Beazley US strength ensures first half beats expectations

22nd Jul 2014 08:44

- Pre-tax profit up 62%- Gross written premiums up 1%- Interim dividend up 7%Premium growth and investment returns were both ahead of expectations at specialist insurer Beazley in the first half of the year, despite a more challenging market.The insurer, which leads some of the leading syndicates at Lloyd's of London, lifted pre-tax profits 61.5% to $132.9m as gross written premiums increased by 1% to $1,077.7m. An investment return of $46.8m helped add a further gloss. Chief Executive Andrew Horton said: "Beazley performed well in the first half of the year, in a market that has become steadily more challenging. As we celebrate the tenth anniversary of our US operations, it is encouraging that we are currently seeing many of our best growth opportunities from our US based underwriters."The FTSE 250 group saw more opportunities in smaller business lines - often underwritten locally in the US - than in the large risks business underwritten mainly in London, where competition has often been intense.The expansion into the US over the last decade, in order to diversify from Lloyd's specialities, has seen that business grow 14% to $238.2m in the first six months of 2014. Management expect the US platform to become increasingly important. Specialty lines, the group's largest division at 36% of revenue during the half-year, benefited from the steady recovery of the US economy, with demand for professional liability and management liability insurance increasing. The second largest division, property, benefited from reduced reinsurance costs in the first half, which meant that net premiums rose in spite of a slight fall in gross written premiums. A large influx of new capital from pension funds into the reinsurance market has continued to depress rates, with the reinsurance division, representing 15% of total gross premiums, suffering a 10% fall in rates on renewals. Looking forward, management, which has lifted the interim dividend 7% to 3.1p, expect the first half's trends to carry through to the second. "Our view is that professional liability and management liability lines will be subject to less competition than short tail catastrophe-exposed lines of business," Horton wrote. "Smaller scale risks will offer more attractive opportunities than large scale risks and, in line with this, our US platform should continue to grow while our London market book may contract."Shares in Beazley were up 3.39% to 257.43p at 08:35 on Tuesday. OH