Posted on Feb 09, 2011 by Sergio Ulloa
Beazley the Dublin based insurance specialist has posted a pre-tax profit of US$250.8 million (£155.6 million:€84.7 million) for 2010. This is up from US$158.1 million (£98 million:€116.4 million) recorded in 2009, representing an increase of 59 percent for year-on-year results.
A breakdown of Beazley's operations in 2010 shows that the insurer generated a 21.4 percent return on equity reflecting an increase from 16 percent last year. There was a 1 percent decline in gross written premiums, which totalled US$1.74 billion (£1.08 million:€1.28 million).
Beazley, a member of the Lloyd's syndicate, highlighted the competitive pressures across all segments of the insurance business during 2010, although the insurer was able to deliver an improvement in the combined ratio from 90 to 88 percent representing a profit of US$19.2 (£12:€14.4) for every US$160 (£100:€120) from premiums obtained.
The increase in profits was partly driven by favorable foreign exchange rates - contributing US$33.7 million (£20.9 million:€24.8 million) to overall results. However, this was offset by a 57 percent fall in returns from investments as Beazley adopted a lower risk strategy to speculative trading, coupled with the impact of exceptionally low interest rates. Premiums from business renewals declined by 2 percent, but these were more than offset by skilled underwriting practices balancing the insurer's portfolio.
Beazley's exposure to the Chilean earthquake in February 2010 is estimated to have cost the insurer approximately US$55 million (£34.1 million:€40.5 million) to US$75 million (£46.5 million:€ 55.2 million) in claims; a figure which has been taken into account in trading results for the year.
The specialist insurer also expected to incur a loss of up to US$35 million (£21.7 million:€25.7 million) from the New Zealand earthquake disaster. However, future claims resulting from the devastating Australian floods this year are unlikely to affect Beazley.
"Our 25th year in business was distinguished by excellent profits and an enhanced underwriting result in the teeth of worsening market conditions. The expertise of our underwriters helped us achieve a combined ratio of 88%, an improvement of two percentage points over 2009. Since we began underwriting in 1986, we have achieved an unbroken track record of profitability through often turbulent market conditions. Our underwriting teams have shown they possess the skills needed to perform strongly in the current challenging environment." said Andrew Horton, Chief Executive Officer of Beazley, when details of 2010 profits were released.
Beazley, which operates in the UK, the US, Europe and Asia, said it was looking for possible deals to augment its business in 2011 and has not ruled out a future acquisition; Beazley failed in an attempt to take-over rival Hardy Underwriting in 2010 but stressed that any future bids will only be made at the right price. Beazley's final bid of US$290 million (£181 million:€212 million) for Hardy Underwriting was made in mid-December 2010 but was turned down by the company.
Beazley acquired Momentum Underwriting Management Limited (MUM) in 2008, which helped the company to grow its life, accident and health business delivering revenue of US$78.1 million (£48.4 million:€57.5 million) in 2010 - a figure which was better than expected.
Beazley has established a reputation as a renowned specialist insurer operating on the global stage providing cover for activities such as employment practice liability, directors and officers liabilities and risks associated with mergers and acquisitions. In addition to providing specialty insurance lines, the company provides insurance cover for conventional risks involving property, marine, life, accident and health insurance together with reinsurance products.
The USA is a pivotal market for Beazley and is a sector in which the specialist insurer has grown its presence over the years - accounting for approximately 60 percent of its current business. Business activity in Europe is also an important market for the company, with expansion through an acquisition a possibility. Likewise, Beazley has not ruled an acquisition in the Asia-Pacific region where it currently operates through a small network of outlets.
Beazley highlights the difficult trading conditions in 2010 with limited opportunities for growth. However, the insurer experienced positive returns through organic trading and the acquisition of MUM. A significant part of Beazley's organic growth came from reinsurance and from an increase in demand for date breach insurance in the USA.
During 2011, Beazley's expects to strengthen its life, accident and health insurance business in the USA and to strengthen its presence in the specialist insurance accident and health risk segment with the development of a team in the USA to offer simple and streamlined corporate healthcare insurance products to US companies.
Over the last two decades Beazley has increased its market share and has become a renowned specialist insurer on the global stage. As Beazley's product range expands and its portfolio increases, with the prospect for further acquisitions, the company is well placed to continue its successful results in 2011 when trading conditions are expected to be very competitive.
Insurance Company Mentioned:
Beazley plc, was founded in 1986 and is a specialist insurance company, provides underwriting and claims services. Beazley operates in five insurance segments: Marine, Political Risks and Contingency, Property, Reinsurance, and Specialty lines. The company has operations in Europe, the United States, Asia, and Australia.