Beazley's pre-tax profits fall by 87% as investment losses hit

Written by Adam Cadle

22/07/2022

Beazley’s H1 2022 pre-tax profits have fallen by 87% to $22.3m compared with a profit of $167.3mn for the first half of 2021, which it said was partly due to $193m in investment losses driven by an “unusual” trading environment.

In its financial statement, Beazley said “short-dated US Treasury yields rose by 2.25 percentage points in this period, increasing at the fastest rate for more than forty years”, and this movement “generated significant mark to market losses on the fixed income securities which form the largest element of our investments”.

“Widening credit spreads on our corporate debt holdings added to fixed income losses. Equities also suffered and global indices had lost more than 20% of their value by the end of this volatile period.”

Beazley said it made a number of adjustments to its portfolio to reduce losses however. “Fixed income duration was maintained significantly below usual levels for much of the period, inflation-protected fixed income holdings were increased and equity exposures were reduced to be less than 1% of our investments. Each of these actions helped to improve our return, while our hedge fund portfolio has performed well in this difficult period.”

Beazley added that it continues to manage the duration of its fixed income investments, using derivatives where appropriate. By the end of June, it has extended duration to 2.2 years, from 1 year at 31 March. This change helped to improve the yield of its fixed income portfolio, which was 3.6%at 30 June, up from 1.3% at 31 March. “The higher yields now available are a good indication of the improved investment returns which we anticipate going forward,” it stated.

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