Beazley PLC (LSE:BEZ), the FTSE 100-listed Lloyd's of London insurer, reports on trading on Friday with its shares having recently regained their pre-pandemic levels with a 35% rise over the past year.
The manager of seven Lloyd’s syndicates, specialising in areas ranging from cybercrime and executive risk, to marine, political risk, catastrophe and property, saw a sharp fall when Ukraine was invaded but this was quickly erased.
Although non-life Insurance stocks are not the easiest to research, given that the nature of the business means they can be prey to sudden shocks and unexpected events, there are a number of factors behind its performance, said analysts Russ Mould and Danni Hewson at AJ Bell.
The expected losses from Russia and Ukraine proved to be well contained, net of reinsurance, at around US$50mln while Hurricane Ian cost around US$120mln, also net of reinsurance.
"The insurer’s investment portfolio is a potential beneficiary of rising bond yields, especially at the short end of the yield curve, although unrealised (paper) losses on bond holdings could cloud that picture in the near term," the analysts said.
"At a time when investors are worried about inflation, Beazley is proving that it can put up its prices. Heavy losses for less disciplined, and less skilful, underwriters mean capacity has come out of the market, to strengthen the hand of those who remain."
The company raised over US$400mln in 2022 so could rake in additional premiums for business covering property and cybersecurity in particular to take advantage of the firm pricing environment.
Last year saw a 14% increase in gross premiums written, which Mould and Hewson said will lay the groundwork for growth in future profits and net asset value in 2023 and beyond.
Consensus forecasts from the City are for pre-tax profit to soar to US$896mln in 2023 from US$191mln last year as Russia, Hurricane Ian and mark-to-market losses on bond holdings cut profits by US$350mln.
By 2024 they are forecast to hit US$1bn, although to paraphrase the Stingray theme song, anything could happen in the next year and a half.
For the past quarter, Beazley should share gross premiums written (last year US$1.2bn and for the full year, analysts are looking for a 15% increase to US$6.1bn), the rate increases on renewals (14% in 2022 and 24% in 2021), the year-to-date investment return (-2% last year for a US$180mln loss), and the combined ratio so far and for the full year (89% last year), with any figure before 100% pointing to profit.
At the results in early Mach, chief executive Adrian Cox said: "we expect to deliver a high-80s combined ratio for 2023 assuming average claims experience. Although significant geopolitical headwinds remain, I believe we are in an excellent position to sustainably grow our company".