
purchase or acquired electricity, steam, heating or cooling consumed by
Beazley. These are as emissions arising from the following; electricity from
the operations of the in scope offices we operate from; energy consumption
from the heating of the in scope offices we operate from, and the charging of
the electric/ hybrid company cars.
Scope 3 GHG Emissions
Scope 3 GHG emissions are all indirect emissions in the supply chain, not
covered within Scope 2. For Beazley, the scope of
our Scope 3 emissions is as follows; Business travel i.e. flights, car hire,
hotel stays, taxi use, personal car use, and rail travel;
transmission and distribution losses arising from electricity for operating
offices, as well as the transmission and distribution
losses from imported heat; and the use of data racks within third party data
centres for our Dublin and London offices.
Sidecar special purpose syndicate
Specialty reinsurance company designed to provide additional capacity to a
specific insurance company. It operates by purchasing a portion or all of a
group of insurance policies, typically catastrophe exposures. These companies
have become quite prominent in the aftermath of Hurricane Katrina as a vehicle
to add risk-bearing capacity, and for investors to participate in the
potential profits resulting from sharp price increases.
Soft market
An insurance market where prevalent prices are low, and terms and conditions
offered by insurers are less restrictive.
Solvency Capital Requirement on an ultimate basis (uSCR)
The capital requirement under Solvency II calculated by Beazley's internal
model which captures the risk in respect of the planned underwriting for the
prospective year of account in full, covering ultimate adverse development and
all exposures.
Surplus lines insurer
An insurer that underwrites surplus lines insurance in the US. Lloyd's
underwriters are surplus lines insurers in all jurisdictions of the US except
Kentucky and the US Virgin Islands.
Total shareholder return (TSR)
The increase in the share price plus the value of any first and second
dividends paid and proposed during the year.
Treaty reinsurance
A reinsurance contract under which the reinsurer agrees to offer and to accept
all risks of a certain size within a defined class.
Unearned premiums reserve
The portion of premium income in the business year that is attributable to
periods after the reporting date in the underwriting provisions.
Underwriting profit
This is calculated as net earned premiums, less net insurance claims,
acquisition costs and administrative expenses.
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