Results for the year ended 31 December 2019 Generic title white Thursday, 6th February 2020 Navigating Change
Disclaimer notice 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. 2
Contents Pages Overview of 2019 4 Financials 9 Performance 10 Investments 11 Reserves 13 Capital 15 Underwriting review 16 Outlook for 2020 20 Appendix 22 3
Generic title white Overview of 2019
Strong investment return and achieved $3bn of premium • Profit before income tax of $267.7m (2018: $76.4m) • Return on equity of 15% (2018: 5%) • Gross premiums written increased by 15% to $3,003.9m (2018: $2,615.3m) • Combined ratio of 100% (2018: 98%) • Rate increase of 6% on renewal portfolio (2018: increase of 3%) • Prior year reserve releases of $9.5m (2018: $115.0m) • Net investment income of $263.7m (2018: $41.1m) • Second interim dividend of 8.2p (2018: 7.8p) taking full year ordinary dividend to 12.3p (2018: 11.7p) 5
Business update • $3bn of gross premiums written during 2019 • Management changes: Anthony Hobkinson succeeded by Beth Diamond as head of claims • Mike Donovan to retire in June 2020 • • Continental European growth of 17%; US growth of 13% • Strategic initiatives: Beazley Digital E-trading platforms have quoted 75,000 risks from 1,000 broker offices in 2019 • Now building digital API connections with brokers • Faster smarter underwriting Projects with four data analytic specialists • • 2019 tailwinds going into next year 6
Cover Premium growth and expense control Gross premiums written ($m) Combined ratio (%) 125% 3,500 100% 3,000 99% 98% 100% 89% 87% 2,500 75% 2,000 58% 62% 59% 48% 48% 1,500 3,003.9 50% 2,615.3 2,343.8 2,195.6 2,080.9 1,000 25% 41% 39% 41% 39% 38% 500 0 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Expense ratio Claims ratio Return on equity (%) Dividends per share (p) 30.0 20% 25.0 15% 20.0 18.4 10.0 15.0 10% 19% 18% 15% 10.0 5% 9% 12.3 11.7 11.1 10.5 5.0 9.9 5% 0.0 0% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Special Interim and second interim 7
Excellent total shareholder return - TSR 23.3% per annum since 31.12.09 1000% 900% 800% 700% Shareholder return (%) 600% 500% 400% 300% 200% 100% 0% 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 NAV target range RF + 10% TSR growth NAV growth (RFR +10% p.a. to (1 month average) (Including dividends) RFR +15% p.a.) * Average NAV growth (including dividends) over the past 10 years of 15.8% 8
Generic title white Financials
Strong growth and profit Year ended Year ended % Increase 31 December 2019 31 December 2018 Gross premiums written ($m) 3,003.9 2,615.3 15% Net premiums written ($m) 2,503.5 2,248.5 11% Net earned premiums ($m) 2,347.0 2,084.6 13% Profit before income tax ($m) 267.7 76.4 250% Claims ratio 62% 59% Expense ratio 38% 39% Combined ratio 100% 98% Earnings per share (pence) 35.0 9.7 Dividend per share (pence) 12.3 11.7 Net assets per share (pence) 235.0 219.6 Net tangible assets per share (pence) 217.3 200.7 10
Strong return on stable investment portfolio 31 December 2019 31 December 2018 Cash and Cash Equivalents, Illiquid Credit Assets, 3.7% Cash and Cash Equivalents, Illiquid Credit Assets, 3.7% 4.8% 6.7% Hedge Funds, 6.0% Hedge Funds , 6.7% Equity Linked funds, 2.8% Equity Linked funds, 1.7% Derivative Asset, 0.4% Senior Secured Loans, 2.6% Other Credit, 0.6% Other Credit, 4.0% Government Government and Quasi and Quasi Government Government 28.0% 32.0% Investment Grade Credit Investment Grade Credit 50.0% 46.3% 11
Portfolio delivered 4.8% return 300.0 6.0% 250.0 5.0% 93.4 Annualised Investment Return 200.0 Investment Return ($m) 4.0% 150.0 3.0% 58.9 100.0 2.0% 170.3 30.4 36.2 14.1 50.0 1.0% 79.4 62.7 33.1 46.8 43.5 8.0 0.0 0.0% 2014 2015 2016 2017 2018 2019 1st half 2nd half Return 12
Overall small reserve release 220.0 15.0% $203.9m 210.0 14.0% 200.0 13.0% 190.0 $180.7m $176.3m 180.0 12.0% 170.0 $115.0m $158.1m 11.0% 160.0 150.0 10.0% 140.0 9.0% 130.0 Reserve Releases $m 120.0 8.0% 110.0 7.0% 100.0 % of NEP 90.0 6.0% 80.0 5.0% 70.0 $9.5m 60.0 4.0% 50.0 3.0% 40.0 30.0 2.0% 20.0 1.0% 10.0 0.0 0.0% -10.0 -1.0% -20.0 -30.0 -2.0% -40.0 -3.0% -50.0 -60.0 -4.0% 2014 2015 2016 2017 2018 2019 Specialty lines CyEx PAC Marine Property Reinsurance % of NEP 13
Whole account reserve strength in the range Surplus in net held reserves 10.0% 8.2% 8.2% 8.2% 7.9% 7.5% 7.4% 7.4% 7.1% % above actuarial estimate 6.9% 6.7% 6.7% 6.8% 6.4% 6.6% 6.1% 5.6% 5.0% 5.0% 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Financial year 14
Updated capital position remains strong • Group capital requirement Year ended Year ended 31 December 2019 31 December 2018 $m $m Lloyd’s economic capital requirement (ECR) 1,828.4 1,594.5 Capital for US insurance companies 203.9 173.4 2,032.3 1,767.9 • Our funding is made up of our own equity (on a Solvency II basis) plus $550.0m of debt and an undrawn banking facility of $225.0m • At 31 December 2019 surplus capital pre dividend of 22% of ECR, including Solvency II adjustments • Increase in BICI capital due to increasing volumes of admitted business • New debt issuance of $300m in September 2019 following redemption of £75.0m retail bond 15
Generic title white Underwriting review
Underwriting review – 2019 achievements • Combined ratio of 100% against backdrop of elevated claims environment • Growth in gross premiums written of 15% to $3,003.9m Growth in 5 out of 6 divisions Double digit growth in specialty lines, cyber & executive risk and political, accident & contingency • Positive rating environment with increase of 6% across the portfolio as a whole • We continue to reserve consistently, maintaining our surplus over actuarial estimate between 5-10% • Active underwriting management continues 17
Cumulative rate changes since 2015 120% 115% 110% 105% Rate change (%) 100% 95% 90% 85% 80% 2015 2016 2017 2018 2019 Underwriting Year Marine Property Specialty Lines CyEx Reinsurance PAC All divisions 18
2020 underwriting outlook • Expect low double digit growth in 2020 • Expect continued lower than average reserve releases in 2020 • Expect rate increases to continue on average across portfolio • Continue to see growth across all platforms 19
Outlook for 2020 • Preparation complete for operating in post Brexit environment • Continue to invest in and leverage digital technology through strategic initiatives • Continue our organic growth and hiring of top talent • Running yield on investments 2.1% at end of 2019 • Continue to support Lloyd’s and its Blueprint One • Sustainability officer to join 20
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Generic title white Appendix
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