Insurer Beazley Plc (BEZ) jumped 5% to 416p as a third quarter update showed growth in premiums ahead of consensus forecasts,
The statement revealed 29% expansion in premiums to $3.27 billion for the first nine months of the year to 30 September.
A POSITIVE RATE ENVIRONMENT
The group has been a key beneficiary of rate increases. Year to date rate increases of 23% across the group, with a 48% rate increases in Cyber and Executive Risk (which is now the largest business), are indicative of the improving rate momentum.
Management is increasing exposure to speciality lines, where rates continue to firm up.
Beazley’s exposure means that it is particularly well positioned to benefit from an improving pricing environment.
However the nature of insurance accounting means that the benefits of rate increases can take several years to be recognised. Consensus earnings estimates may significantly underestimate the impact of the earnings accretive impact of these rises. This view underpins Jefferies 2022-2023 earnings forecast which is 20% ahead of consensus.
CYBER A KEY EARNINGS KICKER
Another appealing facet of Beazley’s business model is its exposure to the most exciting growth opportunity in global insurance: cyber.
Cyber attacks are becoming an increasing concern amongst corporates with management becoming increasingly aware that their insurance cover is inadequate.
Beazley have established themselves as recognised experts in the cyber insurance market. Beazley Breach Response is the group’s signature product and protects clients from malware, ransomware and other cyber threats.
Shore Capital insurance analyst Abid Hussain said: ‘In terms of performance the stock is up 9% year-to-date versus peers down by 10-30%, reflecting lower natural catastrophe exposure and higher growth in cyber risk, capital adequacy and ability to sustain growth.’
