Beazley PLC (LON:BEZ) has reported a 64% drop in half-year profit reflecting a plunge in investment income as its bond portfolio was hit by rising US interest rates, although the Lloyds of London insurer still managed to raise its interim dividend.
Posting results for the half-year ended 30 June 2018, the FTSE 250-listed firm saw its pre-tax profit fall to US$57.5mln, down from US$158.7mln a year earlier, with its net investment income dropping to US$8.0mln from US$79.4mln.
READ: Beazley shares edge up on positive first quarter but Numis downgrades on valuation grounds
However, the insurance group saw gross premiums written in the first-half increase by 15% to US$1,323.8mln, up from US$1,149.3mln in 2017, with its combined ratio rising to 95% from 90%.
Andrew Horton, the firm’s chief executive officer, said: "Beazley saw strong top-line growth during the first half of the year, with premiums up 15%. Growth in premiums was strongest in our property division, where rates have risen sharply following the heavy catastrophe losses incurred by insurers and reinsurers last year.
But, he added: “Our investment return in the first half was depressed by the impact of rising US interest rates on our bond portfolio, but we expect the rate rises seen in the first half of the year will help us deliver stronger returns going forward."
Beazley is to pay a first interim dividend of 3.9p, up from the 3.7p paid in 2017.
In a separate statement, Beazeley also announced that Martin Bride, its group finance director has informed the board of his decision to retire in the second quarter of 2019.
The firm said: “In order to ensure an orderly transition and appropriate handover, the Nomination committee will undertake a comprehensive search process to identify a replacement, which will start immediately.”
Numis cuts forecasts, keeps 'hold'
In a note to clients, analysts at Numis Securities pointed out that Beazley's half-year profit before tax (PBT) figure was well below the consensus estimate for US$91mln.
As a result, they said: “Our FY18 PBT forecast falls from US$267m to US$197m to reflect the subdued H1 result.”
However, the analysts added: “We remain positive on the shares due to ongoing value creation from strong business growth as well as increasing earnings power from higher bond yields.”
Numis repeated a ‘hold’ rating on Beazley with a share price target of 610p.
In early morning trading, Beazley shares were 12.7% lower at 486.6p.
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