Beazley posts $112.9m profit for H1 2012

Beazley returned to profit in the first half of this year on strong investment returns and a lower volume of claims than in 2011.

The Lloyd’s insurer reported before tax net income of $112.9m for the six months to 30 June 2012 compared to a loss of $24.2m for the same period last year.

Gross written premiums climbed 10% to $1bn from $925m over the same period.

Beazley also improved its combined ratio by 17% points at 91% in 2012 from 108% in 2011.

Beazley chief executive Andrew Horton said: “Beazley performed strongly in the first half, delivering a return on equity of 18% and a combined ratio of 91%.  Rates rose by an average of 3%, with increases of 5% in catastrophe exposed lines and 3% on our large professional and management liability book.”

“We launched a series of new products to meet underserved client needs, including new data breach insurance solutions, and these are proving popular with brokers and clients. Looking ahead, we expect to grow profitably during the remainder of the year, with further modest premium rate rises across the portfolio.”

Beazley’s prior year reserves decreased to $47.6m in the first half of 2012 from $88.6m for the corresponding period last year.

Investment income was up almost 30% at $36.1m from $22.5m over the same time frame. Return on equity similarly rose 18% in the opening six months of 2012.

The company increased its dividend 8% to 2.7 pence per share for the first six months of this year from 2.5p in 2011.

Net tangible asset value per share rose 7% to 126.7p per share from 107.8p per share over the same period.

Shore Capital analyst Eamonn Flanagan wrote in a research note that the Beazley’s results in line with estimates, but the dividend and net tangible asset value exceeded expectations.

“Given the relatively benign claims environment in the first half of 2012 compared to the first half of 2011, it was not surprising that Beazley reported a strong turnaround in profitability in the first half of 2012, with pre-tax profits of $112.9m…this reflected a combined ratio of 91%, with reserve releases lower than we had expected, at $47.6m, but a much better investment performance, at 1.8% annualised,” he wrote.

On the dividend and net tangible asset value, he said: “This reflected both the boost from retained earnings together with the benefit from the £30m debt repurchase earlier in the year, which added 1p per share.

“The rating environment remains as we had expected with Beazley reporting a 3% improvement over the period…cat exposed lines up 5%, with major casualty lines up 3%. However, Beazley did indicate that it expected the improvement in cat rates to start to slow in the second half of 2012…contingent, of course, on the hurricane season.

“Beazley reported 10% growth in premiums in the first half of 2012 reflecting expansion both by territory (US and Continental Europe) and lines of business (data breach), which we expect to continue throughout the rest of 2012 and into 2013. The group’s capital position remains very robust, in our view, leaving it well positioned for the approach of Solvency II. Barring exceptional claims in the second half of 2012, Beazley anticipates delivering a 90% combined ratio for the year.”