Beazley

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Results for the year ended 31 December 2013

Thursday, 6 February 2014

Disclaimer notice

2

Certain statements made in this presentation, both oral and written, are or may constitute “forward looking statements”

with respect to the operation, performance and financial condition of the Company and/or the Group. These forward

looking statements are not based on historical facts but rather reflect current beliefs and expectations regarding future

events and results. Such forward looking statements can be identified from words such as “anticipates”, “may”, “will”,

“believes”, “expects”, “intends”, “could”, “should”, “estimates”, “predict” and similar expressions in such statements or the

negative thereof or other variations thereof or comparable terminology. These forward looking statements appear in a

number of places throughout this document and involve significant inherent risks, uncertainties and other factors, known or

unknown, which may cause the actual results, performance or achievements of the Company, or industry results, to be

materially different from any future results, performance or achievements expressed or implied by such forward looking

statements. Given these uncertainties, such forward looking statements should not be read as guarantees of future

performance or results and no undue reliance should be placed on such forward looking statements. A number of factors

could cause actual results to differ materially from the results discussed in these forward-looking statements.

The information and opinions contained in this presentation, including any forward looking statements, are provided, and

reflect knowledge and information available, as at the date of this presentation and are subject to change without

notice. There is no intention, nor is any duty or obligation assumed by the Company, the Group or the Directors to

supplement, amend, update or revise any of the information, including any forward looking statements, contained in this

presentation.

All subsequent written and oral forward-looking statements attributable to the Company and/or the Group or to persons

acting on its behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained

elsewhere in this document.

Contents

Overview of 2013 4-8

FinancialsPerformance 10Investments 11-12Reserves 13-14Capital 15-16

Underwriting review 17-21

Our vision 22

Outlook 23

Appendix 25-35

3

Pages

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Overview of 2013

Exceptional underwriting result

• Profit before income tax of $313.3m (2012: $251.2m)

• Return on equity of 21% (2012: 19%)

• Gross written premiums increased by 4% to $1,970.2m (2012: $1,895.9m)

• Combined ratio of 84% (2012: 91%)

• Rate increase on renewal portfolio of 1% (2012: 3%)

• Prior year reserve releases of $218.0m (2012: $126.0m)

• Net investment income of $43.3m (2012: $82.6m)

• Second interim dividend of 5.9p taking full year dividend to 8.8p (2012: Full year 8.3p). Special dividend of 16.1p (2012: 8.4p)

5

Cover

6

Sustained high performance

1,751.3 1,741.6 1,712.5 1,895.9 1,970.2

0

500

1000

1500

2000

2500

2009 2010 2011 2012 2013

Gross premiums written ($m)

55% 52%62%

53%45%

35% 36%

37%38%

39%

90% 88%

99%91%

84%

0%

25%

50%

75%

100%

125%

2009 2010 2011 2012 2013

Combined ratio (%)

Expense ratio Claims ratio Combined ratio

24%

19%

6%

19%21%

0%

5%

10%

15%

20%

25%

30%

2009 2010 2011 2012 2013

Return on equity (%)

7.0 7.5 7.9 8.3 8.8

2.5

8.4

16.1

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2009 2010 2011 2012 2013

Dividends per share (p)

Special Interim and final

• Record low combined ratio of 84%, with 90% average over the last 5 years

• Rate increases were achieved in specialty lines (3%) and property (3%)

• Continuing investments in:

• People

• Products – 2013: Aviation and growth of Beazley Breach Response

2014: Satellite

• Geography – offices in Dallas, Miami, Dubai and Rio de Janeiro

• Continue to deliver excellent claims service - we have won two industry awards

• NAV growth achieved consistently over the last four years and active capital management has continued

A year of significant achievement

7

Excellent total shareholder return (TSR) and NAV growth

8

0%

25%

50%

75%

100%

125%

150%

175%

200%

225%

250%

31 December 2009 31 December 2010 31 December 2011 31 December 2012 31 December 2013

NAV target range

(RFR +10% p.a. to

RFR +15% p.a.)

NAV growth

(Including dividends)

TSR growth

(1 month average)

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Financials

Strong performance across all metrics

Year ended 31 Dec 2013 Year ended 31 Dec 2012 % increase

Gross premiums written ($m) 1,970.2 1,895.9 4%

Net premiums written ($m) 1,676.5 1,542.7 9%

Net earned premiums ($m) 1,590.5 1,478.5 8%

Profit before income tax ($m) 313.3 251.2 25%

Earnings per share 33.6p 26.7p

Dividend per share 8.8p 8.3p

Special dividend 16.1p 8.4p

Net assets per share (pence) 160.6p 147.5p

Net tangible assets per share (pence) 149.6p 133.4p

10

Portfolio delivered 1.0% in the second half as expected

11

43.5

8.5

22.5

36.1

46.9

29.0

16.8

46.5

43.3

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2009 2010 2011 2012 2013

2nd half 1st half Return

($

m)

In

vestm

en

t R

etu

rn

An

nu

alised

In

vestm

en

t R

etu

rn

Portfolio mix remains stable

12

Cash and Cash Equivalents,

8.7%

Fixed Income: Sovereign and Supranational,

47.0%

Investment Grade Credit,

30.5%

Other Credit, 2.1%

Capital Growth Assets, 11.7%

Dec-13

Cash andCash

Equivalents,7.3%

Fixed Income: Sovereign and Supranational,

56.2%

Other Credit, 1.7% Capital Growth

Assets, 9.7%

Dec-12

Strong prior year reserve releases

13

($

m)

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

-15

0

15

30

45

60

75

90

105

120

135

150

165

180

195

210

225

2009 2010 2011 2012 2013

Specialty lines Political risks and contingency Life accident and health Marine Property Reinsurance % of NEP

Whole account reserve strength within our target range

14

Preferred upper end

% a

bo

ve a

ctu

aria

l esti

mate

6.1%

6.7%6.4%

6.7%

7.5% 7.4%

8.2%7.9%

7.4%

6.9%

8.2%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Financial year

Capital management discipline is maintained

• We have returned capital of $579.7m in the past 5 years

• This represents 87% of our post 2009 rights-issue market capitalisation

15

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

50

100

150

200

250

300

350

400

450

500

550

600

2009 2010 2011 2012 2013

5 year capital return track record

Interim and final dividends Special dividend Share buybacks % of market capital

($

m)

Percen

tag

e o

f m

arket

cap

italisati

on

at

20

09

rig

hts

issu

e

(03/04/2009)

Strong capital position

16

Sources of funds Year ended 31 Dec 2013 Year ended 31 Dec 2012

Shareholders funds ($m) 1,338.7 1,204.5

Subordinated debt ($m) 145.0 184.3

Retail bond ($m) 124.5 122.3

Total Sources of Funds 1,608.2 1,511.1

Uses of funds

Lloyd’s underwriting ($m) 935.4 876.0

US Insurance Company ($m) 107.7 107.7

1,043.1 983.7

Surplus ($m) 565.1 527.4

Unavailable surplus ($m) (248.4) (267.1)

Available surplus ($m) 316.7 260.3

Un-utilised banking facility ($m) 225.0 225.0

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Underwriting review

Underwriting review – 2013 achievements

18

• Combined ratio of 84% in line with earlier guidance

• Gross premiums written achieved 4% growth in 2013

• 2013 rate increase on renewals of 1%

• Favourable claims experience including lower than average catastrophe activity

• We continue to reserve consistently, maintaining our surplus over actuarial estimate between 5-10%

Underwriting review

Year Ended 31 Dec 2013 Year Ended 31 Dec 2012

Gross premiums written ($m) 1,970.2 1,895.9

Net premiums written ($m) 1,676.5 1,542.7

Net earned premiums ($m) 1,590.5 1,478.5

Expenses ratio 39% 38%

Claims ratio 45% 53%

Combined ratio 84% 91%

Rate change on renewals 1% 3%

19

Cumulative rate changes since 2001

20

Rate

Ch

an

ge

50%

100%

150%

200%

250%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Underwriting Year

Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All divisions

Underwriting review – 2014 plans

21

• Increasing competitive headwinds in catastrophe-driven, short tail lines

• Specialty lines continues to enjoy a more favourable rating environment

• Continued opportunities for moderate growth:

• Marine division – marine liability, aviation, satellite

• Property division – smaller risks

• Political & contingency division – political risks

• Specialty lines – employment practices liability, cyber

Our vision and strategic priorities

To become, and be recognised as, the highest performing

specialist insurerM

anag

ing

for

Pe

rfo

rman

ce

Bro

ker

Re

lati

on

s

Asi

a P

acif

ic

US

Inn

ova

tio

n a

nd

P

rod

uct

Dev

elo

pm

en

t

Euro

pe

Gro

win

g th

rou

gh

Lloyd

’s

22

The outlook for 2014

• Well positioned in a changing and increasingly competitive market place

• We expect an annualised 2% investment yield going forward

• Premium growth of 5-10% is planned in 2014

• We continue to identify opportunities for profitable growth

23

Questions?

Any questions?

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Appendix

Specialty lines incurred claims remain in line with expectations

Net ultimate premium $m

26

74%

114%

85%

57%

41% 42% 41%45%

62%65%

53% 52%

38%

12%

81 110 53 92 269 323 340 348 426 459 414 443 429 452

0%

20%

40%

60%

80%

100%

120%

140%

1993-

1996

1997-

2000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Net

incu

rred

lo

ss r

ati

o

Underwriting Year

Net incurred loss ratio at each development year

6

5

4

3

2

ULR

Development Year

Locally underwritten US business grows 17% to $451.8m

GWP by major product category

($

m)

0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

170

2009 2010 2011 2012 2013

Architects and Engineers professional indemnity Technology, Media & Business Services Other specialty lines Property

27

28

Zoom on rate changes since 2008

90%

95%

100%

105%

110%

115%

120%

2008 2009 2010 2011 2012 2013

Underwriting Year

Life, accident & health Marine Political risks & contingency PropertySpecialty lines Reinsurance All divisions

Rate

Ch

an

ge

29

Portfolio management achieves consistent combined ratio through market cycles

40

60

80

100

120

140

160

2009 2010 2011 2012 2013

Year

Life accident & health

• 6% increase in gross premiums

• Losses in Australian business, although

renewal secured at significant rate

increase

Year ended 31 December

2013 2012

Gross premiums written ($m) 100.3 94.4

Net premiums written ($m) 96.1 75.3

Net earned premiums ($m) 95.4 80.3


Rate change on renewals (1%) -

Percentage of business led 73% 73%

30

Marine

• Gross premiums increased by 2%

• Combined ratio of 72% continues

recent outstanding performance

• Prior year reserve releases of $47.3m

(2012: $27.7m)


2013 2012





Rate change on renewals (5%) -


31

Political risks and contingency


2013 2012




Claims ratio 5% 12%

Rate change on renewals (1%) (1%)


32

• Growth in gross premiums of 13% due

to development in our political books

• Combined ratio 50% (2012: 52%)

• Strong prior year reserve release of

$39.4m (2012: $33.1m)

Property


2013 2012







33

• Increase in net premiums of 12% with

improved contribution to group result

of $65m

• Rate change on renewals of 3%


Reinsurance

• Increase in gross premiums of 17% in

spite of rate decreases on renewals of

(3%)



2013 2012





Rate change on renewals (3%) 5%


34

Specialty lines

• Positive rate change on renewals

• 3% increase in gross premiums written

• Prior year reserve releases of $46.6m

(2012: $51.5m)


2013 2012







35

Beazley

Economy & Finance

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