Beazley switches capital metrics; record profits recorded

Written by Adam Cadle

08/09/2023

Beazley has switched its capital metrics and will no longer disclose its capital surplus positions above Lloyds ECR, instead using Group Solvency II coverage ratio as its key capital measure going forward.

In its latest half-year financial report, Beazley said “as we continue growing our business in the US and Europe, we have taken the decision to evolve our approach toward capital disclosures and focus primarily on the capital measure that covers the group’s business across a number of territories”.

“We aim to maintain a Solvency II ratio in excess of 170% of Solvency Capital Requirement (SCR),” it added. As at 31 December 2022, Beazley’s Solvency II coverage ratio was 244%. It estimates that its 30 June 2023 Solvency II ratio will be at 273%.

Record profits of $366.4m were achieved in H1 2023, rising from $364.9m in HY 2022, and insurance written premiums increased to $2,921.1m, up from $2,574.3m in HY 2022.

Beazley’s investments returned $143.9m, or 1.5% in H1 2023 (30 June 2022: a loss of $193m, or 2.5%). Yields on fixed income investments were higher than for many years and this has supported returns in the period, the insurer said.

However, it added that risk-free yields remain volatile and have continued to rise in recent months, generating some capital losses and reducing fixed income returns below yield expectations. This development, it said, has been most significant in sterling bond markets, where 2-year gilt yields have risen by nearly 2 percentage points in the year-to-date, generating losses of 1.4% on these bonds.

“This has impacted our overall return, notwithstanding that only 7.6% of our investments are in sterling denominated bonds. Corporate credit exposures within our fixed income portfolio have added to returns as credit spreads generally declined in this period. Overall, our fixed income investments, which make up 79% of the total, returned 1.2% in H1 2023. Elsewhere, our capital growth investments have performed well, returning 4.6% overall in this period, led by our equity exposures, which returned 16.5%. Looking ahead, our fixed income portfolio yield (5.3% at 30 June 2023) continues to promise a good level of return, but the macro environment remains uncertain, characterised by significant volatility, making it particularly difficult to predict investment outcomes.”

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