Beazley plunges to loss on events payouts

Beazley plunged to an annual loss and paid no dividend as the Lloyd’s of London insurer was hit by $340m (£249m) of losses from the Covid-19 crisis.

The company posted a $50.4m pretax loss for the year to the end of December compared with a $267.7m profit a year earlier The combined ratio jumped to 109% from 100%. A ratio of more than 100% shows an underwriting loss.

The FTSE 250 company said the result was “disappointing” but that it was positive about 2021 and confident about restarting dividends.

The loss was less than half the $106.4m expected in a poll of analysts and Beazley's shares jumped 14.6% to 368p at 08:26 GMT. Gross written premiums, up 19% to $3.56bn, also beat expectations.

Claims related to Covid-19 were mainly for cancelled events in Beazley's contingency book as conferences, pop festivals, sports events and other gatherings were scrapped because of lockdowns. Beazley’s political, accident and contingency division increased its Covid-19 loss estimate by $170m to $240m net of reinsurance as events were cancelled into 2021.

Investment income fell to $188.1m from $263.7m but was better than expected, helping the group result beat forecasts. Beazley also said it expected the combined ratio to drop to the low 90s in 2021 and that prices had hardened in a reset that is continuing.

Chief Executive Andrew Horton said: “Despite the volume of information, data and predictive analytics at our fingertips, we didn't foresee the events of this year. To have ultimately yielded a financial loss has been disappointing.

“We have the capital strength to support our growth plans and look forward to a continued favourable rate environment and expansion of our specialist products globally. I am confident we can return to paying dividends during the course of 2021.”

Horton said Beazley was reviewing its communications and examining its disaster scenarios to judge their ability to respond to new information or an event that plays out worse than initial assumptions.

Shore Capital analyst Alan Devlin, who says 'buy' Beazley shares, said: "The loss is equivalent to a 2% hit to beginning book value, while the stock is c40% lower over the past 12 months. Given the insurance market is in a much better position that it was this time last year, we believe the stock price reaction [decline] is significantly overdone."