Interim Report - period ending 30 June 2017
Beazley Ireland Holdings plc interim report and unaudited condensed consolidated financial statements for the six month period ended 30 June 2017
Company information
Directors and advisors
Directors
C Jones
N Lillis
E McGivney
C Oldridge
Secretary
C Oldridge
Registered office
22 Grenville Street
St Helier
Jersey
JE4 8PX
Registered Number
102680
Interim management report
The directors present their interim management report for Beazley Ireland Holdings plc that accompanies the unaudited condensed consolidated financial statements for the six month period ended 30 June 2017.
Business review and principal activity
Beazley Ireland Holdings plc is an intermediate holding company within the Beazley group which holds £75m sterling denominated debt. It is also the parent company of Beazley Group Limited, which is the intermediate holding company for the majority of the subsidiaries of the Beazley group, and Beazley Insurance dac, which provides capital and reinsurance to the non-life syndicates.
Results and dividends
Beazley Ireland Holdings plc and its consolidated subsidiaries performed well during the first half of 2017, with a strong underwriting result boosted by an excellent investment return. Pre-tax profits rose 5% to $160.3m (2016: $152.0m) on gross premiums that, at $1,149.3m, were 2% higher than for the comparable period last year (2016: $1,124.1m). Our combined ratio was 90% (2016: 90%).
With market conditions for large, catastrophe exposed risks continuing to deteriorate, our specialty lines division, which is less focused on such risks, has been growing as a proportion of our underwriting portfolio. Specialty lines is itself a very diversified book, comprising professional liability, management liability, and environmental business - as well as our market-leading cyber insurance practice.
Most of our specialty lines clients are currently located in the US with large risks frequently underwritten in London and smaller risks commonly underwritten locally in the US. Our other divisions are also represented in the US, although on a smaller scale. We saw locally underwritten US premiums grow 9% in the first half of the year, relative to the same period last year.
We have also been laying the foundations for future growth elsewhere. In February we expanded our presence in Canada with the acquisition of the specialist managing general agent, Creechurch International Underwriters Limited (now Beazley Canada Limited). We have also continued to hire underwriters in Europe, Singapore and Miami: the latter two locations are now well recognised regional hubs for Asian and Latin American business respectively. These investments in the future of the business have led to an increased expense ratio, but we remain focused on managing costs actively in order to minimise such effects.
Continental Europe currently accounts for just over 5% of our total business, but we have growth ambitions there too, supported by the establishment of a new Dublin-based insurance company and by the measures Lloyd's is taking to preserve the market's access to European business following Britain's future departure from the European Union. The group was therefore pleased to receive approval from the Central Bank of Ireland for its Irish-domiciled reinsurance company, Beazley Re dac, to transact insurance. To that end the company has been renamed Beazley Insurance dac.
Earlier, in March, Lloyd's announced plans to establish a new Brussels-based insurance company capable of writing European business for the 1 January 2019 renewal season, subject to regulatory approval. We should accordingly be able to grow our presence in Europe unimpeded, offering clients the specialist products and service we know they value.
Despite our continued success in generating strong underwriting profits, conditions for many of our underwriters remain exceptionally difficult. Premium rates for our business as a whole decreased by 2% but this masked steep declines for war (8%), energy (9%) and terrorism (11%). Rates for these lines of business have been falling steadily for several years. Our underwriters continue to succeed in writing profitable business against the backdrop of ever more challenging conditions, particularly in the marine market, but they are having to walk away from underpriced business with increasing frequency.
For as long as current market conditions prevail we expect growth opportunities for our London underwriters, who often specialise in catastrophe exposed risks, to be limited. By contrast, we continue to see attractive growth opportunities across our specialty lines portfolio. Demand continues for high quality cyber insurance, a market in which Beazley is very well known. Regulations concerning the handling of data breaches are tightening: the long awaited General Data Protection Regulation will come into force across the European Union next spring. Also, illustrations of why companies need to have protection continue, most recently with the internationally coordinated WannaCry malware attacks.
Together these trends continue to drive demand for cyber insurance among businesses of all sizes. Beazley is well equipped to meet this demand. Our Beazley Breach Response product is adapted to the needs of small and mid-sized businesses and Vector, our partnership with Munich Re, helps the world's largest companies build the substantial towers of insurance they are now seeking.
When underwriting cyber insurance we recognise the potential for systemic events, as we do in areas exposed to natural catastrophes, and seek to limit our aggregate exposure as well as purchasing substantial reinsurance. In cyber, as in other business areas, our risk management team, led by Andrew Pryde, works closely with our underwriters to monitor and manage aggregation risk.
Other growth markets for Beazley in the first half, and areas in which we see continuing strong potential, were healthcare risks and environmental risks. Healthcare expenditures account for nearly 18% of the US economy and the market is constantly evolving, generating new risks for healthcare providers. Earlier this year, our US healthcare team launched Beazley Virtual Care, a pioneering insurance policy to cover organisations involved in the provision of telemedicine, a fast growing sector of the healthcare market.
Outside the US, financial institutions business is another market that we see as offering strong growth potential for our specialty lines underwriters. In May we launched a new package product in London for financial institutions, combining crime and professional indemnity cover with Beazley's data breach capability. We have also opened a new office in Barcelona and our hiring plans for the underwriters who will write business for the newly formed Beazley Insurance dac across Europe are well advanced.
Not all markets offer equal promise of course. In May Beazley sold the renewal rights to its Australian accident and health business to Blend Insurance Solutions, a Sydney-based Lloyd's service company. We will continue to focus on the growth of our accident and health business in London as well as in the US where, in May, we welcomed Brian Thompson to lead the US A&H team. These measures should enable us to improve the combined ratio of the team which has been higher than planned.
The divisional structure of Beazley also changed in the first half of the year, spurred by the decision of Adrian Lewers, head of our political risks and contingency division, to retire from the business. This division has now been merged with our life, accident & health division under the leadership of Christian Tolle. Beazley is enormously grateful to Adrian for his many contributions, not least the creation of three successful specialist underwriting teams focusing on political, terrorism and contingency risks.
The group's recruitment and business development efforts around the world continue to be supported by the strength of the Beazley brand within our markets. Beazley has largely grown organically, with rare exceptions for relatively small scale acquisitions of firms, such as Creechurch, that we know well and with which we have long term relationships. The success of this strategy has fostered Beazley's reputation across our industry as an entrepreneurial company where talented individuals can build rewarding long term careers. At times of market dislocation, such as we have recently seen, this makes us a magnet for talent.
Although talent is a necessary condition for success in today's insurance markets, we are well aware that it is not a sufficient condition. The way in which insurers amass and interpret data, to support underwriting and enhance customer service, is also of critical importance. Ian Fantozzi, Beazley's chief operating officer, has been leading a newly established data and analytics strategic initiative to ensure that Beazley is a beneficiary of the exciting developments in this arena.
Our investments returned $79.4 m, or 1.7% in the first half of 2017 (30 June 2016: $62.7 m, 1.4%). Investments have been volatile in this period, largely as a result of political uncertainty in the US. Overall however, US sovereign yields are little changed from the beginning of the year whilst credit spreads have continued to narrow and equity markets have risen strongly, reflecting underlying optimism about global economic prospects. As a result, our return in the year to date is higher than we had anticipated, helped by the shift from sovereign to corporate bond investments that we made in 2016 as well as modest additions to our equity exposures in 2016 and 2017. However, 'risk' assets have been rallying for an extended period and are increasingly vulnerable to disappointing economic news.
A second interim dividend of £90.0m was paid in March 2017 to the company's immediate parent company, Beazley plc, in respect of the six months ended 31 December 2016. The board has declared a 2017 first interim dividend of £20.0m payable to the company's immediate parent company, Beazley plc. This will be paid in August 2017. These financial statements do not provide for the 2017 first interim dividend as a liability.
Social, environmental and ethical risks
Social, environmental and ethical risks are managed on a Beazley group basis. More information can be obtained from the 2016 annual report and accounts of Beazley plc on how the Beazley group manages these risks.
Responsibility statement of the directors in respect of the interim report
We confirm that to the best of our knowledge:
- the unaudited condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
- the interim management report includes a fair review of the information required by DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the unaudited condensed set of financial statements; and the description of the principal risks and uncertainties for the remaining six months of the year.
C Jones
Director
1 August 2017
Unaudited condensed consolidated statement of profit or loss for the six months ended 30 June 2017
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2016 $m |
Year to 31 December 2016 $m |
Gross premiums written |
1,149.3 |
1,124.1 |
2,195.6 |
Written premiums ceded to reinsurers |
(212.9) |
(193.7) |
(341.6) |
Net premiums written |
936.4 |
930.4 |
1,854.0 |
|
|
|
|
Change in gross provision for unearned premiums |
(100.1) |
(103.5) |
(83.4) |
Reinsurer's share of change in the provision for unearned premiums |
50.4 |
34.5 |
(2.4) |
Change in net provision for unearned premiums |
(49.7) |
(69.0) |
(85.8) |
|
|
|
|
Net earned premiums |
886.7 |
861.4 |
1,768.2 |
|
|
|
|
Net investment income |
79.4 |
62.7 |
93.1 |
Other income |
17.0 |
15.8 |
32.7 |
|
96.4 |
78.5 |
125.8 |
|
|
|
|
Revenue |
983.1 |
939.9 |
1,894.0 |
|
|
|
|
Insurance claims |
541.3 |
535.3 |
1,027.3 |
Insurance claims recovered from reinsurers |
(102.4) |
(99.1) |
(171.7) |
Net insurance claims |
438.9 |
436.2 |
855.6 |
|
|
|
|
Expenses for the acquisition of insurance contracts |
241.5 |
219.6 |
472.5 |
Administrative expenses |
121.6 |
116.5 |
246.7 |
Foreign exchange loss |
10.5 |
8.8 |
5.7 |
Operating expenses |
373.6 |
344.9 |
724.9 |
|
|
|
|
Expenses |
812.5 |
781.1 |
1,580.5 |
|
|
|
|
Share of profit/(loss) in associates |
0.1 |
0.2 |
(0.2) |
|
|
|
|
Results of operating activities |
170.7 |
159.0 |
313.3 |
|
|
|
|
Finance costs |
(10.4) |
(7.0) |
(14.4) |
|
|
|
|
Profit before income tax |
160.3 |
152.0 |
298.9 |
|
|
|
|
Income tax expense |
(27.2) |
(21.1) |
(42.9) |
Profit after income tax - all attributable to equity shareholders |
133.1 |
130.9 |
256.0 |
|
|
|
|
Unaudited condensed consolidated statement of comprehensive income for the six months ended 30 June 2017
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2016 $m |
Year to 31 December 2016 $m |
Profit after income tax |
133.1 |
130.9 |
256.0 |
Other comprehensive income |
|
|
|
Items that will never be reclassified to profit or loss: |
|
|
|
Gains on remeasurement of retirement benefit obligations |
- |
- |
(6.1) |
|
|
|
|
Items that may be reclassified subsequently to profit or loss: |
|
|
|
Foreign currency translation differences |
(0.8) |
(5.6) |
(10.1) |
Total other comprehensive income |
(0.8) |
(5.6) |
(16.2) |
Total comprehensive income recognised |
132.3 |
125.3 |
239.8 |
Unaudited condensed consolidated statement of changes in equity for the six months ended 30 June 2017
|
Share capital $m |
Share premium $m |
Foreign currency translation reserve $m |
Other reserves $m |
Retained earnings $m |
Total $m |
Balance as at 1 January 2016 |
41.6 |
12.0 |
(87.3) |
(8.7) |
1,483.8 |
1,441.4 |
|
|
|
|
|
|
|
Total comprehensive income recognised |
- |
- |
(5.6) |
- |
130.9 |
125.3 |
Dividends paid |
- |
- |
- |
- |
(188.3) |
(188.3) |
Issue of shares |
0.1 |
- |
- |
- |
- |
0.1 |
Equity settled share-based payments |
- |
- |
- |
3.5 |
- |
3.5 |
Acquisition of own shares held in trust |
- |
- |
- |
(5.0) |
- |
(5.0) |
Transfer of shares to employees |
- |
- |
- |
(1.6) |
2.5 |
0.9 |
Scheme of arrangement1 |
(4.5) |
- |
- |
4.5 |
- |
- |
Balance as at 30 June 2016 |
37.2 |
12.0 |
(92.9) |
(7.3) |
1,428.9 |
1,377.9 |
|
|
|
|
|
|
|
Total comprehensive income recognised |
- |
- |
(4.5) |
- |
119.0 |
114.5 |
Dividends paid |
- |
- |
- |
- |
(23.9) |
(23.9) |
Tax on share option vestings |
- |
- |
- |
- |
2.1 |
2.1 |
Reclassification of reserves2 |
- |
- |
- |
(3.6) |
3.6 |
- |
Balance as at 31 December 2016 |
37.2 |
12.0 |
(97.4) |
(10.9) |
1,529.7 |
1,470.6 |
|
|
|
|
|
|
|
Total comprehensive income recognised |
- |
- |
(0.8) |
- |
133.1 |
132.3 |
Dividends paid |
- |
- |
- |
- |
(110.3) |
(110.3) |
Balance as at 30 June 2017 |
37.2 |
12.0 |
(98.2) |
(10.9) |
1,552.5 |
1,492.6 |
1 With effect from 13 April 2016, under a scheme of arrangement involving a share exchange with the members of Beazley Ireland Holdings plc, Beazley plc became the new holding company for the Beazley group.
2 Following the scheme of arrangement, and when Beazley Ireland Holdings plc no longer acted as the ultimate parent company of the Beazley plc group, components of equity related to share reserves were re-classified as retained earnings.
Unaudited condensed consolidated statement of financial position as at 30 June 2017
|
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
Assets |
|
|
|
Intangible assets |
127.1 |
89.8 |
96.6 |
Plant and equipment |
5.4 |
4.5 |
5.4 |
Deferred tax asset |
11.8 |
6.8 |
11.0 |
Investments in associates |
10.0 |
10.2 |
9.9 |
Deferred acquisition costs |
274.1 |
247.1 |
242.8 |
Reinsurance assets |
1,153.3 |
1,136.6 |
1,082.1 |
Financial assets at fair value |
4,177.7 |
3,952.8 |
4,195.4 |
Insurance receivables |
868.6 |
881.7 |
795.0 |
Current income tax assets |
3.8 |
10.0 |
16.3 |
Other receivables |
81.6 |
40.3 |
46.4 |
Cash and cash equivalents |
461.4 |
441.8 |
507.2 |
Total assets |
7,174.8 |
6,821.6 |
7,008.1 |
|
|
|
|
Equity |
|
|
|
Share capital |
37.2 |
37.2 |
37.2 |
Share premium |
12.0 |
12.0 |
12.0 |
Foreign currency translation reserve |
(98.2) |
(92.9) |
(97.4) |
Other reserves |
(10.9) |
(7.3) |
(10.9) |
Retained earnings |
1,552.5 |
1,428.9 |
1,529.7 |
Total equity |
1,492.6 |
1,377.9 |
1,470.6 |
|
|
|
|
Liabilities |
|
|
|
Insurance liabilities |
4,802.4 |
4,704.1 |
4,657.7 |
Financial liabilities |
380.2 |
232.4 |
363.8 |
Retirement benefit liability |
5.0 |
0.6 |
6.2 |
Deferred tax liabilities |
9.7 |
0.9 |
12.8 |
Other payables |
484.9 |
505.7 |
497.0 |
Total liabilities |
5,682.2 |
5,443.7 |
5,537.5 |
Total equity and liabilities |
7,174.8 |
6,821.6 |
7,008.1 |
C Jones
Director
C Oldridge
Director
1 August 2017
Unaudited condensed consolidated statement of cash flows for the six months ended 30 June 2017
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2016 $m |
Year to 31 December 2016 $m |
Cash flow from operating activities |
|
|
|
Profit before income tax |
160.3 |
152.0 |
298.9 |
Adjustments for: |
|
|
|
Amortisation of intangibles |
6.2 |
2.1 |
5.3 |
Equity settled share based compensation |
- |
3.1 |
3.1 |
Net fair value gain on financial investments |
(45.1) |
(34.8) |
(28.9) |
Share of (profit)/loss in associates |
(0.1) |
(0.2) |
0.2 |
Depreciation of plant and equipment |
1.2 |
0.8 |
1.8 |
Impairment of reinsurance assets recognised/(written back) |
0.7 |
- |
(1.1) |
Increase in insurance and other liabilities |
147.8 |
143.0 |
85.1 |
Increase in insurance, reinsurance and other receivables |
(181.5) |
(194.4) |
(59.5) |
Increase in deferred acquisition costs |
(31.3) |
(20.9) |
(16.6) |
Financial income |
(37.4) |
(31.8) |
(71.5) |
Finance expense |
10.4 |
7.0 |
14.4 |
Income tax paid |
(17.9) |
(20.0) |
(39.8) |
Net cash from operating activities |
13.3 |
5.9 |
191.4 |
|
|
|
|
Cash flow from investing activities |
|
|
|
Purchase of plant and equipment |
(1.2) |
(1.1) |
(2.9) |
Expenditure on software development |
(0.7) |
(1.9) |
(4.7) |
Purchase of investments |
(1,215.4) |
(3,573.4) |
(5,985.4) |
Proceeds from sale of investments |
1,272.8 |
3,501.6 |
5,666.0 |
Investment in associate |
- |
- |
(0.1) |
Cash acquired on sale of Australian accident and health business |
0.8 |
- |
- |
Net cash spent in business combinations |
(31.2) |
- |
(8.0) |
Interest and dividends received |
37.4 |
31.8 |
71.5 |
Net cash from investing activities |
62.5 |
(43.0) |
(263.6) |
|
|
|
|
Cash flow from financing activities |
|
|
|
Acquisition of own shares in trust |
- |
(5.0) |
(5.0) |
Repayment of borrowings |
- |
- |
(107.1) |
Proceeds of debt issue |
- |
- |
248.7 |
Interest paid |
(10.4) |
(7.0) |
(14.4) |
Dividends paid |
(110.3) |
(188.3) |
(212.2) |
Net cash used in financing activities |
(120.7) |
(200.3) |
(90.0) |
|
|
|
|
Net decrease in cash and cash equivalents |
(44.9) |
(237.4) |
(162.2) |
Cash and cash equivalents at beginning of period |
507.2 |
676.9 |
676.9 |
Effect of exchange rate changes on cash and cash equivalents |
(0.9) |
2.3 |
(7.5) |
Cash and cash equivalents at end of period |
461.4 |
441.8 |
507.2 |
Notes to unaudited condensed consolidated interim financial statements
1 Statement of accounting policies
Beazley Ireland Holdings plc is a company incorporated in Jersey and is resident for tax purposes in Ireland. The unaudited condensed consolidated interim financial statements for the six months ended 30 June 2017 comprise the parent company, its subsidiaries and the subsidiaries' interest in associates. Beazley Ireland Holdings plc's immediate parent company is Beazley plc, a company registered in England and Wales and listed on the London Stock Exchange.
The unaudited condensed consolidated interim financial statements have been prepared and approved by the directors in accordance with IAS 34 Interim Financial Reporting as adopted by the EU ('Adopted IFRS'). The unaudited condensed consolidated interim financial statements of Beazley Ireland Holdings plc have been prepared on a going concern basis. The directors of the company have a reasonable expectation that the company and its subsidiaries (the group) have adequate resources to continue in operational existence for the foreseeable future. The principal risks and uncertainties faced by the group remain consistent with those risks and uncertainties discussed and disclosed on pages 43 to 48 of the group's 2016 annual report and accounts.
The preparation of unaudited condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made by management in applying the group's accounting policies of Beazley Ireland Holdings plc and its subsidiaries accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements of Beazley Ireland Holdings plc as at, and for, the year ended 31 December 2016. As required by IFRS 13 (Fair Value Measurement) information relating to the fair value measurement of financial assets and liabilities is outlined in note 8 to the unaudited condensed consolidated interim financial statements.
The accounting policies applied in the unaudited condensed consolidated interim financial statements are the same as those applied in the group's consolidated financial statements of Beazley Ireland Holdings plc for the year ended 31 December 2016. There have been no additional standards endorsed by the EU since the year ended 31 December 2016, thus no additional standards have been applied by the group.
The comparative figures for the financial year ended 31 December 2016 are extracted from the financial statements of Beazley Ireland Holdings plc for that financial year. Those financial statements have been reported on by the company's auditor and delivered to the Jersey Financial Services Commission. The report of the auditor was unqualified.
New holding company
On 13 April 2016, under a scheme of arrangement involving a share exchange with the members of Beazley Ireland Holdings plc, Beazley plc became the new holding company for the Beazley group.
For further details on this please refer to pages 135 and 136 of the Beazley plc's 2016 annual report and accounts.
2 Segmental analysis
Segment information is presented in respect of reportable segments. This is based on the group's management and internal reporting structures and represents the level at which financial information is reported to the board, being the chief operating decision maker as defined in IFRS 8.
Finance costs and taxation have not been allocated to operating segments as these items are determined by group level factors and do not relate to operating performance.
30 June 2017 |
Marine $m |
Political, accident & contingency 1 $m |
Property $m |
Reinsurance $m |
Specialty lines $m |
Total $m |
Gross premiums written |
145.6 |
108.4 |
194.1 |
140.8 |
560.4 |
1,149.3 |
Net premiums written |
118.9 |
94.9 |
149.6 |
82.9 |
490.1 |
936.4 |
|
|
|
|
|
|
|
Net earned premiums |
114.0 |
91.5 |
147.6 |
55.6 |
478.0 |
886.7 |
Net investment income |
7.1 |
4.0 |
8.0 |
5.6 |
54.7 |
79.4 |
Other income |
0.7 |
2.1 |
2.4 |
0.6 |
11.2 |
17.0 |
Revenue |
121.8 |
97.6 |
158.0 |
61.8 |
543.9 |
983.1 |
|
|
|
|
|
|
|
Net insurance claims |
60.5 |
48.8 |
74.9 |
20.9 |
233.8 |
438.9 |
Expenses for the acquisition
of insurance contracts |
33.6 |
32.6 |
43.2 |
14.2 |
117.9 |
241.5 |
Administrative expenses |
15.3 |
15.4 |
19.6 |
6.4 |
64.9 |
121.6 |
Foreign exchange loss |
1.4 |
1.1 |
1.7 |
0.7 |
5.6 |
10.5 |
Expenses |
110.8 |
97.9 |
139.4 |
42.2 |
422.2 |
812.5 |
|
|
|
|
|
|
|
Share of (loss)/profit in associates |
- |
(0.2) |
- |
- |
0.3 |
0.1 |
Segment result |
11.0 |
(0.5) |
18.6 |
19.6 |
122.0 |
170.7 |
Finance costs |
|
|
|
|
|
(10.4) |
Profit before income tax |
|
|
|
|
|
160.3 |
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
(27.2) |
Profit after income tax |
|
|
|
|
|
133.1 |
|
|
|
|
|
|
|
Claims ratio |
53% |
53% |
51% |
38% |
49% |
49% |
Expense ratio |
43% |
53% |
42% |
37% |
38% |
41% |
Combined ratio |
96% |
106% |
93% |
75% |
87% |
90% |
|
|
|
|
|
|
|
Segment assets and liabilities |
|
|
|
|
|
|
Segment assets |
1,212.5 |
1,069.1 |
1,105.7 |
438.4 |
3,349.1 |
7,174.8 |
Segment liabilities |
(875.8) |
(922.9) |
(890.8) |
(253.1) |
(2,739.6) |
(5,682.2) |
Net assets |
336.7 |
146.2 |
214.9 |
185.3 |
609.5 |
1,492.6 |
1 During 2017, the life, accident and health division and political risks and contingency division were combined to form the political, accident and contingency division. Comparative figures for 30 June 2016 and 31 December 2016 have been re-presented to reflect this change in structure and allow comparability.
30 June 2016 |
Marine $m |
Political, accident & contingency 1 $m |
Property $m |
Reinsurance $m |
Specialty lines $m |
Total $m |
Gross premiums written |
134.0 |
149.3 |
173.0 |
150.2 |
517.6 |
1,124.1 |
Net premiums written |
107.9 |
128.8 |
142.1 |
92.9 |
458.7 |
930.4 |
|
|
|
|
|
|
|
Net earned premiums |
110.7 |
103.2 |
144.1 |
63.9 |
439.5 |
861.4 |
Net investment income |
5.6 |
3.9 |
6.7 |
4.4 |
42.1 |
62.7 |
Other income |
1.2 |
1.2 |
2.9 |
3.1 |
7.4 |
15.8 |
Revenue |
117.5 |
108.3 |
153.7 |
71.4 |
489.0 |
939.9 |
|
|
|
|
|
|
|
Net insurance claims |
56.9 |
51.1 |
59.7 |
17.5 |
251.0 |
436.2 |
Expenses for the acquisition
of insurance contracts |
32.1 |
32.0 |
43.8 |
16.0 |
95.7 |
219.6 |
Administrative expenses |
18.0 |
17.5 |
22.8 |
7.1 |
51.1 |
116.5 |
Foreign exchange loss |
1.0 |
1.2 |
1.3 |
0.9 |
4.4 |
8.8 |
Expenses |
108.0 |
101.8 |
127.6 |
41.5 |
402.2 |
781.1 |
|
|
|
|
|
|
|
Share of profit in associates |
- |
0.1 |
- |
- |
0.1 |
0.2 |
Segment result |
9.5 |
6.6 |
26.1 |
29.9 |
86.9 |
159.0 |
Finance costs |
|
|
|
|
|
(7.0) |
Profit before income tax |
|
|
|
|
|
152.0 |
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
(21.1) |
Profit after income tax |
|
|
|
|
|
130.9 |
|
|
|
|
|
|
|
Claims ratio |
52% |
49% |
41% |
27% |
57% |
51% |
Expense ratio |
45% |
48% |
46% |
36% |
34% |
39% |
Combined ratio |
97% |
97% |
87% |
63% |
91% |
90% |
|
|
|
|
|
|
|
Segment assets and liabilities |
|
|
|
|
|
|
Segment assets |
1,153.2 |
1,026.2 |
1,063.0 |
411.2 |
3,168.0 |
6,821.6 |
Segment liabilities |
(805.8) |
(872.9) |
(849.7) |
(248.1) |
(2,667.2) |
(5,443.7) |
Net assets |
347.4 |
153.3 |
213.3 |
163.1 |
500.8 |
1,377.9 |
1 During 2017, the life, accident and health division and political risks and contingency division were combined to form the political, accident and contingency division. Comparative figures for 30 June 2016 and 31 December 2016 have been re-presented to reflect this change in structure and allow comparability.
31 December 2016 |
Marine $m |
Political, accident & contingency 1 $m |
Property $m |
Reinsurance $m |
Specialty lines $m |
Total $m |
Gross premiums written |
247.4 |
245.3 |
329.7 |
213.4 |
1,159.8 |
2,195.6 |
Net premiums written |
220.7 |
215.6 |
277.1 |
141.2 |
999.4 |
1,854.0 |
|
|
|
|
|
|
|
Net earned premiums |
223.2 |
221.1 |
287.0 |
138.4 |
898.5 |
1,768.2 |
Net investment income |
8.9 |
4.9 |
10.2 |
6.4 |
62.7 |
93.1 |
Other income |
3.8 |
2.9 |
6.4 |
6.2 |
13.4 |
32.7 |
Revenue |
235.9 |
228.9 |
303.6 |
151.0 |
974.6 |
1,894.0 |
|
|
|
|
|
|
|
Net insurance claims |
98.9 |
99.7 |
115.3 |
40.2 |
501.5 |
855.6 |
Expenses for the acquisition
of insurance contracts |
65.9 |
67.1 |
88.8 |
34.7 |
216.0 |
472.5 |
Administrative expenses |
35.1 |
33.4 |
46.6 |
14.5 |
117.1 |
246.7 |
Foreign exchange loss |
0.7 |
0.7 |
0.8 |
0.4 |
3.1 |
5.7 |
Expenses |
200.6 |
200.9 |
251.5 |
89.8 |
837.7 |
1,580.5 |
|
|
|
|
|
|
|
Share of loss in associates |
- |
- |
- |
- |
(0.2) |
(0.2) |
Segment result |
35.3 |
28.0 |
52.1 |
61.2 |
136.7 |
313.3 |
Finance costs |
|
|
|
|
|
(14.4) |
Profit before income tax |
|
|
|
|
|
298.9 |
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
(42.9) |
Profit after income tax |
|
|
|
|
|
256.0 |
|
|
|
|
|
|
|
Claims ratio |
44% |
45% |
40% |
29% |
56% |
48% |
Expense ratio |
46% |
46% |
47% |
36% |
37% |
41% |
Combined ratio |
90% |
91% |
87% |
65% |
93% |
89% |
|
|
|
|
|
|
|
Segment assets and liabilities |
|
|
|
|
|
|
Segment assets |
1,175.5 |
1,060.0 |
1,087.8 |
418.1 |
3,266.7 |
7,008.1 |
Segment liabilities |
(816.4) |
(889.6) |
(862.7) |
(233.5) |
(2,735.3) |
(5,537.5) |
Net assets |
359.1 |
170.4 |
225.1 |
184.6 |
531.4 |
1,470.6 |
1 During 2017, the life, accident and health division and political risks and contingency division were combined to form the political, accident and contingency division. Comparative figures for 30 June 2016 and 31 December 2016 have been re-presented to reflect this change in structure and allow comparability.
3 Net investment income
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2016 $m |
Year to 31 December 2016 $m |
Interest and dividends on financial investments at fair value through profit or loss |
37.2 |
31.5 |
70.9 |
Interest on cash and cash equivalents |
0.2 |
0.3 |
0.6 |
Net realized gains/(losses) on financial investments at fair value through profit or loss |
5.4 |
(4.0) |
(4.9) |
Net unrealised fair value gains on financial investments at fair value through profit or loss |
39.7 |
38.8 |
33.8 |
Investment income from financial investments |
82.5 |
66.6 |
100.4 |
|
|
|
|
Investment management expenses |
(3.1) |
(3.9) |
(7.3) |
|
79.4 |
62.7 |
93.1 |
4 Other income
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2016 $m |
Year to 31 December 2016 $m |
Commission income |
10.6 |
9.6 |
15.5 |
Profit commissions |
4.5 |
5.2 |
14.9 |
Agency fees |
1.1 |
1.0 |
2.0 |
Other income1 |
0.8 |
- |
0.3 |
|
17.0 |
15.8 |
32.7 |
1 In May 2017 the group sold its Australian accident and health business, previously included in the PAC segment, to Blend Insurance Solutions PTY Limited, a Sydney-based Lloyd's service company, for total consideration of $0.8 m. The gain on the disposal of $0.8 m is included in the other income line.
5 Finance costs
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2016 $m |
Year to 31 December 2016 $m |
Interest expense |
10.4 |
7.0 |
14.4 |
|
10.4 |
7.0 |
14.4 |
6 Dividends
A second interim dividend of £90.0m was paid in March 2017 to the company's immediate parent company, Beazley plc, in respect of the six months ended 31 December 2016.
The board has declared a 2017 first interim dividend of £20.0m payable to the company's immediate parent company, Beazley plc. This will be paid in August 2017. These financial statements do not provide for the 2017 first interim dividend as a liability.
7 Income tax expense
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2016 $m |
Year to 31 December 2016 $m |
Current tax expense |
|
|
|
Current year |
32.8 |
24.9 |
37.8 |
Prior year adjustments |
0.8 |
1.7 |
2.1 |
|
33.6 |
26.6 |
39.9 |
Deferred tax expense |
|
|
|
Origination and reversal of temporary differences |
(6.0) |
(4.6) |
2.1 |
Impact of change in UK tax rates |
- |
(0.2) |
(0.8) |
Prior year adjustments |
(0.4) |
(0.7) |
1.7 |
|
(6.4) |
(5.5) |
3.0 |
Income tax expense |
27.2 |
21.1 |
42.9 |
|
6 months ended 30 June 2017 $m |
6 months ended 30 June 2017 % |
6 months ended 30 June 2016 $m |
6 months ended 30 June 2016 % |
Year to 31 December 2016 $m |
Year to 31 December 2016 % |
Profit before tax |
160.3 |
|
152.0 |
|
298.9 |
|
Tax calculated at the weighted average of statutory tax rates |
26.9 |
16.8 |
22.5 |
14.8 |
44.7 |
15.0 |
|
|
|
|
|
|
|
Effects of: |
|
|
|
|
|
|
Non-deductible expenses |
0.6 |
0.4 |
1.2 |
0.8 |
1.4 |
0.5 |
Non-taxable gains on foreign exchange |
(0.7) |
(0.4) |
(3.4) |
(2.2) |
(5.6) |
(1.9) |
Tax relief on share based payments - current and future years |
- |
- |
- |
- |
(0.6) |
(0.2) |
Under/(over) provided in prior years |
0.4 |
0.2 |
1.0 |
0.7 |
3.8 |
1.3 |
Change in UK tax rates1 |
- |
- |
(0.2) |
(0.1) |
(0.8) |
(0.3) |
Tax charge for the period |
27.2 |
17.0 |
21.1 |
14.0 |
42.9 |
14.4 |
1 The Finance Act 2015, which provides for reduction in the UK Corporation tax rate down to 19% effective from 1 April 2017 was substantively enacted on 26 October 2015. The Finance Act 2016, which provides for reduction in the UK Corporation tax rate down to 17% effective from 1 April 2020 was substantively enacted on 6 September 2016. These rate reductions to 19% and 17% will reduce the company's future current tax charge and have been reflected in the calculation of the deferred tax balance as at 30 June 2017.
The group has assessed the potential impact of diverted profits tax (DPT) following the enactment of new legislation in April 2015 and is of the view that no liability arises. The ultimate outcome may differ and any profits that did fall within scope of DPT would potentially be taxed at a rate of 25% rather than 12.5% (the current rate of tax on corporate earning in Ireland).
8 Financial assets and liabilities
|
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
Financial assets at fair value |
|
|
|
Government issued |
908.2 |
1,170.4 |
1,180.0 |
Quasi-government |
28.7 |
121.7 |
62.0 |
Supranational |
18.1 |
0.9 |
19.5 |
Asset backed securities |
11.3 |
3.6 |
4.6 |
Senior secured loans |
91.3 |
83.3 |
96.2 |
Corporate bonds |
|
|
|
- Investment grade |
2,322.1 |
1,928.8 |
2,158.0 |
- High yield |
106.0 |
118.7 |
97.1 |
Total fixed and floating rate debt securities |
3,485.7 |
3,427.4 |
3,617.4 |
|
|
|
|
Equity linked funds |
167.0 |
98.9 |
116.3 |
Hedge funds |
344.0 |
295.4 |
317.1 |
Illiquid credit assets |
168.4 |
125.8 |
132.4 |
Total capital growth |
679.4 |
520.1 |
565.8 |
Total financial investments at fair value through statement of profit or loss |
4,165.1 |
3,947.5 |
4,183.2 |
|
|
|
|
Derivative financial assets |
12.6 |
5.3 |
12.2 |
Total financial assets at fair value |
4,177.7 |
3,952.8 |
4,195.4 |
Quasi-government securities include securities which are issued by government agencies or entities supported by government guarantees. Supranational securities are issued by institutions sponsored by more than one sovereign issuer. Asset backed securities are backed by financial assets, including corporate loans. Investment grade corporate bonds include debt instruments of corporate issuers rated BBB-/Baa3 or better by one or more major rating agency and high yield corporate bonds have credit ratings below this level. Equity linked funds are investment vehicles which are predominantly exposed to equity securities. Our illiquid credit assets are described in further detail below. The fair value of these assets at 30 June 2017 excludes an unfunded commitment of $59.6m (30 June 2016: $91.0 m).
The amount expected to mature before and after one year are: |
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
Within one year |
981.2 |
1,069.4 |
937.2 |
After one year |
2,517.1 |
2,363.3 |
2,692.4 |
|
3,498.3 |
3,432.7 |
3,629.6 |
Our capital growth assets have no defined maturity dates and have thus been excluded from the above maturity table. However, 92% (30 June 2016: 89%) of equity linked funds could be liquidated within two weeks and 8% within six months, 80% (30 June 2016: 96%) of hedge fund assets within six months and the remaining 20% (30 June 2016: 4%) of hedge fund assets within 18 months. Illiquid credit assets are not readily realisable and principal will be returned over the life of these assets, which may be up to ten years.
Financial liabilities |
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
Retail bond |
95.5 |
99.8 |
94.7 |
Subordinated debt |
18.0 |
18.0 |
18.0 |
Tier 2 subordinated debt (2026) - recalled in 2016 |
- |
103.0 |
- |
Tier 2 subordinated debt (2026) - issued in 2016 |
248.4 |
- |
248.3 |
Derivative financial liabilities |
18.3 |
11.6 |
2.8 |
Total financial liabilities |
380.2 |
232.4 |
363.8 |
|
|
|
|
The amount expected to mature before and after one year are: |
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
Within one year |
18.3 |
114.6 |
2.8 |
After one year |
361.9 |
117.8 |
361.0 |
|
380.2 |
232.4 |
363.8 |
Fair value measurement
The table below summarises financial assets carried at fair value using a valuation hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1 - Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Included within
level 1 are bonds and treasury bills of government and government agencies which are measured based on quoted prices.
Level 2 - Valuations based on quoted prices in markets that are not active, or based on pricing models for which significant inputs can be corroborated by observable market data (e.g. interest rates, exchange rates). Included within level 2 are government bonds and treasury bills which are not actively traded, corporate bonds, asset backed securities and mortgage-backed securities.
Level 3 - Valuations based on inputs that are unobservable or for which there is limited market activity against which to measure fair value.
The availability of financial data can vary for different financial assets and is affected by a wide variety of factors, including the type of financial instrument, whether it is new and not yet established in the marketplace, and other characteristics specific to each transaction. To the extent that valuation is based on models or inputs that are unobservable in the market, the determination
of fair value requires more judgement. Accordingly the degree of judgement exercised by management in determining fair value is greatest for instruments classified in level 3. The group uses prices and inputs that are current as of the measurement date for valuation of these instruments.
If the inputs used to measure the fair value of an asset or a liability could be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
Level 2 investments
The group has an established control framework and valuation policy with respect to the measurement of fair values. For the group's level 2 debt securities our fund administrator obtains the prices used in the valuation from independent pricing vendors such as Bloomberg, Standard & Poor's, Reuters, Markit and International Data Corporation. The independent pricing vendors derive an evaluated price from observable market inputs. The market inputs include trade data, two-sided markets, institutional bids, comparable trades, dealer quotes, news media, and other relevant market data. These inputs are verified in their pricing engines and calibrated with the pricing models to calculate spread to benchmarks, as well as other pricing assumptions such as Weighted Average life (WM), Discount Margins (DM), Default rates, and recovery and prepayments assumptions for mortgage securities. While such valuations are sensitive to estimates, it is believed that changing one or more of the assumptions to reasonably possible alternative assumptions would not change the fair value significantly.
The group records the unadjusted price provided and validates the price through various tolerance checks, such as comparison with prices provided by investment custodians and investment managers, to assess the reasonableness and accuracy of the price to be used to value each security. In the rare case that a price fails the tolerance test, it is escalated and discussed internally. We would not normally override a price retrospectively, but we would work with the administrator and pricing vendor to investigate the difference. We also review our valuation policy on a regular basis to ensure it is fit for purpose. As at 30 June 2017, no adjustments have been made to the prices obtained from the independent administrator.
For our hedge funds and equity linked funds, pricing and valuation is undertaken by independent administrators in accordance with the valuation policy of each fund. Regulated equity linked fund prices are published on a daily or weekly basis via Bloomberg and other market data providers such as Reuters. Hedge fund values are communicated by the independent administrators to all investors via monthly investor statements.
Additional information is obtained from fund managers relating to the underlying assets within individual hedge funds and equity linked funds. This shows that 67% (30 June 2016: 73%, 31 December 2016: 77%) of these underlying assets were level 1 and the remainder level 2. This enables us to categorise our hedge fund and equity linked fund investments as level 2.
Prior to any new hedge fund investment, extensive due diligence is undertaken on each fund to ensure that pricing and valuation is undertaken by an independent administrator and that each fund's valuation policy is appropriate for the financial instruments the manager will be employing to execute the investment strategy. Fund liquidity terms are reviewed prior to the execution of any investment to ensure that there is no mismatch between the liquidity of the underlying fund assets and the liquidity terms offered to fund investors.
Level 3 investments
The level 3 categorisation applies only to some of our illiquid credit investments. These are generally participations in limited partnership vehicles which hold diverse, typically illiquid, investments. While these funds provide full transparency of their underlying investments, the investments themselves are in many cases private and unquoted, and are therefore classified as level 3 investments.
Valuation inputs can be subjective and may include a discount rate applied to the investment based on market factors and expectations of future cash flows, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance relative to benchmarks, financial condition, and financing transactions subsequent to the acquisition of the investment.
We take the following steps to ensure accurate valuation of these level 3 assets: a substantial part of the pre-investment due diligence process is dedicated to a comprehensive review of each fund's valuation policy and the internal controls of the manager. In addition to this, confirmation that the investment reaches a minimum set of standards relating to the independence of service providers, corporate governance, and transparency is sought prior to approval. Post investment, unaudited capital statements confirming the fair value of the Limited Partner interests are received and reviewed on a quarterly (or more frequent) basis. Audited financial statements are received on an annual basis, with the valuation of each transaction being confirmed.
The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy.
30 June 2017 |
Level 1 $m |
Level 2 $m |
Level 3 $m |
Total $m |
Financial assets measured at fair value |
|
|
|
|
Government issued |
908.2 |
- |
- |
908.2 |
Quasi-government |
28.5 |
0.2 |
- |
28.7 |
Supranational |
18.1 |
- |
- |
18.1 |
Asset backed securities |
- |
11.3 |
- |
11.3 |
Senior secured loans |
- |
91.3 |
- |
91.3 |
Corporate bonds |
|
|
|
|
- Investment grade |
17.7 |
2,304.4 |
- |
2,322.1 |
- High yield |
- |
106.0 |
- |
106.0 |
Equity linked funds |
- |
167.0 |
- |
167.0 |
Hedge funds |
- |
344.0 |
- |
344.0 |
Illiquid credit assets |
- |
- |
168.4 |
168.4 |
Derivative financial assets |
12.6 |
- |
- |
12.6 |
Total financial assets measured at fair value |
985.1 |
3,024.2 |
168.4 |
4,177.7 |
|
|
|
|
|
Financial liabilities measured at fair value |
|
|
|
|
Derivative financial liabilities |
18.3 |
- |
- |
18.3 |
|
|
|
|
|
Financial liabilities not measured at fair value |
|
|
|
|
Retail bond |
- |
101.3 |
- |
101.3 |
Tier 2 subordinated debt (2026) - issued in 2016 |
- |
256.8 |
- |
256.8 |
Total financial liabilities not measured at fair value |
- |
358.1 |
- |
358.1 |
30 June 2016 |
Level 1 $m |
Level 2 $m |
Level 3 $m |
Total $m |
Financial assets measured at fair value |
|
|
|
|
Government issued |
1,170.4 |
- |
- |
1,170.4 |
Quasi-government |
121.7 |
- |
- |
121.7 |
Supranational |
0.9 |
- |
- |
0.9 |
Asset backed securities |
2.0 |
1.6 |
- |
3.6 |
Senior secured loans |
- |
83.3 |
- |
83.3 |
Corporate bonds |
|
|
|
|
- Investment grade |
39.3 |
1,889.5 |
- |
1,928.8 |
- High yield |
- |
118.7 |
- |
118.7 |
Equity linked funds |
- |
98.9 |
- |
98.9 |
Hedge funds |
- |
295.4 |
- |
295.4 |
Illiquid credit assets |
- |
8.7 |
117.1 |
125.8 |
Derivative financial assets |
5.3 |
- |
- |
5.3 |
Total financial assets measured at fair value |
1,339.6 |
2,496.1 |
117.1 |
3,952.8 |
|
|
|
|
|
Financial liabilities measured at fair value |
|
|
|
|
Derivative financial liabilities |
11.6 |
- |
- |
11.6 |
|
|
|
|
|
Financial liabilities not measured at fair value |
|
|
|
|
Retail bond |
- |
102.8 |
- |
102.8 |
Tier 2 subordinated debt |
- |
101.2 |
- |
101.2 |
Total financial liabilities not measured at fair value |
- |
204.0 |
- |
204.0 |
31 December 2016 |
Level 1 $m |
Level 2 $m |
Level 3 $m |
Total $m |
Financial assets measured at fair value |
|
|
|
|
Government issued |
1,180.0 |
- |
- |
1,180.0 |
Quasi-government |
62.0 |
- |
- |
62.0 |
Supranational |
19.5 |
- |
- |
19.5 |
Asset backed securities |
- |
4.6 |
- |
4.6 |
Senior secured loans |
- |
96.2 |
- |
96.2 |
Corporate bonds |
|
|
|
|
- Investment grade |
45.0 |
2,113.0 |
- |
2,158.0 |
- High yield |
- |
97.1 |
- |
97.1 |
Equity linked funds |
- |
116.3 |
- |
116.3 |
Hedge funds |
- |
317.1 |
- |
317.1 |
Illiquid credit assets |
- |
6.3 |
126.1 |
132.4 |
Derivative financial assets |
12.2 |
- |
- |
12.2 |
Total financial assets measured at fair value |
1,318.7 |
2,750.6 |
126.1 |
4,195.4 |
|
|
|
|
|
Financial liabilities measured at fair value |
|
|
|
|
Derivative financial liabilities |
2.8 |
- |
- |
2.8 |
|
|
|
|
|
Financial liabilities not measured at fair value |
|
|
|
|
Retail bond |
- |
100.8 |
- |
100.8 |
Tier 2 subordinated debt (2026) - issued in 2016 |
- |
253.3 |
- |
253.3 |
Total financial liabilities not measured at fair value |
- |
354.1 |
- |
354.1 |
The table above does not include financial assets and liabilities that are, in accordance with the group's accounting policies, recorded at amortised cost, if the carrying amount of these financial assets and liabilities approximates their fair values at the reporting date.
Unconsolidated structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant activities are directed by means of contractual arrangements.
As part of its standard investment activities the group holds investments in high yield bond funds, asset backed securities, equity linked funds, hedge funds and illiquid credit assets which in accordance with IFRS 12 are classified as unconsolidated structured entities. The group does not sponsor any of the unconsolidated structured entities. The assets classified as unconsolidated structured entities are held at fair value on the balance sheet.
The investments comprising the group's unconsolidated structured entities are as follows:
|
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
High yield bond funds |
106.0 |
40.7 |
97.1 |
Asset backed securities |
11.3 |
3.6 |
4.6 |
Equity linked funds |
167.0 |
99.4 |
116.3 |
Hedge funds |
344.0 |
294.9 |
317.1 |
Illiquid credit assets |
168.4 |
125.8 |
132.4 |
Investments through unconsolidated structured entities |
796.7 |
564.4 |
667.5 |
Transfers and level 3 investment reconciliations
There were no transfers in either direction between level 1, level 2 and level 3 in either 2016 or 2017.
The table below shows a reconciliation from the opening balances to the closing balances of level 3 fair values. The total net unrealised gains recognised in the $9.8m (30 June 2016: $4.7 m) are included in the net investment income number of $79.4m (30 June 2016: $62.7 m) shown in the condensed consolidated statement of profit or loss.
|
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
As at 1 January |
126.1 |
89.7 |
89.7 |
Purchases |
41.0 |
36.2 |
47.9 |
Sales |
(8.5) |
(13.5) |
(21.6) |
Total net unrealised gains recognised in profit or loss |
9.8 |
4.7 |
10.1 |
As at period end |
168.4 |
117.1 |
126.1 |
The currency exposures of our financial assets held at fair value are detailed below:
30 June 2017 |
UK £ $m |
CAD $ $m |
EURO € $m |
Subtotal $m |
US $ $m |
Total $m |
Financial assets at fair value |
|
|
|
|
|
|
Fixed and floating rate debt securities |
13.4 |
160.3 |
- |
173.7 |
3,312.0 |
3,485.7 |
Equity linked funds |
- |
- |
35.7 |
35.7 |
131.3 |
167.0 |
Hedge funds |
- |
- |
- |
- |
344.0 |
344.0 |
Illiquid credit assets |
- |
- |
10.9 |
10.9 |
157.5 |
168.4 |
Derivative financial assets |
- |
- |
- |
- |
12.6 |
12.6 |
Total |
13.4 |
160.3 |
46.6 |
220.3 |
3,957.4 |
4,177.7 |
|
|
|
|
|
|
|
30 June 2016 |
UK £ $m |
CAD $ $m |
EURO € $m |
Subtotal $m |
US $ $m |
Total $m |
Financial assets at fair value |
|
|
|
|
|
|
Fixed and floating rate debt securities |
219.1 |
121.6 |
118.6 |
459.3 |
2,968.1 |
3,427.4 |
Equity linked funds |
- |
- |
28.5 |
28.5 |
70.4 |
98.9 |
Hedge funds |
- |
- |
- |
- |
295.4 |
295.4 |
Illiquid credit assets |
- |
- |
10.3 |
10.3 |
115.5 |
125.8 |
Derivative financial assets |
- |
- |
- |
- |
5.3 |
5.3 |
Total |
219.1 |
121.6 |
157.4 |
498.1 |
3,454.7 |
3,952.8 |
|
|
|
|
|
|
|
31 December 2016 |
UK £ $m |
CAD $ $m |
EURO € $m |
Subtotal $m |
US $ $m |
Total $m |
Financial assets at fair value |
|
|
|
|
|
|
Fixed and floating rate debt securities |
140.1 |
169.2 |
- |
309.3 |
3,308.1 |
3,617.4 |
Equity linked funds |
- |
- |
29.7 |
29.7 |
86.6 |
116.3 |
Hedge funds |
- |
- |
- |
- |
317.1 |
317.1 |
Illiquid credit assets |
- |
- |
8.1 |
8.1 |
124.3 |
132.4 |
Derivative financial assets |
- |
- |
- |
- |
12.2 |
12.2 |
Total |
140.1 |
169.2 |
37.8 |
347.1 |
3,848.3 |
4,195.4 |
The above qualitative and quantitative disclosures, along with the risk management disclosure included in note 2 of the annual report for the year ending 31 December 2016, enables more comprehensive evaluation of Beazley's exposure to risks arising from financial instruments.
9 Cash and cash equivalents
|
30 June 2017 $m |
30 June 2016 $m |
31 December 2016 $m |
Cash at bank and in hand |
417.2 |
303.6 |
374.6 |
Short-term deposits and highly liquid investments |
44.2 |
138.2 |
132.6 |
|
461.4 |
441.8 |
507.2 |
Total cash and cash equivalents include $49.0 m (31 December 2016: $44.5 m) held in Lloyd's Singapore trust accounts. These funds are only available for use by the group to meet local claim and expense obligations.
10 Insurance claims
The loss development tables below provide information about historical claims development by the five segments -marine, political, accident and 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 ratios and ultimate net claims ratios.
The top part of the table illustrates how the group's estimated claims ratio for each underwriting year has changed at successive year-ends.
While the information in the tables provide 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 estimates of total claims liabilities as at 30 June 2017 are 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 |
2007ae |
2008 % |
2009 % |
2010 % |
2011 % |
2012 % |
2013 % |
2014 % |
2015 % |
2016 % |
2017 % |
Total |
Marine |
|
12 months |
|
69.3 |
54.3 |
50.5 |
54.6 |
55.9 |
56.5 |
57.5 |
56.7 |
59.5 |
|
|
24 months |
|
65.5 |
50.9 |
49.7 |
47.4 |
46.3 |
52.0 |
46.8 |
54.0 |
|
|
|
36 months |
|
59.4 |
44.1 |
44.0 |
39.0 |
34.7 |
44.4 |
47.1 |
|
|
|
|
48 months |
|
63.3 |
40.6 |
42.3 |
33.7 |
32.2 |
42.7 |
|
|
|
|
|
60 months |
|
62.9 |
40.3 |
40.4 |
35.3 |
31.4 |
|
|
|
|
|
|
72 months |
|
59.2 |
48.6 |
40.1 |
31.6 |
|
|
|
|
|
|
|
84 months |
|
55.4 |
47.8 |
42.1 |
|
|
|
|
|
|
|
|
96 months |
|
54.8 |
49.1 |
|
|
|
|
|
|
|
|
|
108 months |
|
51.7 |
|
|
|
|
|
|
|
|
|
|
Position at
30 June 2017 |
|
58.4 |
49.0 |
40.7 |
31.1 |
31.4 |
42.2 |
46.3 |
48.7 |
61.4 |
|
|
Political, accident & contingency |
|
12 months |
|
57.4 |
58.3 |
57.7 |
57.5 |
60.0 |
59.2 |
59.2 |
59.8 |
61.3 |
|
|
24 months |
|
71.7 |
43.4 |
44.8 |
44.5 |
54.4 |
49.4 |
51.2 |
58.8 |
|
|
|
36 months |
|
75.9 |
37.9 |
39.0 |
44.2 |
51.3 |
44.9 |
47.0 |
|
|
|
|
48 months |
|
89.4 |
33.7 |
32.5 |
39.4 |
48.9 |
43.9 |
|
|
|
|
|
60 months |
|
73.8 |
29.3 |
31.5 |
37.6 |
45.8 |
|
|
|
|
|
|
72 months |
|
62.5 |
25.0 |
30.3 |
35.5 |
|
|
|
|
|
|
|
84 months |
|
59.2 |
25.1 |
29.4 |
|
|
|
|
|
|
|
|
96 months |
|
59.8 |
25.2 |
|
|
|
|
|
|
|
|
|
108 months |
|
59.0 |
|
|
|
|
|
|
|
|
|
|
Position at
30 June 2017 |
|
58.3 |
25.3 |
29.9 |
35.2 |
45.6 |
43.2 |
46.1 |
57.9 |
58.3 |
|
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
12 months |
|
70.5 |
53.6 |
57.8 |
58.2 |
55.4 |
55.1 |
53.2 |
54.9 |
58.9 |
|
|
24 months |
|
65.1 |
41.5 |
60.3 |
50.3 |
47.4 |
49.2 |
47.7 |
49.0 |
|
|
|
36 months |
|
64.1 |
36.3 |
58.3 |
47.8 |
39.7 |
45.8 |
41.3 |
|
|
|
|
48 months |
|
62.0 |
35.2 |
55.6 |
46.0 |
36.7 |
45.8 |
|
|
|
|
|
60 months |
|
60.5 |
34.1 |
52.9 |
45.1 |
36.1 |
|
|
|
|
|
|
72 months |
|
59.4 |
33.1 |
51.9 |
44.0 |
|
|
|
|
|
|
|
84 months |
|
58.3 |
32.5 |
51.0 |
|
|
|
|
|
|
|
|
96 months |
|
57.6 |
32.1 |
|
|
|
|
|
|
|
|
|
108 months |
|
57.3 |
|
|
|
|
|
|
|
|
|
|
Position at
30 June 2017 |
|
57.3 |
32.1 |
50.8 |
43.9 |
35.9 |
45.6 |
40.6 |
48.1 |
58.6 |
|
|
Reinsurance |
|
|
|
|
|
|
|
|
|
|
|
|
12 months |
|
59.8 |
60.7 |
68.0 |
79.2 |
62.9 |
58.8 |
61.5 |
65.8 |
67.5 |
|
|
24 months |
|
54.4 |
48.0 |
141.0 |
77.7 |
37.5 |
45.0 |
33.6 |
33.7 |
|
|
|
36 months |
|
44.7 |
39.9 |
127.8 |
69.6 |
32.1 |
42.4 |
31.0 |
|
|
|
|
48 months |
|
41.2 |
39.4 |
120.1 |
65.9 |
31.2 |
41.1 |
|
|
|
|
|
60 months |
|
40.9 |
35.2 |
123.5 |
63.1 |
31.3 |
|
|
|
|
|
|
72 months |
|
41.0 |
32.3 |
122.2 |
62.9 |
|
|
|
|
|
|
|
84 months |
|
40.3 |
31.7 |
122.2 |
|
|
|
|
|
|
|
|
96 months |
|
40.0 |
31.7 |
|
|
|
|
|
|
|
|
|
108 months |
|
39.9 |
|
|
|
|
|
|
|
|
|
|
Position at
30 June 2017 |
|
39.9 |
31.7 |
122.2 |
61.4 |
31.3 |
40.2 |
30.7 |
26.8 |
67.5 |
|
|
Specialty lines |
|
|
|
|
|
|
|
|
|
|
|
|
12 months |
|
72.0 |
72.5 |
73.7 |
75.4 |
73.9 |
73.4 |
68.5 |
67.4 |
65.3 |
|
|
24 months |
|
71.8 |
72.4 |
73.8 |
75.5 |
74.0 |
73.2 |
68.4 |
67.8 |
|
|
|
36 months |
|
71.8 |
71.6 |
72.8 |
76.5 |
72.1 |
72.9 |
65.0 |
|
|
|
|
48 months |
|
72.0 |
71.3 |
73.3 |
75.5 |
70.2 |
69.3 |
|
|
|
|
|
60 months |
|
71.4 |
71.6 |
69.5 |
74.1 |
67.3 |
|
|
|
|
|
|
72 months |
|
71.8 |
68.6 |
69.7 |
69.4 |
|
|
|
|
|
|
|
84 months |
|
70.1 |
69.7 |
69.4 |
|
|
|
|
|
|
|
|
96 months |
|
73.5 |
70.3 |
|
|
|
|
|
|
|
|
|
108 months |
|
72.9 |
|
|
|
|
|
|
|
|
|
|
Position at
30 June 2017 |
|
73.2 |
70.6 |
69.4 |
68.8 |
66.1 |
67.6 |
63.6 |
65.2 |
65.1 |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
12 months |
|
69.1 |
62.8 |
64.4 |
67.2 |
64.6 |
63.8 |
62.2 |
62.7 |
63.3 |
|
|
24 months |
|
68.1 |
56.9 |
71.4 |
62.8 |
58.2 |
59.3 |
55.8 |
58.4 |
|
|
|
36 months |
|
66.5 |
53.1 |
67.4 |
60.4 |
53.2 |
56.4 |
52.5 |
|
|
|
|
48 months |
|
67.7 |
51.6 |
65.3 |
57.8 |
51.0 |
54.3 |
|
|
|
|
|
60 months |
|
65.7 |
50.7 |
63.0 |
56.9 |
49.1 |
|
|
|
|
|
|
72 months |
|
64.1 |
49.8 |
62.6 |
53.7 |
|
|
|
|
|
|
|
84 months |
|
62.1 |
49.9 |
62.5 |
|
|
|
|
|
|
|
|
96 months |
|
63.6 |
50.3 |
|
|
|
|
|
|
|
|
|
108 months |
|
62.6 |
|
|
|
|
|
|
|
|
|
|
Position at
30 June 2017 |
|
63.8 |
50.4 |
62.3 |
53.2 |
48.6 |
53.3 |
51.4 |
55.6 |
63.1 |
|
|
Total ultimate losses ($m) |
5,416.5 |
1,195.2 |
1,059.5 |
1,292.8 |
1,020.4 |
945.5 |
1,151.1 |
1,197.6 |
1,364.1 |
1,594.1 |
1,726.8 |
17,963.6 |
Less paid claims ($m) |
(5,168.0) |
(1,025.5) |
(845.9) |
(1,141.6) |
(857.7) |
(753.3) |
(778.8) |
(656.3) |
(472.3) |
(247.4) |
(17.8) |
(11,964.6) |
Less unearned portion of ultimate losses ($m) |
- |
- |
- |
- |
- |
- |
- |
- |
(6.3) |
(235.9) |
(1,512.8) |
(1,755.0) |
Gross claims liabilities (100% level) ($m) |
248.5 |
169.7 |
213.6 |
151.2 |
162.7 |
192.2 |
372.3 |
541.3 |
885.5 |
1,110.8 |
196.2 |
4,244.0 |
Less unaligned share ($m) |
(47.7) |
(24.6) |
(33.6) |
(30.5) |
(31.6) |
(41.2) |
(61.8) |
(82.8) |
(134.1) |
(165.9) |
(30.2) |
(684.0) |
Gross claims liabilities, group share ($m) |
200.8 |
145.1 |
180.0 |
120.7 |
131.1 |
151.0 |
310.5 |
458.5 |
751.4 |
944.9 |
166.0 |
3,560.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net ultimate claims |
2007ae |
2008 % |
2009 % |
2010 % |
2011 % |
2012 % |
2013 % |
2014 % |
2015 % |
2016 % |
2017 % |
Total |
Marine |
|
|
|
|
|
|
|
|
|
|
|
|
12 months |
|
61.3 |
53.2 |
52.1 |
55.5 |
55.4 |
56.0 |
56.4 |
56.7 |
56.7 |
|
|
24 months |
|
56.9 |
47.5 |
49.2 |
47.6 |
46.1 |
53.1 |
48.4 |
52.5 |
|
|
|
36 months |
|
50.5 |
38.8 |
44.7 |
38.5 |
37.4 |
47.4 |
46.5 |
|
|
|
|
48 months |
|
47.3 |
35.1 |
42.6 |
34.3 |
35.0 |
45.8 |
|
|
|
|
|
60 months |
|
46.8 |
34.8 |
41.0 |
35.4 |
33.9 |
|
|
|
|
|
|
72 months |
|
46.2 |
38.4 |
40.1 |
32.1 |
|
|
|
|
|
|
|
84 months |
|
45.0 |
37.7 |
42.3 |
|
|
|
|
|
|
|
|
96 months |
|
44.5 |
37.0 |
|
|
|
|
|
|
|
|
|
108 months |
|
44.9 |
|
|
|
|
|
|
|
|
|
|
Position at 30 June 2017 |
|
47.9 |
36.9 |
40.8 |
31.6 |
33.9 |
45.7 |
46.3 |
49.4 |
59.6 |
|
|
Political, accident & contingency |
|
|
12 months |
|
55.8 |
56.3 |
54.4 |
54.8 |
58.6 |
58.6 |
56.9 |
57.5 |
60.2 |
|
|
24 months |
|
79.6 |
41.5 |
43.6 |
45.1 |
52.5 |
50.9 |
49.8 |
56.1 |
|
|
|
36 months |
|
78.8 |
36.4 |
39.6 |
45.4 |
49.9 |
47.4 |
45.0 |
|
|
|
|
48 months |
|
81.6 |
33.6 |
33.3 |
42.2 |
46.9 |
44.8 |
|
|
|
|
|
60 months |
|
71.0 |
29.7 |
32.3 |
40.2 |
43.7 |
|
|
|
|
|
|
72 months |
|
60.2 |
26.2 |
31.2 |
38.1 |
|
|
|
|
|
|
|
84 months |
|
56.6 |
26.3 |
29.7 |
|
|
|
|
|
|
|
|
96 months |
|
56.9 |
26.3 |
|
|
|
|
|
|
|
|
|
108 months |
|
56.6 |
|
|
|
|
|
|
|
|
|
|
Position at 30 June 2017 |
|
56.0 |
26.5 |
30.5 |
37.7 |
43.6 |
43.8 |
45.7 |
55.0 |
58.1 |
|
|
Property |
|
|
|
|
|
|
|
|
|
|
|
|
12 months |
|
66.9 |
53.3 |
58.8 |
60.2 |
58.6 |
56.7 |
54.5 |
55.0 |
57.6 |
|
|
24 months |
|
66.7 |
47.2 |
65.0 |
57.6 |
52.9 |
56.3 |
51.1 |
50.2 |
|
|
|
36 months |
|
64.7 |
43.7 |
65.6 |
53.5 |
45.9 |
52.3 |
44.2 |
|
|
|
|
48 months |
|
63.5 |
41.5 |
59.7 |
50.3 |
41.2 |
50.1 |
|
|
|
|
|
60 months |
|
62.4 |
40.8 |
57.6 |
48.9 |
40.7 |
|
|
|
|
|
|
72 months |
|
61.0 |
39.6 |
56.5 |
47.8 |
|
|
|
|
|
|
|
84 months |
|
60.3 |
39.1 |
56.0 |
|
|
|
|
|
|
|
|
96 months |
|
59.3 |
38.8 |
|
|
|
|
|
|
|
|
|
108 months |
|
59.1 |
|
|
|
|
|
|
|
|
|
|
Position at 30 June 2017 |
|
59.0 |
38.8 |
55.8 |
47.8 |
40.5 |
50.0 |
42.8 |
49.2 |
57.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance |
|
|
|
|
|
|
|
|
|
|
|
|
12 months |
|
68.7 |
55.5 |
76.7 |
90.1 |
67.0 |
56.7 |
58.8 |
61.4 |
60.9 |
|
|
24 months |
|
61.5 |
52.6 |
125.1 |
87.9 |
45.5 |
51.7 |
37.4 |
34.2 |
|
|
|
36 months |
|
51.1 |
46.8 |
115.2 |
80.4 |
39.2 |
48.3 |
33.6 |
|
|
|
|
48 months |
|
48.8 |
46.1 |
109.1 |
74.9 |
37.8 |
46.8 |
|
|
|
|
|
60 months |
|
48.3 |
41.2 |
119.0 |
72.6 |
37.8 |
|
|
|
|
|
|
72 months |
|
48.6 |
37.9 |
113.1 |
72.6 |
|
|
|
|
|
|
|
84 months |
|
47.4 |
37.1 |
113.1 |
|
|
|
|
|
|
|
|
96 months |
|
47.1 |
37.1 |
|
|
|
|
|
|
|
|
|
108 months |
|
47.1 |
|
|
|
|
|
|
|
|
|
|
Position at 30 June 2017 |
|
47.1 |
37.1 |
113.1 |
70.8 |
37.8 |
45.7 |
33.2 |
25.7 |
60.9 |
|
|
Specialty lines |
12 months |
|
70.1 |
69.5 |
70.9 |
72.4 |
71.0 |
69.5 |
66.0 |
63.5 |
62.9 |
|
|
24 months |
|
70.0 |
69.3 |
71.0 |
72.4 |
70.6 |
69.0 |
65.9 |
63.9 |
|
|
|
36 months |
|
69.8 |
68.7 |
70.5 |
71.7 |
68.7 |
68.5 |
63.6 |
|
|
|
|
48 months |
|
68.5 |
65.8 |
69.5 |
69.5 |
65.7 |
63.5 |
|
|
|
|
|
60 months |
|
67.8 |
65.7 |
68.9 |
70.1 |
63.8 |
|
|
|
|
|
|
72 months |
|
67.7 |
64.9 |
69.0 |
68.8 |
|
|
|
|
|
|
|
84 months |
|
67.7 |
65.5 |
68.8 |
|
|
|
|
|
|
|
|
96 months |
|
69.9 |
65.4 |
|
|
|
|
|
|
|
|
|
108 months |
|
69.7 |
|
|
|
|
|
|
|
|
|
|
Position at 30 June 2017 |
|
69.5 |
65.3 |
68.8 |
68.4 |
63.4 |
62.2 |
60.5 |
61.6 |
62.6 |
|
|
Total |
12 months |
|
66.7 |
60.6 |
64.2 |
67.0 |
64.0 |
62.2 |
60.6 |
60.1 |
60.8 |
|
|
24 months |
|
67.1 |
56.5 |
68.4 |
63.6 |
58.3 |
60.1 |
56.1 |
56.5 |
|
|
|
36 months |
|
64.6 |
52.8 |
66.0 |
60.1 |
53.7 |
57.3 |
52.5 |
|
|
|
|
48 months |
|
63.4 |
50.3 |
62.9 |
57.0 |
50.7 |
54.2 |
|
|
|
|
|
60 months |
|
61.8 |
49.3 |
62.8 |
56.7 |
49.3 |
|
|
|
|
|
|
72 months |
|
60.6 |
48.6 |
61.8 |
55.1 |
|
|
|
|
|
|
|
84 months |
|
59.9 |
48.5 |
61.8 |
|
|
|
|
|
|
|
|
96 months |
|
60.6 |
48.3 |
|
|
|
|
|
|
|
|
|
108 months |
|
60.5 |
|
|
|
|
|
|
|
|
|
|
Position at 30 June 2017 |
|
60.9 |
48.3 |
61.6 |
54.6 |
49.1 |
53.4 |
50.9 |
54.0 |
60.8 |
|
|
Total ultimate losses ($m) |
3,638.8 |
938.9 |
778.6 |
1,051.0 |
856.5 |
828.2 |
966.7 |
1,008.3 |
1,089.4 |
1,281.1 |
1,415.9 |
13,853.4 |
Less paid claims ($m) |
(3,414.0) |
(835.5) |
(684.3) |
(937.3) |
(741.0) |
(666.1) |
(671.8) |
(567.5) |
(407.7) |
(222.1) |
(17.4) |
(9,164.7) |
Less unearned portion of ultimate losses ($m) |
- |
- |
- |
- |
- |
- |
- |
- |
(2.9) |
(228.2) |
(1,258.9) |
(1,490.0) |
Net claims liabilities
(100% level) ($m) |
224.8 |
103.4 |
94.3 |
113.7 |
115.5 |
162.1 |
294.9 |
440.8 |
678.8 |
830.8 |
139.6 |
3,198.7 |
Less unaligned share ($m) |
(31.1) |
(17.1) |
(19.1) |
(23.2) |
(24.9) |
(32.2) |
(50.5) |
(67.0) |
(103.3) |
(123.1) |
(21.3) |
(512.8) |
Net claims liabilities, group share ($m) |
193.7 |
86.3 |
75.2 |
90.5 |
90.6 |
129.9 |
244.4 |
373.8 |
575.5 |
707.7 |
118.3 |
2,685.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of movements in loss development tables
We have updated our loss development tables to show the interim ultimate loss ratios as at 30 June 2017 for each underwriting year. As such, care should be taken when comparing these half year movements to the full year movements shown within the body of the table.
Marine
The 2008 underwriting year saw a deterioration following adverse development on a specific claim within the energy book. Conversely, the 2010 year saw a release as a result of a favourable settlement. Catastrophe margin has been released from the 2015 underwriting year, however adverse claims experience across hull, aviation and UK marine in the 2016 underwriting year has resulted in an increase.
Political, accident & contingency
Recoveries in respect of political claims have driven small releases across prior underwriting years. The 2014 year saw a net strengthening following a deterioration on a trade credit claim within the political book. Some catastrophe margin has been released from the stand alone terrorism book, from the 2016 underwriting year.
Property
The remaining catastrophe margin was released from the 2015 underwriting year, reflecting the continued benign catastrophe experience and the run off of exposure. Small releases were seen across prior years from a number of classes.
Reinsurance
Catastrophe margin has been released from the 2015 underwriting year following continued benign experience. Small releases from prior years reflect favourable developments observed on underlying claims.
Specialty lines
Releases from the 2012 and 2013 underwriting years reflect favourable developments in the long tail book, whilst in the 2014 underwriting year, releases have been made from the cyber classes.
Claims releases
The table below analyses our net insurance claims between current year claims and adjustments to prior year net claims reserves. These have been broken down by segment and period.
The net of reinsurance claims release on 2016 and prior underwriting years has risen to $83.4m (2016: $77.4 m). The releases are the result of both generally favourable development and recoveries on specific claims.
The movements shown on 2014 and earlier are absolute claim movements and are not impacted by any current year movements on premium on those underwriting years.
6 months ended 30 June 2017 |
Marine $m |
Political, accident & contingency $m |
Property $m |
Reinsurance $m |
Specialty lines $m |
Total $m |
Current year |
63.8 |
48.8 |
82.1 |
35.2 |
292.4 |
522.3 |
Prior year |
|
|
|
|
|
|
- 2014 and earlier |
(0.8) |
2.9 |
(4.1) |
(2.9) |
(37.5) |
(42.4) |
- 2015 underwriting year |
(5.6) |
(1.7) |
(3.0) |
(11.3) |
(20.9) |
(42.5) |
- 2016 underwriting year |
3.1 |
(1.2) |
(0.1) |
(0.1) |
(0.2) |
1.5 |
|
(3.3) |
- |
(7.2) |
(14.3) |
(58.6) |
(83.4) |
Net insurance claims |
60.5 |
48.8 |
74.9 |
20.9 |
233.8 |
438.9 |
6 months ended 30 June 2016 |
Marine $m |
Political, accident & contingency $m |
Property $m |
Reinsurance $m |
Specialty lines $m |
Total $m |
Current year |
56.3 |
58.5 |
77.3 |
35.0 |
286.5 |
513.6 |
Prior year |
|
|
|
|
|
|
- 2013 and earlier |
5.8 |
(7.0) |
(5.0) |
(1.1) |
(22.8) |
(30.1) |
- 2014 underwriting year |
(2.0) |
(1.7) |
(9.3) |
(3.7) |
(11.7) |
(28.4) |
- 2015 underwriting year |
(3.2) |
1.3 |
(3.3) |
(12.7) |
(1.0) |
(18.9) |
|
0.6 |
(7.4) |
(17.6) |
(17.5) |
(35.5) |
(77.4) |
Net insurance claims |
56.9 |
51.1 |
59.7 |
17.5 |
251.0 |
436.2 |
Year to 31 December 2016 |
Marine $m |
Political, accident & contingency $m |
Property $m |
Reinsurance $m |
Specialty lines $m |
Total $m |
Current year |
114.8 |
127.0 |
152.0 |
72.5 |
570.0 |
1,036.3 |
Prior year |
|
|
|
|
|
|
- 2013 and earlier |
(7.0) |
(17.7) |
(11.6) |
- |
(52.0) |
(88.3) |
- 2014 underwriting year |
(4.1) |
(9.0) |
(18.4) |
(4.2) |
(17.0) |
(52.7) |
- 2015 underwriting year |
(4.8) |
(0.5) |
(6.8) |
(28.1) |
0.5 |
(39.7) |
|
(15.9) |
(27.2) |
(36.8) |
(32.3) |
(68.5) |
(180.7) |
Net insurance claims |
98.9 |
99.8 |
115.2 |
40.2 |
501.5 |
855.6 |
11 Related party transactions
The nature of the related party transactions of the group are consistent in nature and scope with those disclosed in note 29 of the group's consolidated financial statements for the year ended 31 December 2016.
12 Foreign exchange rates
The group used the following exchange rates to translate foreign currency assets, liabilities, income and expenses into US dollars, being the group's presentation currency:
|
6 months ended 30 June 2017 |
6 months ended 30 June 2016 |
Year to 31 December 2016 |
Average |
|
|
|
Pound sterling |
0.80 |
0.69 |
0.73 |
Canadian dollar |
1.34 |
1.34 |
1.34 |
Euro |
0.94 |
0.90 |
0.91 |
|
|
|
|
Spot |
|
|
|
Pound sterling |
0.78 |
0.75 |
0.79 |
Canadian dollar |
1.33 |
1.30 |
1.31 |
Euro |
0.89 |
0.90 |
0.94 |
13 Subsequent events
Since the reporting date, Beazley has sold its share in one of its associates, Equinox Global Limited. The effect of the transaction is still to be fully confirmed but will have an immaterial effect on the financial position of the group.
14 Business combinations
Acquisition of business portfolio
In January 2017 Beazley Furlonge Holdings Limited, an intermediate holding company within the group, set up a direct 100% subsidiary, 1104980 BC Limited, in Canada. The principal activity of 1104980 BC Limited was to act as an intermediate holding company within the group. This subsidiary acquired 100% of the share capital of a Canadian coverholder, Creechurch International Underwriters Limited (now Beazley Canada Limited), on 3 February 2017. In June 2017 1104980 BC Limited and Beazley Canada Limited amalgamated under the name of Beazley Canada Limited.
The acquisition secured a strategic platform for specialty lines and Beazley's expansion in Canada. It also allowed us to write more business through increased line size and launching new specialist products through the acquiree's distribution channels. The acquisition was achieved in one stage. The total amount of consideration paid was $33.8m. Total amount of consideration represents cash and no contingent consideration was offered.
The acquisition had the following effect on the group's assets and liabilities:
Net assets acquired (provisional) |
Carrying value at acquisition $m |
Fair value adjustment $m |
Fair value on completion $m |
Intangible assets - renewal rights |
- |
34.4 |
34.4 |
Fixed assets |
0.1 |
- |
0.1 |
Cash and cash equivalents |
2.6 |
- |
2.6 |
Other receivables |
0.3 |
- |
0.3 |
Other payables |
(1.0) |
- |
(1.0) |
Deferred tax liability |
- |
(2.6) |
(2.6) |
Estimated value of net assets acquired |
2.0 |
31.8 |
33.8 |
Intangible assets - goodwill |
|
|
- |
Consideration paid |
|
|
33.8 |
The effect of the acquisition on the group's consolidated statement of profit or loss in the current period was less than $1.0m. No material costs related to the acquisition were incurred by the group.
For further information, please contact:
Beazley Ireland Holdings plc |
Beazley Ireland Holdings plc |
Martin Bride |
Chris Jones |
Tel: +353 (0) 1 854 4700 |
Tel: +353 (0) 1 854 4700 |
Glossary
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.
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 balance sheet 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 linked 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. As at 30 June 2017, this ratio was 49% (30 June 2016: 51%; 31 December 2016: 48%). This represented claims of $438.9 m (30 June 2016: $436.2 m; 31 December 2016: $855.6 m) divided by net earned premiums of $886.7 m (30 June 2016: $861.4 m; 31 December 2016: $1,768.2m).
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. At 30 June 2017, this ratio was 90% (30 June 2016: 90%; 31 December 2016: 89%). This represents the sum of net insurance claims of $438.9 m (30 June 2016: $436.2 m; 31 December 2016: $855.6m), expenses for acquisition of insurance contracts of $241.5 m (30 June 2016: $219.6 m; 31 December 2016: $472.5 m) and administrative expenses of $121.6m (30 June 2016: $116.5 m; 31 December 2016: $246.7 m) to net earned premiums of $886.7 m (30 June 2016: $861.4 m; 31 December 2016: $1,768.2 m). This is also the sum of the expense ratio 41% (30 June 2016: 39%; 31 December 2016: 41%) and the claims ratio 49% (30 June 2016: 51%; 31 December 2016: 48%).
Coverholder/managing general agent
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. At 30 June 2017, the expense ratio was 41% (30 June 2016: 39%; 31 December 2016: 41%). This represents the sum of expenses for acquisition of insurance contracts of $241.5 m (30 June 2016: $219.6 m; 31 December 2016: $472.5 m) and administrative expenses of $121.6 m (30 June 2016: $116.5 m; 31 December 2016: $246.7 m) to net earned premiums of $886.7 m (30 June 2016: $861.4 m; 31 December 2016: $1,768.2 m).
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, including any brokerage and commission deducted by intermediaries.
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 although no claims have been reported so far.
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).
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.
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 million 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.
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 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.
Risk
This term may variously 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.
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 cat 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 USA. Lloyd's underwriters are surplus lines insurers in all jurisdictions of the USA except Kentucky and the US Virgin Islands.
Treaty reinsurance
A reinsurance contract under which the reinsurer agrees to offer and to accept all risks of 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.