Beazley delivers record profit of $1.25 billion.
London, 7 March 2024
Beazley plc results for period ended 31 December 2023
• Profit before tax increased to $1,254.4m (2022: $584.0m)
• Insurance written premiums increased to $5,601.4m (2022: $5,246.3m)
• Net insurance written premiums increased to $4,696.2m (2022: $3,772.4m)
• Undiscounted combined ratio of 74% (2022: 82%), Discounted combined ratio of 71% (2022: 79%)
• Return on equity of 30% (2022: 19%)
• High single digit gross IWP growth for FY 2024
• Low 80s undiscounted combined ratio for FY 2024
• Interim dividend of 14.2p
• Launch of a share buyback programme of up to $325m
• Barbara Plucnar Jensen has been appointed as Beazley's Chief Financial Officer (CFO), effective 1 May 2024
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| Year ended 31 December 2023 | Year ended 31 December 2022 | % movement |
| Insurance Written Premiums ($m) | 5,601.4 | 5,246.3 | 7% |
| Net Insurance Written Premiums ($m) | 4,696.2 | 3,772.4 | 24% |
| Insurance Service Result ($m) | 1,251.0 | 822.9 | 52% |
| Profit before tax ($m) | 1,254.4 | 584.0 | 115% |
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| Earnings per share (pence) | 124.8 | 63.4 | 97% |
| Net assets per share (pence) | 468.6 | 364.2 | 29% |
| Net tangible assets per share (pence) | 448.7 | 348.3 | 29% |
Adrian Cox, Chief Executive Officer, said:
"I am delighted with our record $1.25 billion profit which enables us to launch a share buyback programme of up to $325m. The strength of Beazley's expertise-led underwriting and claims management was the driver of the excellent combined ratio we achieved in 2023. We believe that with increased demand for insurance that the accelerating risk environment is creating, as well as an adequate rating environment, we are well positioned to continue successfully growing our business and I remain confident that Beazley will see strong, long-term performance.
I am pleased that Barbara Plucnar Jensen will become our CFO on 1 May 2024, the depth and breadth of her experience, together with her leadership style, will be both a great cultural fit and an asset to Beazley."
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Note to editors:
Beazley plc (BEZ.L), is the parent company of specialist insurance businesses with operations in Europe, North America, Latin America and Asia. Beazley manages seven Lloyd's syndicates and, in 2023, underwrote gross premiums worldwide of $5,601.4million. All Lloyd's syndicates are rated A by A.M. Best.
Beazley's underwriters in the United States focus on writing a range of specialist insurance products. In the admitted market, coverage is provided by Beazley Insurance Company, Inc., an A.M. Best A rated carrier licensed in all 50 states. In the surplus lines market, coverage is provided by the Beazley syndicates at Lloyd's.
Beazley's European insurance company, Beazley Insurance dac, is regulated by the Central Bank of Ireland and is A rated by A.M. Best and A+ by Fitch.
Beazley is a market leader in many of its chosen lines, which include Professional Indemnity, Cyber Liability, Property, Marine, Reinsurance, Accident and Life, and Political Risks and Contingency Business.
For more information please go to: www.beazley.com
Statement of the Chair
Beazley delivered a record pre-tax profit in 2023 of $1,254.4m representing an increase of 115% on the previous year (2022: $584.0m). This equated to a return on equity of 30% (2022: 19%) and earnings per share of 154.7c (2022: 79.0c). Our combined ratio reflected an excellent insurance service result as it improved to 71% (2022: 79%) and 74% on an undiscounted basis (2022: 82%). These results enable the Board to commit to a share buyback programme of up to $325m. This is a powerful symbol of our confidence in the Company, its business model and the future. It reflects hard work over the last 12 months and I am pleased that we have repaid the confidence that you, our shareholders, place in us to deliver.
I was proud to take up the role of Chair of the Board of Directors in April 2023, and I've been impressed by the teams whom I have worked with across Beazley. Our colleagues demonstrate intellectual acuity, managerial agility and are committed to our values: Being Bold, Striving for Better and Doing the Right Thing. I am sure that, like me, the 545 other new colleagues we welcomed during 2023 will have recognised these values in their everyday experience. It is this that drives our competitive difference, enriching all our stakeholders.
Beazley aims to be the leading global sustainable specialty insurer. I am pleased to say that 2023 saw us make significant strides forward to deliver that.
Leading - Our track record is of strong financial results, which deliver excellent returns for our investors and shareholders, through insurance solutions that are valued by our clients and brokers.
Being a leader means both driving things forward and stepping back when market changes dictate. Leading is not easy, as the challenges in the cyber market this year have shown; but when systemic cyber risk needed to be addressed, Beazley was willing to 'stand up' and lead market thinking.
Global - We are a global company operating from 25 offices around the world. Through our wholesale platforms based in London, Miami and Singapore, we underwrite 53% of our Group premium. North America and European platforms contribute 40% and 7% respectively. In 2023, we further strengthened our global outreach with the appointment of Fred Kleiterp to lead our future strategic vision for Europe, plus the establishment of our onshore excess and surplus (E&S) carrier in the US, which commenced underwriting in January 2024.
Sustainable - We continue to manage the risk of a changing climate; harnessed to the real opportunities which energy transition will bring. I was pleased that we were able to present more detail on this at our Capital Markets' Day in late November 2023.
Our focus is on how, by better understanding the underlying risks ourselves, we can support clients to adapt in ways that will not only reduce their business risks but will actively protect our environment from the worst impacts of climate change.
Specialty - As a specialty insurer, our business adds most value where things are complex, volatile or changing. Evidence of our commercial prowess is seen in the fact that we lead 87% of the business that our firm underwrites.
For instance, in the last 18 months the property insurance market has understood that inflationary pressures, demographics and climate change mean that as a class of insurance it should no longer be commoditised. Instead property insurance requires considerable underwriting skill; a reality that since the start of 2023 has been reflected in pricing; terms and conditions. This change has seen us lean into property with Property Risks premiums increasing 64% year on year. We are grateful to our shareholders who enabled us to seize this opportunity, by supporting our November 2022 capital raise.
Geopolitical turmoil and economic uncertainty also highlights the value of our specialist underwriting skills. In our MAP Risks division, which includes business such as marine, aviation, contingency and political risk, our team of expert underwriters add considerable value to our brokers and their clients, often underwriting policies for extremely difficult environments such as areas of conflict in Ukraine or the Middle East, or policies for the use of complex technology solutions, including putting satellites into space.
Insurer - We have built a global underwriting model which allows us to capitalise on opportunities or pause when markets become unprofitable. This protects both our strategic growth agenda and the interests of our clients.
We have an innovative, disciplined, underwriting led approach to developing products to solve real world problems. We combine this with a 'claims ecosystem' that consistently wins praise. In 2023 we were also proud to win the Gracechurch award for claims excellence for the eighth time in a row.
IFRS 17
This report marks the culmination of the first year of reporting under IFRS 17. The Board was kept fully informed of the progress of implementation throughout the year via regular updates and interactions through its Audit Committee. It was clear throughout, that it has been a challenging process and I would like to thank everyone across the business for their tireless efforts to ensure the successful introduction of the new accounting standard.
Beazley is well governed
On 1 March 2024 we welcomed Carolyn Johnson as Chair of our growing US operations and to the Beazley Plc Board. Her appointment to the Board is designed to strengthen our corporate structure with diverse and industry experienced colleagues of her calibre.
Christine LaSala has signalled her intent to step down from the Board, where she is the Senior Independent Non-Executive Director, at the conclusion of the 2024 AGM. I would like to thank Christine for her valuable input into the Company and the Board over her tenure, perhaps most notably when she stepped up as Interim Chair for six months in late 2022.
Capital management
Our 2023 interim results presentation in September set out in greater detail how we think about and plan our capital management. This was a clear statement of our intent to protect your company by maintaining a prudent capital surplus above 170% of the Solvency Capital Ratio. We will manage key underwriting risks' exposure to equity (for example, natural catastrophe risk to a 1:250 event) and consideration of the prospects for profitable deployment of capital generated into the Company's future. These considerations will be balanced versus appropriate returns of excess capital to shareholders.
Capital return
With this approach to capital management in mind I am pleased to say that the Board has proposed an ordinary interim dividend of 14.2p for the full year, we are also pleased to announce a share buyback programme of up to $325m.
Risky business
We are an ambitious company that will deliver what we promise. This is at the core of the Company's commit and deliver philosophy, based on living up to our values and is the source of our competitive advantage. It enables our clients to explore, create and build their businesses, whilst positioning Beazley for success as a leader in our market.
I want to thank our clients, brokers and shareholders for their support over the last 12 months. The strength of our financial result reflects intelligent navigation of the risky world in which we all live and ensures we are here to support our clients and brokers in the future. As a leading, global, sustainable, specialty insurer we are in the risk business, but as shown this year, with risk comes reward.
Chief Executive Officer's statement
I am pleased to be reporting a record pre-tax profit of $1,254.4m (2022: $584.0m), a strong investment return of 4.9% (2022: (2.1)%) and an impressive combined ratio of 71% for 2023 (2022: 79%). Our results demonstrate that the clarity of our strategy across platforms, products and geographies not only gives good access to risk but when combined with disciplined underwriting and a responsive claims infrastructure, delivers sustainable profits for all our stakeholders.
A year of achievement
Beazley achieved its goals in 2023. We successfully deployed capital across the business to capture opportunities and our insurance written premiums (IWP) now stands at $5,601.4m (2022: $5,246.3m). Our net IWP growth of 24% gives a strong indication of the Company's trajectory during 2023 and I am pleased we've achieved this despite several headwinds. Property Risks has had a particularly successful year with premiums increasing by 64%, taking IWP to $1,351.9m. The key strengths that have led to this positive result are our expertise-led, specialty underwriting and our knowledge based, client focused claims service. I would also like to thank our trading partners, our brokers and our clients across the world for their support of our business.
Access to high quality risk is delivered via our straightforward and clear three platform strategy which brings together Wholesale via Lloyd's and insurance companies in North America and Europe. In 2023 this strategy was further enhanced with the establishment of our dedicated Excess and Surplus (E&S) carrier in the US, which will open up access to business that is currently often only available to onshore carriers.
The appointment in June 2023 of Fred Kleiterp as European General Manager has brought additional focus and energy to our underwriting in the region and we look forward to seeing the roll out of more of the products and services we are known for across our platform in Europe.
There can hardly have been a more important moment for Beazley to stand with our clients and deliver specialist insurance risk management and capital as they address the challenges of climate change, rapidly advancing digitisation and a sea change in geopolitics. On all these key issues, Beazley has made an important contribution during the last 12 months.
It was also great to see our investments team complement the underwriting result, delivering an investment return of 4.9% (2022: loss of 2.1%). While we are primarily an insurance company, with assets under management in excess of $10bn, generating returns from our portfolio is a key focus for us and it is pleasing to see the effort made in this area bearing fruits.
Underwriting for climate change
We moved at speed to be at the forefront of the market as property insurers adjusted to the impact that climate change is bringing and which we believe will create a long term opportunity for Beazley, particularly in North America. We were able to do this because of the hard work done on risk selection, property valuations and, importantly, in building a climate risk framework. This framework seeks to engage with clients to understand, not just the impact of climate risk today, but how it is evolving and changing.
This work is part of an ongoing journey to assess a risk that is not following a linear path of development and to also seek out the opportunities that the energy transition will bring.
As a specialty insurer we need to support businesses to move beyond fossil fuels and during 2023 this saw us ramp up our renewable energy underwriting capabilities and invest in understanding how we can add further value to the carbon capture and storage industry.
Leading on cyber
To meet growing demand from clients for cyber insurance we believe it is vital for the industry to have access to a deep pool of capital which will allow it to hedge accumulation risk. We were therefore pleased, in January 2023, to be the first insurance company to launch a cyber catastrophe bond and to go further as the year turned with the launch of our first publicly traded cyber catastrophe bond. We are also seeing that broad market consensus is being achieved around the complex subject of cyber war, bringing clarity of purpose to the cover which is to the benefit of all.
Uncertainty calls for specialty
It is clear to us all that the geopolitical certainties that persisted for much of the last 80 years have shifted and we are in a challenging phase while new structures and norms take hold. Our expertise in understanding global trade flows, transportation and political uncertainty is actively helping support clients as they navigate through.
Agile cycle management
We are able to deliver consistent profitability because we operate a robust and effective approach to managing the insurance cycle. In 2023 this was demonstrated by our strong commitment to the Property Risks segment, where a change in the rating environment offered significant opportunity. In contrast, our approach to the directors and officers (D&O) market is suffering from excessive competition and is where we took the decision to stand back. This is never easy and I want to commend our Specialty Risks team for their professionalism and committed underwriting discipline, noting that this has allowed them space to creatively explore new and growing niches in the liability market.
A team that delivers
I want to thank our outstanding team across disciplines and geographies whose hard work and flexibility this year has helped deliver our record profit. Their commitment to living our values of Being Bold, Striving for Better and Doing the Right Thing, whilst working alongside our broker partners and supporting clients, is a key differentiator for Beazley and one that ensures strong retention across the business.
While the contribution of the entire team underpins our success, I would like to specifically mention some important changes that have happened in our senior team during the year. Brenna Westinghouse was promoted to Head of Strategy and, in January 2024, we welcomed Liz Ashford as Chief People Officer and Head of ESG.
Finally, I am looking forward to working with our new Chief Financial Officer (CFO) Barbara Plucnar Jensen, who will join Beazley on 1 May 2024. Barbara was, until late 2023, Group CFO at Tryg, the largest non-life insurer in Scandinavia with a top 3 market position across Denmark, Norway, Sweden. Barbara comes with over 25 years of experience in the financial services industry. Her depth and breadth of experience, together with her leadership style, will be both a great cultural fit and an asset to Beazley.
Responsibility
Being a Responsible Business is important to us and, in 2023, we reviewed our approach to further embedding ESG at Beazley. This work will inform our next round of three year target setting which is focused on maintaining the diversity of our workforce where we already see significant progress (45% senior women and 27% People of Colour) and in reducing our contribution to carbon emissions which today are 47% lower compared to 2019 levels when normalised per FTE.
I am pleased that our ESG Consortium, two years since founding, is building positive momentum and from 1 January 2024 has moved fully to syndicate 5623. It is also exploring how it can offer capacity via our North American and European insurance companies, as client demand for ESG solutions continues to develop.
Our Responsible Business efforts extend to our investment portfolio and our Impact Investment Fund made a positive contribution in 2023, by becoming a founding investor of the Big Issue Social Impact Debt Fund, which will contribute to housing, care and social infrastructure projects in the UK.
The work we have already concluded in the ESG space, together with the continuing effort to include climate change risk in our underwriting, will inform the development of our Net Zero Transition plan which we will deliver during 2024.
Harnessing AI
2023 saw a leap forward in the capability of Artificial Intelligence (AI) and in particular, Generative AI. We believe that this technology will enable the simplification of manual processes, improve decision making and ultimately improve product and service offerings to brokers and clients.
We are continuing to expand our use of AI, including piloting Generative AI in several areas of our business, to help improve speed, accuracy and to reduce risk.
AI is opening up exciting new horizons where our expert teams will increasingly be able to make faster and more effective decisions that will enrich their work by reducing administrative burdens. It will also improve our ability to grow, as the technology takes up the operational strain that an expanding business has historically created.
Getting on with the job
Recent years have seen many external challenges from pandemic to war and the impact of climate change. At Beazley we have been adapting to change, ensuring our underwriting contemplates the evolving risk landscape, increasing our own resilience and responding to customer needs. As we look ahead, we continue to operate with one eye on emerging threats and opportunities, be that AI technology or changes in the legal environment, while the other is firmly set on ensuring access for clients and brokers to our specialty products and services. Our expectation for 2024 is for high single digit gross IWP growth and an undiscounted combined ratio in line with our initial guidance for 2023 of low 80s.
We believe that by continuing to focus on what we do best, underwriting and managing specialty insurance risk, we will fulfil our purpose of enabling our stakeholders to explore, create and build and that this approach will deliver the ongoing profitability that our investors rightly expect of us.
Chief Underwriting Officer's report
I am proud of our underwriting teams and their success in 2023. They have shown agility and insight in the delivery of risk management expertise to our clients, whilst retaining a laser like focus on underwriting profitability. As a result, we have delivered an excellent Insurance Service Result of $1,251.0m, an increase of 52% on the previous year (2022: $822.9m) and a combined ratio of 71% (2022: 79%).
This positive result is based on long-term investment into understanding how risk is evolving so we can seize underwriting opportunities as they develop and protect our clients from emerging threats. These strong results are also testament to the hand in glove partnership our underwriters have with our award winning claims team, ensuring we have some of the best underwriting intelligence available in the market.
2023 saw us continue our work to get under the skin of climate change risk as our five-pillar climate risk framework began to be embedded into underwriting. Meanwhile in our Cyber Risks business we presented our probabilistic modelling framework externally.
Our underwriting
Our Property Risks team has had a standout year. The investment they made during the soft cycle of the market paid off as the rating environment improved, leading to a 64% increase in IWP to $1,351.9m (2022: $823.2m). We expect this growth to continue as we head into 2024, although not at the same pace as we saw in 2023.
Innovation underwriting moved into the business as usual phase as it became formally embedded within the wider underwriting function and produced two new parametric property underwriting products, focused on the risks associated with severe convective storms in the US.
Generative AI may have hit the headlines this year, but for some time we have been actively looking across our business to better understand how AI impacts the risk environment and where the potential for loss might be. In this effort the work of our claims team has proved invaluable in identifying how the risk is emerging and how it is impacting the claims and litigation environment, ensuring we are able to effectively respond as the adoption of the technology evolves.
In our Cyber Risks division, our focus is always on understanding risk to improve our underwriting and protect against emerging threats. The substantial rate increases of 2021 and early 2022 moderated during 2023 and we expect this trend to be maintained.
We are confident that with our cyber ecosystem in place, which provides comprehensive support to clients before, during and after a cyber attack, the environment remains attractive and demand-led growth will continue, notably across our international business and particularly in Europe where we see strong growth opportunities.
Active cycle management is at the heart of our underwriting and while the current conditions mean we are leaning into property, in contrast we remain cautious in the D&O market. Here rates remain very competitive and instead we are rebalancing our Specialty Risk business by focusing on niche classes.
Geopolitical uncertainty looks here to stay at least looking ahead for the medium term and this is where our MAP Risks division has a key role to play in helping to keep businesses investing and trade moving. The work of our Marine team in ensuring grain corridors in Ukraine remain open, or our Political Risks underwriters' support for clients' overseas operations in unstable parts of the world, is critical to this effort.
We continue to refine and improve our product sets across the globe. Through a focused roll out this year we have expanded existing products such as virtual care, product recall and media liability to new geographies, with Europe as a region where we saw a step change in our underwriting and which I expect to see develop further into 2024.
Our goal is to support business so that they can thrive and to achieve this we seek to stay ahead of where risk is moving and invest in developing our capabilities to help clients, whilst retaining our focus on delivering positive returns for our investors. I believe we lived up to this promise during 2023 and I look forward to continuing on this path in 2024.
Insurance written premiums
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| 2023 | 2022 |
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| $m | $m |
| Cyber Risks | 1,184.3 | 1,157.8 |
| Digital | 227.5 | 231.7 |
| MAP Risks | 964.3 | 1,115.2 |
| Property Risks | 1,351.9 | 823.2 |
| Specialty Risks | 1,873.4 | 1,918.4 |
| Total | 5,601.4 | 5,246.3 |
Net Insurance written premiums
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| 2023 | 2022 |
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| $m | $m |
| Cyber Risks | 912.9 | 839.5 |
| Digital | 202.4 | 190.6 |
| MAP Risks | 851.6 | 780.2 |
| Property Risks | 1,157.3 | 603.0 |
| Specialty Risks | 1,572.0 | 1,359.1 |
| Total | 4,696.2 | 3,772.4 |
Cyber Risks
Our Cyber Risks team delivered IWP of $1,184.3m, (2022: $1,157.8m). The rating spike experienced in the previous two years stabilised and with increased stability competition entered, particularly in the US market, which led to our growth predominantly coming from a strong performance by our international business, particularly in Europe.
2023 was also the moment when the market began to mature and address the challenges of systemic cyber risk, namely the possibility that a single cyber event or incident might trigger widespread failures and harmful impacts across multiple entities, sectors, or countries. We took a leading position in this with the robust approach we have championed, thus succeeding in bringing much needed clarity to the existing war exclusions. As we enter 2024, we are seeing broad market consensus.
The innovations Cyber Risks has made over the last 12 months in the development of cyber catastrophe bonds and in addressing systemic or catastrophic cyber risk, have been made possible by the team's ongoing work on modelling cyber risk. We shared our approach to modelling catastrophic cyber with the market during 2023, detailing our move to a probabilistic modelling framework which is underpinned by third party data and our own models to give greater insight into cyber catastrophe scenarios.
Looking forward there is growing business demand for cyber insurance and we are pleased to see that the insurance and capital markets are responding by providing the additional capacity the market needs to reach its potential. In particular we see an opportunity to grow among businesses with revenues below $250m, where our expertise and experience of managing cyber risk adds real value to their operations.
Ransomware has not gone away and while we have not seen any significant uptick in our book at the point of reporting, there is evidence in other parts of the market that it is increasing in frequency. We believe we will be able to navigate an upswing given both the improvements we made in the risk selection of our book and the investment we continue to make into threat assessment and risk mitigation strategies.
Digital
Digital's segment result of $59.4m (2022: $31.1m), reflects our underwriting discipline together with the growing distribution of our increasingly broad product suite. IWP was $227.5m (2022: $231.7m) with a combined ratio of 68% (2022: 76%).
Digital, or our Small Business division, had a successful year as we increased the number of products we brought to market. We delivered a profit by maintaining our focus on underwriting discipline, resulting in the rate of growth being broadly level with the previous year. We are pleased with the reception of our high quality service offering and claims handling received from brokers and the way that new products and digital access points are welcomed by the market.
We are building our Small Business proposition for the long-term, focused on underwriting discipline and client service. This approach is valued by brokers, when making a claim or in needing help with securing cover for their clients. Brokers increasingly are seeking cyber cover that includes cyber breach response and our experience in this area is rapidly becoming a key differentiator for us.
MAP Risks
The MAP Risks division delivered a profitable performance based on strong demand for our specialist product set and the market leading expertise of our team. With a combined ratio of 79% (2022: 78%), IWP for the division decreased by 14% to $964.3m (2022: $1,115.2m) due to the one-off effect of portfolio underwriting premium being directly written by external syndicate 5623 rather than being fronted by the Group.
Geopolitical uncertainty continued through 2023, creating a heightened risk environment and increasing demand for
insurance across our terrorism, political risk, contingency, marine and aviation war and cargo lines of business.
2023 saw us recruit a new Head of Hull and War as part of our Marine underwriting business. Our Marine business is a key component in the smooth functioning of global trade and in our cargo account, which is three times larger than it was five years ago, increasing trade activity following the pandemic and challenges in supply chains have been important drivers of demand, while the team's focus on the fundamentals has delivered sustainable profits.
Our Contingency business continued to benefit from increased demand for events post pandemic. We had expected, after an increase in demand for events immediately after the
pandemic in 2022, that 2023 would see a fall back to the typical level of demand that we experienced before the pandemic. It has been pleasing to see that the world continues to be excited by the prospect of attending a face-to-face event.
Our ESG Consortium is entering the business as usual phase of development, having successfully launched the additional capacity model for businesses that score highly against ESG criteria in 2022. From 1 January 2024 the consortium will continue its growth as part of syndicate 5623.
Energy demand and use continues to grow alongside an increasing pace of transition away from fossil fuels. Our
energy team is actively investing in the fast expanding renewable sector and with the hire of a new Head of Renewable Energy.
Property Risks
Property Risks had a highly successful year as we leant into the opportunity that the turn in the market rating environment offered. As a result, we increased our IWP to $1,351.9m from $823.2m the previous year, or 64% growth and a rate increase of 22%.
This success resulted from hard work over the prior two years, as we stepped back from growth during a period where market conditions were unfavourable. This meant that throughout 2023 we have been able to take up the opportunity in the property market and were rewarded with strong growth in both insurance and reinsurance (treaty) with the property market in the US the significant driver.
Beyond substantial rate increases, we have tightened terms and conditions and raised attachment points. Importantly, we have ensured that property values have increased to reflect higher inflation.
All of the team's underwriting in the US is done in the specialist E&S lines market. Over the last year this market has proven to be an excellent environment for us to operate in as commercial property underwriting has become increasingly complex and volatile.
Against this backdrop, many brokers have shifted their client's non-standard property programs to this market, which can pivot and adapt to fast changing conditions more effectively than the admitted market, offering access to new clients and business that would previously have been unavailable.
Our reinsurance (treaty) business also had a successful year with significant rate increases achieved at higher attachment points. As we expected, the US segment of our business experienced the strongest market rating environment.
We have seized the potential of this change in conditions across the property market with enthusiasm.
Specialty Risks
2023 saw the Specialty Risks team continue the diversification of our book by growing strongly across niche specialist lines while managing through a softening market in D&O. This hard work has paid off, leaving the book relatively flat overall with IWP of $1,873.4m (2022: $1,918.4m).
The headwinds in D&O - pricing pressure and high competition - saw us actively pull back from risks we considered unsustainably priced and as a result, D&O reduced from 35% of the division's total IWP to less than 30%. We remain committed to our position in the D&O market, supporting our clients, but have made tough decisions to pull back when pricing is not adequate. We are actively investing in our other product lines where the reward better reflects the risk.
Across the board we have over 27 trading teams in Specialty Risks with the vast majority seeing positive market conditions. We have ramped up our niches and growing areas and this has delivered through 2023.
Looking ahead, we are hopeful that the market will begin to return to equilibrium in D&O during 2024. We will continue to build our brand in Europe and Asia Pacific, ensuring that our diverse business continues to prosper around the globe.
Cumulative Rate Change
|
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Cyber Risks | 100% | 100% | 108% | 203% | 285% | 271% |
| Digital | 100% | 103% | 103% | 112% | 135% | 136% |
| MAP Risks | 100% | 106% | 118% | 129% | 135% | 143% |
| Property Risks | 100% | 109% | 125% | 138% | 153% | 187% |
| Specialty Risks | 100% | 108% | 130% | 145% | 147% | 146% |
| All divisions | 100% | 106% | 122% | 151% | 172% | 179% |
Performance by Division
2023
|
| Cyber Risks | Digital | MAP Risks | Property Risks | Specialty Risks |
| Insurance written premiums ($m) | 1,184.3 | 227.5 | 964.3 | 1,351.9 | 1,873.4 |
| Net insurance written premiums ($m) | 912.9 | 202.4 | 851.6 | 1,157.3 | 1,572.0 |
| Segment result ($m) | 307.4 | 59.4 | 158.2 | 354.7 | 415.3 |
| Claims ratio | 42% | 23% | 41% | 35% | 42% |
| Expense ratio | 26% | 45% | 38% | 30% | 31% |
| Combined ratio | 68% | 68% | 79% | 65% | 73% |
| Undiscounted combined ratio | 72% | 70% | 79% | 67% | 78% |
| Rate change | (5)% | 1% | 6% | 22% | (1)% |
Performance by Division
2022
|
| Cyber Risks | Digital | MAP Risks | Property Risks | Specialty Risks |
| Insurance written premiums ($m) | 1,157.8 | 231.7 | 1,115.2 | 823.2 | 1,918.4 |
| Net insurance written premiums ($m) | 839.5 | 190.6 | 780.2 | 603.0 | 1,359.1 |
| Segment result ($m) | 230.0 | 31.1 | 124.9 | 1.7 | 235.7 |
| Claims ratio | 44% | 40% | 39% | 60% | 49% |
| Expense ratio | 23% | 36% | 39% | 34% | 31% |
| Combined ratio | 67% | 76% | 78% | 94% | 80% |
| Undiscounted combined ratio | 68% | 78% | 80% | 95% | 86% |
| Rate change | 40% | 21% | 4% | 11% | 2% |
Financial review
Group Performance
Beazley delivered a profit before tax in 2023 of $1,254.4m (2022: $584.0m), an excellent result consisting of a combined ratio of 71% (2022: 79%) and investment return of 4.9% (2022: (2.1)%).
Result
Profit before tax in 2023 was $1,254.4m (2022: $584.0m). This was achieved through a substantial insurance service result of $1,251.0m (2022: $822.9m) driven by a combined ratio of 71% (2022: 79%). This was complemented by an investment result of $480.2m (2022: ($179.7m)) which represents an investment return of 4.9% (2022: (2.1%)).
Premiums
Insurance written premiums increased by 7% in 2023 to $5,601.4m (2022: $5,246.3m). Rates on renewal business on average increased by 4% across the portfolio (2022: increased by 14%). Strong growth was seen in our Property Risks division, where we have taken advantage of the improving underwriting conditions, with growth of 64%.
Our net insurance written premiums increased by 24% in 2023 to $4,696.2m (2022: $3,772.4m). The higher growth in net premium compared to gross is primarily due to two reasons: Firstly, the change in relationship with syndicate 5623 for our Portfolio Underwriting business. In 2022 this was underwritten by the Group and reinsured out to syndicate 5623, however, from 2023, syndicate 5623 directly underwrote this business as a standalone entity. Secondly, we have actively purchased less proportional reinsurance within our Cyber Risks and Specialty Risks divisions, further increasing our net insurance written premiums.
Statement of profit or loss
|
| 2023 | 2022 |
|
| $m | $m |
| Insurance service result | 1,251.0 | 822.9 |
| Net investment income/(loss) | 480.2 | (179.7) |
| Net insurance finance (expense)/income | (153.4) | 183.0 |
| Net insurance and financial result | 1,577.8 | 826.2 |
| Other income | 78.5 | 32.1 |
| Operating expenses | (365.8) | (217.6) |
| Foreign exchange gains/(losses) | 4.5 | (17.3) |
| Finance costs | (40.6) | (39.4) |
| Profit before tax | 1,254.4 | 584.0 |
| Income tax expense | (227.6) | (100.7) |
| Profit after tax | 1,026.8 | 483.3 |
|
|
|
|
| Claims ratio | 39% | 47% |
| Expense ratio | 32% | 32% |
| Combined ratio | 71% | 79% |
|
|
|
|
| Rate increase | 4% | 14% |
| Investment return | 4.9% | (2.1)% |
Insurance service result
The Group saw strong growth in the insurance service result of 52% leading to a total of $1,251.0m (2022: $822.9m). Insurance revenue of $5,442.4m (2022: $4,848.4m), a 12% increase, reflected the growth of the business during 2023. Insurance service expense reduced year on year by $421.4m. 2023 was a benign year for insured catastrophes and this led to an improved claims experience for the Group in 2023 leading to a claims ratio of 39% (2022: 47%). Directly attributable expenses increased by 12% in line with the growth of the business.
The allocation of reinsurance premium increased to $1,127.3m (2022: $965.4m) while amounts recoverable from reinsurers for incurred claims decreased to $528.5m (2022: $953.9m). As prior year gross claims estimates have decreased, a reduction in the amounts recoverable from reinsurers and a benign year for catastrophes has led to lower recoveries than the prior year. Reinsurers share of directly attributable expenses has increased to $3.6m (2022: $1.7m).
Combined ratio
The combined ratio of an insurance company is a measure of its performance from transacting (re)insurance contracts. Under IFRS 17 this represents the ratio of its insurance service expense less directly attributable expenses and amounts recoverable from reinsurers for incurred claims, to the total insurance revenue less allocation of reinsurance premium. This is all on a discounted basis and excludes operating expenses which are non-directly attributable and excluded from the insurance service result.
A combined ratio under 100% indicates a profit on the insurance service result. Consistent delivery of operating performance across the market cycle is clearly a key objective for an insurer. Beazley's combined ratio improved in 2023 to 71% (2022: 79%) primarily driven by a much improved claims experience. For further information please see the APMs section.
Other income
Other income grew by 145% to $78.5m (2022: $32.1m), reflecting increases in profit commissions and general commissions received from syndicate 623 compared to the prior year.
Reserve confidence level
Beazley has a consistent reserving philosophy, with initial reserves being set to include a risk adjustment that may be released over time as and when any uncertainty reduces.
With the move to IFRS 17 from IFRS 4, we took the opportunity to revisit our reserving strategy. Under IFRS 17, we have moved to a preferred confidence level range of between the 80th and 90th percentile. This percentile indicates the strength of reserves held across the best estimate and risk adjustment for non-financial risk. IFRS 17 outlines the key principles in order to calculate the risk adjustment for non-financial risk. There are two principles that are particularly important, and thus worth highlighting. First, the level needs to be consistent with how risk is managed, contracts are priced and the portfolios are managed. The second principle states that the risk adjustment level should make the firm neutral to running off the obligations or selling them.
At the end of 2023, our confidence level was at the 85th percentile (2022: 85th percentile).
Past service development
Net past service development saw a net release of $109.8m in 2023 (2022: net strengthening of $54.9m) which represented (2.5)% (2022: 1.4%) of insurance revenue less allocation of reinsurance premiums. Property shows the largest release of $78.0m (2022: $22.4m) due to favourable attritional claims experience on the older underwriting years, improvement in past catastrophe estimates along with the expiry of risk across the more recent underwriting years. The $28.0m (2022: $4.5m) release on Digital is driven by a reduction in estimates on specific losses, favourable attritional claims experience on the cyber business, along with expiry of risk. Cyber Risks has seen a deterioration of $9.9m (2022: $0.9m) due to the adverse development arising from cyber liability claims partially offset by benign claims experience on recent underwriting years. Specialty Risks shows a release of $8.1m (2022: strengthening of $65.2m) driven by favourable claims experience on more recent underwriting years. There has been some deterioration of older underwriting years partially offsetting this experience, though this has been mitigated by the aggregate excess of loss reinsurance protection in place across both Cyber Risks and Specialty Risks. The release of $5.6m (2022: strengthening of $15.7m) on MAP Risks is driven by favourable attritional experience.
Prior year claims adjustment
|
| 2023 | 2022 |
| Net | $m | $m |
| Cyber Risks | 9.9 | 0.9 |
| Digital | (28.0) | (4.5) |
| MAP Risks | (5.6) | 15.7 |
| Property Risks | (78.0) | (22.4) |
| Specialty Risks | (8.1) | 65.2 |
| Total | (109.8) | 54.9 |
| (Release)/strengthening as a percentage of insurance revenue less allocation of reinsurance premiums | (2.5)% | 1.4% |
Total expenditure
The expense ratio, which under IFRS 17 includes only expenses directly attributed to insurance activities, remained flat at 32% for 2023 (2022: 32%). For 2023, non-directly attributable expenses of $365.8m (2022: $217.6m) fall outside the insurance result. Taking these items together, total expenses for 2023 totalled $1,728.4m (2022: $1,435.2m).
We continue to focus on our total expense base, allowing for additional expenses where aligned to underlying business growth or to enhancement to our business model. The latter includes execution of our three platform strategy, modernisation of our underwriting and finance platforms, setting up of an onshore E&S carrier and digital trading capabilities. Given the increased focus on the above areas, proportionately more of the total expenses incurred during the year were recognised outside the directly attributable than in 2022.
During 2023, we have also recognised increased remuneration expense due to the substantial increase in profit.
Foreign exchange
The majority of Beazley's business is transacted in US dollars, which is the currency we have reported in since 2010 and the currency in which we aim to hold the Company's net assets. Changes in the US dollar exchange rate with sterling, the Canadian dollar and the euro do have an impact as we receive premiums in those currencies and a material number of our staff receive their salary in sterling. Beazley's foreign exchange gain taken through the statement of profit or loss in 2023 was $4.5m (2022: $17.3m loss).
Investment performance
Our investments generated a return of $480.2m, or 4.9% in 2023 (2022: a loss of $179.7m, or 2.1%). This is, by some margin, the highest contribution from investments in our history. It is partly a consequence of the ongoing growth in our financial assets, which reached $10.5bn as at 31 December (2022: $9.0bn). It also reflects the yields available on fixed income investments, which are much higher than in recent years, as well as strong returns from equity and credit exposures.
Considering the year as a whole, US bond yields were little changed at most maturities, so that the returns achieved on our fixed income portfolio closely reflected starting yields. Within the year, yields rose significantly in the first nine months driven by ongoing inflationary pressures and resilient economic growth. However, within the final quarter, yields declined as the markets began to anticipate a lower interest rate environment in 2024. As a result, more than half of our 2023 investment return was generated in the final two months of the year.
Equity markets were also volatile, but posted strong gains overall. Our modest equity exposures, focused on US markets and selected to reflect our responsible investment commitments, returned more than 26% in 2023, with the strongest performance again in the final months of the year. High yield credit exposures also produced good returns as credit spreads declined, while our alternative investments, which are predominantly in hedge funds, generated more modest returns. We continue to build our impact portfolio, targeting up to $100m in investment opportunities which have measurable social or environmental benefits. To date, we have made commitments totalling $31m, to three different impact funds. These investments are at an early stage, but initial returns are encouraging. From 2024, we will also be measuring progress against their impact objectives.
Although yields have declined in recent months, levels are similar to those at the beginning of 2023: The yield of our fixed income portfolio at 31 December 2023 was 4.8% with a duration of 1.8 years. This suggests that the good contribution from our investments in 2023 could be repeated in 2024, given stability in financial markets. However, such stability is likely to remain elusive, as global geo-political risks remain elevated and forthcoming elections, in the US, UK and elsewhere, may generate further uncertainty.
The table below details the breakdown of our portfolio by asset class:
|
| 31 Dec 2023 | 31 Dec 2022 | ||
|
| $m | % | $m | % |
| Cash and cash equivalents | 812.3 | 7.8 | 652.5 | 7.3 |
| Fixed and floating rate debt securities |
|
|
|
|
| - Government issued | 4,469.1 | 42.6 | 5,006.3 | 55.6 |
| - Corporate bonds |
|
|
|
|
| - Investment grade | 3,578.3 | 34.1 | 2,050.5 | 22.8 |
| - High yield | 489.0 | 4.7 | 308.7 | 3.4 |
| Syndicate loans | 34.1 | 0.3 | 32.5 | 0.4 |
| Derivative financial assets | 10.0 | 0.1 | 34.7 | 0.4 |
| Core portfolio | 9,392.8 | 89.6 | 8,085.2 | 89.9 |
| Equity funds | 282.7 | 2.7 | 159.4 | 1.8 |
| Hedge funds | 582.2 | 5.6 | 530.6 | 5.9 |
| Illiquid credit assets | 220.1 | 2.1 | 222.9 | 2.4 |
| Total capital growth assets | 1,085.0 | 10.4 | 912.9 | 10.1 |
| Total | 10,477.8 | 100.0 | 8,998.1 | 100.0 |
Comparison of return by major asset class:
|
| 31 Dec 2023 | 31 Dec 2022 | ||
|
| $m | % | $m | % |
| Core portfolio | 392.7 | 4.5% | (182.8) | (2.4) |
| Capital growth assets | 87.5 | 8.8% | 3.1 | 0.3 |
| Overall return | 480.2 | 4.9% | (179.7) | (2.1) |
Tax
Beazley is liable to corporation tax in a number of jurisdictions, notably the UK, the US and Ireland. Beazley's effective tax rate is thus a composite tax rate mainly driven by the Irish, UK and US tax rates. The weighted average of the statutory tax rates for the year was 17.6% (2022: 19.0%). The tax rate of 17.6% is lower than last year due to this year's composition of profits and losses across the Group.
The effective tax rate has increased in 2023 to 18.1% (2022: 17.2%).
Balance sheet management
Summary statement of financial position
|
| 2023 | 2022 | Movement |
|
| $m | $m | % |
| Intangible assets | 165.3 | 128.8 | 28 |
| Insurance contract assets | 101.5 | 84.1 | 21 |
| Reinsurance contract assets | 2,426.7 | 2,175.3 | 12 |
| Other assets | 494.1 | 326.7 | 51 |
| Financial assets at fair value and cash and cash equivalents | 10,477.8 | 8,998.1 | 16 |
| Total assets | 13,665.4 | 11,713.0 | 17 |
| Insurance contract liabilities | 7,992.2 | 7,349.8 | 9 |
| Reinsurance contract liabilities | 333.5 | 161.2 | 107 |
| Financial liabilities | 554.6 | 562.5 | (1) |
| Other liabilities | 903.0 | 684.5 | 32 |
| Total liabilities | 9,783.3 | 8,758.0 | 12 |
| Net assets | 3,882.1 | 2,955.0 | 31 |
| Net assets per share (cents) | 585.8c | 444.1c | 32 |
| Net tangible assets per share (cents) | 560.9c | 424.7c | 32 |
| Net assets per share (pence) | 468.6p | 364.2p | 29 |
| Net tangible assets per share (pence) | 448.7p | 348.3p | 29 |
| Number of shares² | 662.7m | 665.4m | - |
1 The Group has restated its summary statement of financial position as at 31 December 2022 following the adoption of IFRS 17.
2 Excludes shares held in the employee share trust and treasury shares.
Intangible assets
Intangible assets consist of goodwill on acquisitions of $62.0m (2022: $62.0m), purchased syndicate capacity of $31.3m (2022: $13.7m), US admitted licences of $9.3m (2022: $9.3m) and capitalised expenditure on IT projects of $62.7m (2022: $43.8m).
Net reinsurance contract assets
Net reinsurance contract assets represent recoveries from reinsurers, and are comprised of the asset for remaining coverage (ARC) and the asset for incurred claims (AIC). At 31 December 2023, the ARC was in a net liability position of $321.9m (2022: $229.8m net liability) as the future premium payable to the reinsurers was higher than the expected claim recoveries. The AIC was in a net asset position of $2,415.1m at 31 December 2023 (2022: $2,243.9m net asset).
The Group's exposure to reinsurers is managed through:
• minimising risk through selection of reinsurers who meet strict financial criteria (e.g. minimum net assets, minimum 'A' rating by S&P). These criteria vary by type of business (short vs medium tail);
• timely calculation and issuance of reinsurance collection notes from our ceded reinsurance team; and
• regular monitoring of the outstanding debtor position by our Reinsurance Security Committee and Credit Control Committee.
Net insurance contract liabilities
Net insurance contract liabilities of $7,890.7m (2022: $7,265.7m) consist of two main elements, being the liability for remaining coverage (LRC) and the liability for incurred claims (LIC).
Our LRC balance is made up of a reserve for expected claims, a risk adjustment, a contractual service margin, provision for onerous contracts and premium debtors. At 31 December 2023, the LRC balance was $755.4m (2022: $747.6m). Our LIC has increased by 9% to $7,135.3m (2022: $6,518.1m).
CSM Sustainability
The Contractual Service Margin (CSM) reflects the expected profit of contracts within the asset/liability for remaining coverage. We have calculated the CSM sustainability as the closing CSM divided by the opening CSM, and thus a value of 1 and above shows that the expected profit within the ARC/LRC is higher than the previous valuation. For more information on CSM Sustainability, including the calculation, please refer to the APMs section.
As at 31 December 2023, the gross CSM sustainability score was 1.01 (2022: 1.79) while the net CSM sustainability score was 1.17 (2022: 1.27). This is a pleasing result and shows the strength of the expected profit contained on the balance sheet has increased on both a gross and net basis during 2023. This puts us in good stead as we move in to 2024.
Discounting impacts
During 2023, the net finance expense was $153.4m (2022: net finance income $183.0m), which was broken down into a $294.7m (2022: $125.2m) unwind of discounting recognised on existing business, partially offset by $141.3m (2022: $308.2m) of income from changes in financial assumptions.
Financial liabilities
Financial liabilities comprise borrowings and derivative financial liabilities. The Group utilises two long-term debt facilities:
• in November 2016, Beazley Insurance dac issued $250.0m of 5.875% subordinated tier 2 notes due in 2026; and
• in September 2019, Beazley Insurance dac issued $300.0m of 5.5% subordinated tier 2 notes due in 2029.
A syndicated short-term banking facility led by Lloyds Banking Group plc provides potential borrowings up to $450.0m. Under the facility $450.0m may be drawn as letters of credit to support underwriting at Lloyd's, and up to $225.0m may be advanced as cash under a revolving facility. The cost of the facility is based on a commitment fee of 0.4725% per annum, and any amounts drawn are charged at a margin of 1.35% per annum.
The cash element of the facility will expire on 25 May 2026, whilst letters of credit issued under the facility can be used to provide support for the 2023, 2024 and 2025 underwriting years. In 2023 $225.0m has been placed as a letter of credit as Funds at Lloyd's (FAL).
Other assets
Other assets are analysed separately in the notes to the financial statements. The items included comprise:
• amounts due from syndicates 623 and 4321;
• prepayments and accrued income; and
• other receivables.
Capital structure
Beazley aims to hold capital in excess of regulatory requirements in order to be best placed to swiftly take advantage of growth opportunities arising outside of our business plan, as well as to provide additional protection against downside events.
Beazley has a number of requirements for capital at a Group and subsidiary level. Capital is required to support underwriting at Lloyd's, in the US and through our European branches and is subject to prudential regulation by local regulators (the Prudential Regulation Authority, Lloyd's, the Central Bank of Ireland, and the US state level supervisors). Beazley is subject to the capital adequacy requirements of the European Union (EU) Solvency II regime (SII).
Further capital requirements come from rating agencies which provide ratings for Beazley Insurance Company, Inc., Beazley America Insurance Company Inc., Beazley Excess and Surplus Insurance Company, Inc., and Beazley Insurance dac. We aim to manage our capital levels to obtain the ratings necessary to trade with our preferred client base.
Earlier in the year, we took the decision to evolve our approach toward capital disclosures. We have chosen to use the Group Solvency II coverage ratio (Solvency II ratio) as the key capital measure for the Group going forward. This measure covers the Group's business across all territories and is comparable with Solvency II Capital disclosures made by our peers both in the UK and Europe.
We aim to maintain a Solvency II ratio in excess of 170% of Solvency Capital Requirement ("SCR").
The amount of surplus capital held is considered on an ongoing basis in light of the current regulatory framework, and opportunities for organic or acquisitive growth and a desire for both prudence and to maximise returns for investors.
As at 31 December 2023, our Solvency II coverage is estimated at 218% (31 December 2022: 244%). The strong ratio is a result of good underwriting performance, enabled by an equity raise in 2022, and a strong return on investments driving significant own funds generation. Capital requirement (SCR) is established using our Solvency II approved internal model approved by Central Bank of Ireland (CBI) and reflects the business we expect to write through to the end of 2024 as per our business plan which is targeting gross growth of high single digits.
The Group actively seeks to manage its capital structure. Our preferred use of capital is to deploy it on opportunities to underwrite profitably. However where we have surplus capital substantially in excess of the opportunities, we consider means to return this capital to shareholders. Given the Company's outstanding performance in 2023, we are pleased to announce a share buyback programme up to $325m, in addition to the interim dividend of 14.2p.
The projected year-end Group Solvency II ratio of 218% takes into account the interim dividend and foreseeable distributions noted above of $325m.
|
| 2023 Estimate* | 2022 |
|
| $m | $m |
| Eligible Tier-1 capital after foreseeable distributions | 3,967.4 | 3,330.5 |
| Eligible Tier-2 capital - subordinated debt | 520.8 | 506.2 |
| Total Solvency II Eligible own funds | 4,488.2 | 3,836.7 |
| Capital requirement | 2,058.0 | 1,573.8 |
| Group Solvency II ratio | 218% | 244% |
*The final 2023 ratio is subject to review and audit and will be published in Group 2023 Solvency and Financial Condition Report (SFCR).
Our funding comes from a mixture of Tier-1 basic own funds and $520.8m ($550.0m gross of capitalised borrowing costs and fair value adjustments) of tier 2 subordinated debt.
Both tier 2 subordinated debt issuances in 2016 and 2019 are issued by Beazley Insurance dac, which maintain an Insurer Financial Strength (IFS) rating of 'A+' by Fitch.
Scenario sensitivity analysis
The table below shows the impact on the Group's estimated Solvency II ratio in the event of the following scenarios as at 31 December 2023. The impact on the Group's Solvency II ratio could arise from movements in both the Group's SCR and own funds.
| Scenario | Impact on Solvency II ratio |
| Cyber 1-in-250 Cyber scenario* | (32)% |
| Nat Cat 1-in-250 Combined scenario | (26)% |
| 50 bps decrease in interest rates** | (10)% |
|
|
|
| *Based on Cyber Probabilistic Model **This considers the impact on the SCR in isolation to the impact on eligible own funds |
|
Consolidated statement of profit or loss for the year ended 31 December 2023
|
| 2023 | 20221 |
|
| $m | $m |
| Insurance revenue | 5,442.4 | 4,848.4 |
| Insurance service expenses | (3,592.6) | (4,014.0) |
| Allocation of reinsurance premium | (1,127.3) | (965.4) |
| Amounts recoverable from reinsurers for incurred claims | 528.5 | 953.9 |
| Insurance service result | 1,251.0 | 822.9 |
|
|
|
|
| Net investment income/(loss) | 480.2 | (179.7) |
| Net finance (expense)/income from insurance contracts issued | (169.3) | 279.5 |
| Net finance income/(expense) from reinsurance contracts held | 15.9 | (96.5) |
| Net insurance and financial result | 1,577.8 | 826.2 |
|
|
|
|
| Other income | 78.5 | 32.1 |
| Operating expenses² | (365.8) | (217.6) |
| Foreign exchange gains/(losses) | 4.5 | (17.3) |
| Results from operating activities | 1,295.0 | 623.4 |
|
|
|
|
| Finance costs | (40.6) | (39.4) |
| Profit before tax | 1,254.4 | 584.0 |
|
|
|
|
| Tax expense | (227.6) | (100.7) |
| Profit after tax for the year | 1,026.8 | 483.3 |
|
|
|
|
| Earnings per share (cents per share): |
|
|
| Basic | 154.7 | 79.0 |
| Diluted | 151.4 | 78.0 |
| Earnings per share (pence per share): |
|
|
| Basic | 124.8 | 63.4 |
| Diluted | 122.1 | 62.6 |
1 The Group has restated its consolidated statement of profit or loss for the year ended 31 December 2022 following the adoption of IFRS 17. The earnings per share for this year has also been restated - refer to Note 12 for further details.
2 The Group has not presented its impairment losses determined in accordance with IFRS 9 separately in the statement of profit or loss as the amounts are not material. These are included within operating expenses.
Consolidated statement of comprehensive income for the year ended 31 December 2023
|
| 2023 | 20221 |
|
| $m | $m |
| Profit after tax for the year | 1,026.8 | 483.3 |
|
|
|
|
| Items that will never be reclassified to profit or loss: |
|
|
| Loss on remeasurement of retirement benefit obligations | (0.1) | (12.5) |
| Tax credit on defined benefit obligation | 0.7 | 2.7 |
|
|
|
|
| Items that may be reclassified subsequently to profit or loss: |
|
|
| Foreign exchange translation gains/(losses) | 5.7 | (12.6) |
|
|
|
|
| Total other comprehensive income/(expense) | 6.3 | (22.4) |
|
|
|
|
| Total comprehensive income recognised | 1,033.1 | 460.9 |
1 Profit after tax for the year and foreign exchange translation differences have been restated for the year ended 31 December 2022 following the adoption of IFRS 17.
Consolidated statement of changes in equity for the year ended 31 December 2023
|
| Share capital | Share premium | Foreign currency translation reserve | Other reserves | Retained earnings | Total |
|
| $m | $m | $m | $m | $m | $m |
| Balance as at 31 December 2021 (previously reported) | 42.9 | 5.3 | (97.2) | (4.0) | 2,183.8 | 2,130.8 |
| IFRS 17 adjustment | - | - | - | - | 59.4 | 59.4 |
| Restated balance as at 01 January 2022 | 42.9 | 5.3 | (97.2) | (4.0) | 2,243.2 | 2,190.2 |
| Total comprehensive (expense) /income | - | - | (12.6) | - | 473.5 | 460.9 |
| Dividend paid | - | - | - | - | (103.0) | (103.0) |
| Acquisition of own shares held in trust | - | - | - | (17.8) | - | (17.8) |
| Issue of shares | 0.1 | 0.8 | - | - | - | 0.9 |
| Equity raise | 3.6 | 3.6 | - | 397.2 | - | 404.4 |
| Transfer of merger reserve to retained earnings | - | - | - | (397.2) | 397.2 | - |
| Equity settled share based payments | - | - | - | 15.7 | - | 15.7 |
| Tax on share option vestings | - | - | - | 3.1 | 0.6 | 3.7 |
| Transfer of shares to employees | - | - | - | (4.6) | 4.6 | - |
| Balance at 31 December 2022 | 46.6 | 9.7 | (109.8) | (7.6) | 3,016.1 | 2,955.0 |
| IFRS 9 adjustment | - | - | - | - | (1.0) | (1.0) |
| Balance at 01 January 2023 | 46.6 | 9.7 | (109.8) | (7.6) | 3,015.1 | 2,954.0 |
| Total comprehensive income | - | - | 5.7 | - | 1,027.4 | 1,033.1 |
| Dividend paid | - | - | - | - | (107.7) | (107.7) |
| Issue of shares | 0.1 | 0.9 | - | - | - | 1.0 |
| Equity settled share based payments | - | - | - | 36.2 | - | 36.2 |
| Acquisition of own shares held in trust | - | - | - | (33.6) | - | (33.6) |
| Tax on share option vestings | - | - | - | 0.7 | (1.6) | (0.9) |
| Transfer of shares to employees | - | - | - | (8.5) | 8.5 | - |
| Balance at 31 December 2023 | 46.7 | 10.6 | (104.1) | (12.8) | 3,941.7 | 3,882.1 |
Consolidated statement of financial position as at 31 December 2023
|
| 2023 | 20221 |
|
| $m | $m |
| Intangible assets | 165.3 | 128.8 |
| Plant and equipment | 15.9 | 14.9 |
| Right-of-use assets | 59.4 | 60.5 |
| Deferred tax asset² | 46.9 | 30.8 |
| Retirement benefit asset | 4.5 | 4.6 |
| Insurance contract assets | 101.5 | 84.1 |
| Reinsurance contract assets | 2,426.7 | 2,175.3 |
| Financial assets at fair value | 9,665.5 | 8,345.6 |
| Other assets² | 354.2 | 204.2 |
| Current tax asset | 13.2 | 11.7 |
| Cash and cash equivalents | 812.3 | 652.5 |
| Total assets | 13,665.4 | 11,713.0 |
| Share capital | 46.7 | 46.6 |
| Share premium | 10.6 | 9.7 |
| Foreign currency translation reserve | (104.1) | (109.8) |
| Other reserves | (12.8) | (7.6) |
| Retained earnings | 3,941.7 | 3,016.1 |
| Total equity | 3,882.1 | 2,955.0 |
| Deferred tax liability | 202.2 | 79.2 |
| Financial liabilities | 554.6 | 562.5 |
| Lease liabilities | 76.6 | 72.7 |
| Insurance contract liabilities | 7,992.2 | 7,349.8 |
| Reinsurance contract liabilities | 333.5 | 161.2 |
| Current tax liability | 13.7 | 8.6 |
| Other liabilities | 610.5 | 524.0 |
| Total liabilities | 9,783.3 | 8,758.0 |
| Total equity and liabilities | 13,665.4 | 11,713.0 |
1 The Group has restated its consolidated statement of financial position as at 01 January 2022 and 31 December 2022 following the adoption of IFRS 17.
2 The Group recognised IFRS 9 expected credit losses ("ECLs") of $1.3m against its other receivables as at 01 January 2023, offset by $0.3m of deferred tax assets.
Consolidated statement of cash flows for the year ended 31 December 2023
|
| 2023 | 20221 |
|
| $m | $m |
| Cash flows from operating activities: |
|
|
| Profit before tax | 1,254.4 | 584.0 |
|
|
|
|
| Adjustments for non-cash items: |
|
|
| Interest and dividends receivable on financial assets | (215.3) | (101.1) |
| Finance costs payable | 40.6 | 39.4 |
| Net fair value (gains)/losses on financial assets | (325.2) | 274.4 |
| Other non-cash items² | 45.7 | 62.6 |
|
|
|
|
| Changes in operational assets and liabilities: |
|
|
| Increase in net insurance and reinsurance contract liabilities | 545.9 | 226.7 |
| Increase in other liabilities | 86.5 | 38.0 |
| (Increase)/decrease in other assets | (150.0) | 33.9 |
| Purchases of investments | (7,115.9) | (6,645.4) |
| Proceeds from sale of investments | 6,129.8 | 5,325.3 |
| Interest and dividends received on financial assets | 207.4 | 94.2 |
|
|
|
|
| Tax paid | (110.7) | (61.1) |
| Net cash in/(out)flows from operating activities | 393.2 | (129.1) |
|
|
|
|
| Cash flows from investing activities: |
|
|
| Purchase of plant and equipment | (4.3) | (1.0) |
| Expenditure on software development and other intangible assets | (50.9) | (22.7) |
| Net cash outflows from investing activities | (55.2) | (23.7) |
|
|
|
|
| Cash flows from financing activities: |
|
|
| Acquisition of own shares in trust | (33.6) | (17.8) |
| Payment of lease liabilities | (12.0) | (11.6) |
| Equity raise | - | 404.4 |
| Finance costs paid | (37.5) | (36.3) |
| Dividend paid | (107.7) | (103.0) |
| Net cash (out)/inflows from financing activities | (190.8) | 235.7 |
|
|
|
|
| Net increase in cash and cash equivalents | 147.2 | 82.9 |
| Opening cash and cash equivalents | 652.5 | 591.8 |
| Effect of exchange rate changes on cash and cash equivalents | 12.6 | (22.2) |
| Closing cash and cash equivalents | 812.3 | 652.5 |
1 The consolidated statement of cash flows has been restated for the year ended 31 December 2022 following the adoption of IFRS 17.
2 Other non-cash items includes amounts relating to depreciation, amortisation, and foreign exchange differences.
1 General information
1a Nature of operations
Beazley plc (registered number 09763575) is a public company incorporated in England and Wales. The Company's registered address is 22 Bishopsgate, London, EC2N 4BQ, United Kingdom. The principal activity of the Company and its subsidiaries ("the Group") is to participate as a specialist insurer which transacts primarily in commercial lines of business through its subsidiaries and Lloyd's syndicates. The Group's consolidated financial statements for the year ended 31 December 2023 comprise the parent company, its subsidiaries and the Group's interest in associates.
1b Basis of preparation
The financial information set out above does not constitute statutory accounts for the years ended 31 December 2023 or 2022 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the registrar of companies, and those for 2023 will be delivered in due course. The Group's external auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Group's consolidated financial statements have been prepared in accordance with UK adopted International Financial Reporting Standards ("IFRS") and the requirements of the Companies Act 2006. These are prepared on the historical cost basis, with the exception of financial assets and derivative financial instruments which are stated at their fair value, and the defined benefit pension asset which is measured at the fair value of plan assets less the present value of the defined benefit pension obligation. All amounts are presented in US dollars and millions, unless stated otherwise.
1c New accounting standards
International Financial Reporting Standard 17, Insurance Contracts ("IFRS 17")
IFRS 17 replaces IFRS 4 for annual periods beginning on or after 01 January 2023. The Group has applied the transitional provisions per Appendix C of IFRS 17 and taken a fully retrospective approach, restating comparative information for the year ended 31 December 2022.
International Financial Reporting Standard 9, Financial Instruments ("IFRS 9")
IFRS 9 was issued by the International Accounting Standards Board ("IASB") in July 2014 and became effective for accounting periods beginning on or after 01 January 2018. The Group previously applied the amendment issued by the IASB which exempted eligible entities from applying IFRS 9 until accounting periods beginning on or after 01 January 2023.
1d Amendments to existing standards
In the current year, the Group has applied several amendments to IFRS issued by the IASB and endorsed by the UK Endorsement Board ("UKEB") that are mandatorily effective for accounting periods beginning on or after 01 January 2023. Of these, the following amendments have not had a material impact on the Group on adoption:
• Amendment to IAS 8 - Definition of Accounting Estimates;
• Amendment to IAS 1 - Disclosure of Accounting Policies; and
• Amendment to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction.
The Group has also applied the amendment to IAS 12 - International Tax Reform - Pillar Two Model Rules from 01 January 2023, as issued by the IASB and endorsed by the UKEB. This amendment was issued in response to the Pillar Two framework issued by the Organisation for Economic Co-operation and Development, which aims to ensure that large multinational enterprises pay a minimum effective corporate tax rate of 15% on the income arising in each jurisdiction in which they operate. The amendment introduces a mandatory temporary exemption from recognising and disclosing deferred taxes arising from the Pillar Two rules. For jurisdictions in which legislation has been substantively enacted, the Group has applied this exemption. Refer to Note 11 for further details.
The IASB has issued a number of other minor amendments to standards which are not yet effective at the reporting date and have not been applied in preparing these financial statements. These have been endorsed by the UKEB with an effective date of 01 January 2024 unless noted otherwise below. None of these are expected to have a material impact on the Group.
• Amendments to IAS 1 - Classification of Liabilities as Current or Non-Current and Non-Current Liabilities with Covenants;
• Amendment to IFRS 16 - Lease Liability in a Sale and Leaseback;
• Amendments to IAS 7 and IFRS 7 - Supplier Finance Arrangement Disclosures;
• Amendment to IAS 21 - Lack of exchangeability (not yet endorsed, effective date 01 January 2025); and
• Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (not yet endorsed, effective date postponed indefinitely).
1e Going concern
The consolidated financial statements of Beazley plc have been prepared on a going concern basis. In adopting the going concern basis, the Board has reviewed the Group's current and forecast solvency and liquidity positions for the 12 months from the date that the financial statements are authorised for issue. The Group's business activities, together with the factors likely to affect its future development, performance, and position, are set out in the strategic report contained in this Annual Report & Accounts. In addition, the risk report and financial review includes the Group's risk management objectives and the Group's objectives, policies and processes for managing its capital.
In assessing the Group's going concern position as at 31 December 2023, the Directors have considered a number of factors, including:
• the current statement of financial position and in particular the adequacy of technical provisions;
• the Group's strategic and financial plan, taking account of possible changes in trading performance and funding retention;
• the Group's capital forecast, which takes into account the capital requirements of major subsidiaries and their current external credit rating and outlook;
• the Group's liquidity at both a Group and material Subsidiary level;
• stress testing and scenario analysis assessing the impact of natural and cyber catastrophe events on the Group's capital and liquidity positions and reverse stress test scenarios designed to render the business model unviable; and
• other qualitative factors, such as the market environment, the Group's ability to raise additional capital and/or liquidity, and climate change.
As a result of the assessment, no material uncertainty in relation to going concern has been identified. As at its most recent regulatory submission, the Group's capital ratios and its total capital resources are comfortably in excess of regulatory solvency requirements, and internal stress testing indicates that the Group can withstand severe economic and competitive stresses.
Based on the going concern assessment performed, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence over a period of 12 months from the date of this report being authorised for issue, and therefore believe that the Group is well placed to manage its business risks successfully. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.
2 Segmental reporting
2a Reporting segments
Segmental information is presented based on the Group's management and internal reporting structures which represent the level at which financial information is reported, performance is analysed and resources are allocated by the Group's Executive Committee, being the chief operating decision maker as defined by IFRS 8.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Those items that are allocated on a reasonable basis are split based on each segment's capital requirement which is taken from the Group's most up-to-date business plan. The reporting segments do not cross-sell business to each other.
Finance costs and taxation have not been allocated to operating segments as these items are determined at a consolidated level and do not relate to operating performance.
As a result of the adoption of IFRS 17, comparative information has been restated for the year ended 31 December 2022.
An overview of the Group's segments is set out below.
Cyber Risks
This segment underwrites cyber and technology risks.
Digital
This segment underwrites a variety of marine, contingency and SME liability risks through digital channels such as e-trading platforms and broker portals.
MAP Risks
This segment underwrites marine, portfolio underwriting and political and contingency business.
Property Risks
This segment underwrites first party property risks and reinsurance business.
Specialty Risks
This segment underwrites a wide range of liability classes, including employment practices risks and directors and officers, as well as healthcare, lawyers and international financial institutions.
2b Segmental information
|
| Year ended 31 December 2023 | |||||
|
| Cyber Risks | Digital | MAP Risks | Property Risks | Specialty Risks | Total |
| 2023 | $m | $m | $m | $m | $m | $m |
| Insurance revenue | 1,174.9 | 224.7 | 1,015.4 | 1,145.2 | 1,882.2 | 5,442.4 |
| Insurance service expenses | (802.1) | (144.0) | (635.5) | (643.9) | (1,367.1) | (3,592.6) |
| Current year claims | (565.2) | (90.5) | (430.8) | (470.1) | (940.1) | (2,496.7) |
| Adjustments to prior year claims | (8.9) | 33.7 | 88.6 | 108.1 | 39.8 | 261.3 |
| (Loss on)/reversal of onerous contracts | (2.6) | 2.6 | 1.4 | (0.1) | 0.5 | 1.8 |
| Insurance acquisition cash flows amortisation and other directly attributable expenses | (225.4) | (89.8) | (294.7) | (281.8) | (467.3) | (1,359.0) |
| Allocation of reinsurance premium | (308.5) | (24.3) | (236.1) | (198.5) | (359.9) | (1,127.3) |
| Amounts recoverable from reinsurers for incurred claims | 210.1 | 7.1 | 23.9 | 26.4 | 261.0 | 528.5 |
| Current year claims | 211.8 | 13.0 | 107.6 | 57.0 | 294.2 | 683.6 |
| Adjustments to prior year claims | (1.0) | (5.7) | (83.0) | (30.1) | (31.7) | (151.5) |
| Share of expenses and other amounts | (0.7) | (0.2) | (0.7) | (0.5) | (1.5) | (3.6) |
| Insurance service result | 274.4 | 63.5 | 167.7 | 329.2 | 416.2 | 1,251.0 |
|
|
|
|
|
|
|
|
| Net investment income | 86.6 | 14.8 | 53.5 | 75.2 | 250.1 | 480.2 |
| Net finance expense from insurance contracts issued | (17.5) | (2.9) | (12.6) | (10.9) | (125.4) | (169.3) |
| Net finance (expense)/income from reinsurance contracts held | (1.3) | 0.5 | 2.1 | (13.7) | 28.3 | 15.9 |
| Net insurance and financial result | 342.2 | 75.9 | 210.7 | 379.8 | 569.2 | 1,577.8 |
|
|
|
|
|
|
|
|
| Other income | 16.9 | 3.2 | 14.8 | 16.5 | 27.1 | 78.5 |
| Other operating expenses | (52.7) | (19.9) | (68.1) | (42.5) | (182.6) | (365.8) |
| Foreign exchange gains | 1.0 | 0.2 | 0.8 | 0.9 | 1.6 | 4.5 |
| Segment result | 307.4 | 59.4 | 158.2 | 354.7 | 415.3 | 1,295.0 |
| Finance costs |
|
|
|
|
| (40.6) |
| Profit before tax |
|
|
|
|
| 1,254.4 |
| Tax expense |
|
|
|
|
| (227.6) |
| Profit after tax |
|
|
|
|
| 1,026.8 |
|
|
|
|
|
|
|
|
| Claims ratio | 42% | 23% | 41% | 35% | 42% | 39% |
| Expense ratio | 26% | 45% | 38% | 30% | 31% | 32% |
| Combined ratio | 68% | 68% | 79% | 65% | 73% | 71% |
|
|
|
|
|
|
|
|
| Insurance assets | 50.5 | 14.1 | 0.5 | 13.7 | 22.7 | 101.5 |
| Reinsurance assets | 469.0 | 27.5 | 322.6 | 287.2 | 1,320.4 | 2,426.7 |
| Other | 2,411.3 | 368.1 | 1,511.2 | 1,961.7 | 4,884.9 | 11,137.2 |
| Total assets | 2,930.8 | 409.7 | 1,834.3 | 2,262.6 | 6,228.0 | 13,665.4 |
|
|
|
|
|
|
|
|
| Insurance liabilities | 1,634.8 | 208.8 | 1,006.6 | 1,173.3 | 3,968.7 | 7,992.2 |
| Reinsurance liabilities | 73.2 | 8.7 | 160.2 | - | 91.4 | 333.5 |
| Other | 333.8 | 52.5 | 182.2 | 297.3 | 591.8 | 1,457.6 |
| Total liabilities | 2,041.8 | 270.0 | 1,349.0 | 1,470.6 | 4,651.9 | 9,783.3 |
The calculation bases for the claims, expense and combined ratios are disclosed within the APMs section.
|
| Year ended 31 December 2022 (restated) | |||||
|
| Cyber Risks | Digital | MAP Risks | Property Risks | Specialty Risks | Total |
| 2022 | $m | $m | $m | $m | $m | $m |
| Insurance revenue | 1,013.5 | 211.3 | 970.3 | 807.2 | 1,846.1 | 4,848.4 |
| Insurance service expenses | (750.9) | (161.3) | (859.5) | (699.5) | (1,542.8) | (4,014.0) |
| Current year claims | (506.3) | (104.3) | (436.2) | (524.0) | (974.5) | (2,545.3) |
| Adjustments to prior year claims | (81.4) | 9.1 | (139.4) | 37.0 | (102.2) | (276.9) |
| (Loss on)/reversal of onerous contracts | 23.2 | (0.2) | (0.5) | 1.2 | 0.4 | 24.1 |
| Insurance acquisition cash flows amortisation and other directly attributable expenses | (186.4) | (65.9) | (283.4) | (213.7) | (466.5) | (1,215.9) |
| Allocation of reinsurance premium | (198.3) | (27.2) | (250.1) | (175.7) | (314.1) | (965.4) |
| Amounts recoverable from reinsurers for incurred claims | 208.4 | 21.5 | 296.3 | 108.5 | 319.2 | 953.9 |
| Current year claims | 128.2 | 26.2 | 172.9 | 123.4 | 282.9 | 733.6 |
| Adjustments to prior year claims | 80.5 | (4.6) | 123.7 | (14.6) | 37.0 | 222.0 |
| Share of expenses and other amounts | (0.3) | (0.1) | (0.3) | (0.3) | (0.7) | (1.7) |
| Insurance service result | 272.7 | 44.3 | 157.0 | 40.5 | 308.4 | 822.9 |
|
|
|
|
|
|
|
|
| Net investment loss | (34.5) | (8.7) | (20.5) | (27.1) | (88.9) | (179.7) |
| Net finance income from insurance contracts issued | 30.2 | 4.8 | 45.3 | 24.5 | 174.7 | 279.5 |
| Net finance expense from reinsurance contracts held | (9.0) | (0.9) | (19.6) | (5.2) | (61.8) | (96.5) |
| Net insurance and financial result | 259.4 | 39.5 | 162.2 | 32.7 | 332.4 | 826.2 |
|
|
|
|
|
|
|
|
| Other income | 7.9 | 2.3 | 1.0 | 7.4 | 13.5 | 32.1 |
| Other operating expenses | (33.7) | (9.9) | (34.8) | (35.5) | (103.7) | (217.6) |
| Foreign exchange (losses) | (3.6) | (0.8) | (3.5) | (2.9) | (6.5) | (17.3) |
| Segment result | 230.0 | 31.1 | 124.9 | 1.7 | 235.7 | 623.4 |
| Finance costs |
|
|
|
|
| (39.4) |
| Profit before tax |
|
|
|
|
| 584.0 |
| Tax expense |
|
|
|
|
| (100.7) |
| Profit after tax |
|
|
|
|
| 483.3 |
|
|
|
|
|
|
|
|
| Claims ratio | 44% | 40% | 39% | 60% | 49% | 47% |
| Expense ratio | 23% | 36% | 39% | 34% | 31% | 32% |
| Combined ratio | 67% | 76% | 78% | 94% | 80% | 79% |
|
|
|
|
|
|
|
|
| Insurance assets | 0.4 | 0.0 | 44.1 | 14.0 | 25.6 | 84.1 |
| Reinsurance assets | 308.6 | 26.5 | 327.0 | 430.8 | 1,082.4 | 2,175.3 |
| Other | 2,169.6 | 340.6 | 1,307.0 | 1,436.5 | 4,199.9 | 9,453.6 |
| Total assets | 2,478.6 | 367.1 | 1,678.1 | 1,881.3 | 5,307.9 | 11,713.0 |
|
|
|
|
|
|
|
|
| Insurance liabilities | 1,285.8 | 198.2 | 1,141.9 | 1,141.9 | 3,582.0 | 7,349.8 |
| Reinsurance liabilities | 17.9 | 2.1 | 82.6 | 3.9 | 54.7 | 161.2 |
| Other | 348.6 | 49.5 | 134.6 | 218.3 | 496.0 | 1,247.0 |
| Total liabilities | 1,652.3 | 249.8 | 1,359.1 | 1,364.1 | 4,132.7 | 8,758.0 |
3 Insurance revenue
Insurance revenue represents the total changes in the liability for remaining coverage that relate to services for which the Group expects to receive consideration. This includes the difference between the claims and other expenses expected at the beginning of the year versus those actually incurred (per Note 4), after the loss component allocation.
|
| 2023 | 2022 |
|
| $m | $m |
| Amounts relating to changes in the liability for remaining coverage: |
|
|
| Expected incurred claims and other expenses after loss component allocation | 3,015.7 | 2,723.8 |
| Change in risk adjustment for non-financial risk for the risk expired after loss component allocation | 316.8 | 274.7 |
| CSM recognised in profit or loss for services provided | 691.4 | 565.2 |
| Other amounts including experience adjustments | 503.7 | 434.6 |
| Insurance acquisition cash flows recovery | 914.8 | 850.1 |
| Total insurance revenue | 5,442.4 | 4,848.4 |
4 Insurance service expenses
The table below shows the insurance service expenses recognised on groups of insurance contracts issued by the Group. These are recognised in the consolidated statement of profit or loss as they are incurred.
|
| 2023 | 2022 |
|
| $m | $m |
| Incurred claims and other directly attributable expenses | 2,911.6 | 2,908.6 |
| Changes that relate to past service - adjustments to the LIC | (232.0) | 279.4 |
| Losses on onerous contracts and reversal of those losses | (1.8) | (24.1) |
| Insurance acquisition cash flows amortisation | 914.8 | 850.1 |
| Total insurance service expense | 3,592.6 | 4,014.0 |
5 Net income / expenses from reinsurance contracts held
The table below shows the net income/expenses from reinsurance contracts held, comprised of the allocation of reinsurance premium and amounts recoverable from reinsurers for incurred claims.
|
| 2023 | 2022 |
|
| $m | $m |
| Amounts relating to changes in the remaining coverage: |
|
|
| - Expected claims and other expenses recovery | (740.5) | (731.8) |
| - Changes in the risk adjustment recognised for the risk expired | (105.2) | (74.3) |
| - CSM recognised for the services received | (290.8) | (195.3) |
| - Other amounts including experience adjustments | 9.2 | 36.0 |
| Allocation of reinsurance premium | (1,127.3) | (965.4) |
| Effect of changes in the risk of reinsurers non-performance | 4.2 | (32.6) |
| Claims recovered | 680.1 | 733.4 |
| Other incurred directly attributable expenses | (3.6) | (1.7) |
| Changes that relate to past service - adjustments to incurred claims recovery | (152.2) | 254.8 |
| Amounts recoverable from reinsurers for incurred claims | 528.5 | 953.9 |
| Total net expenses from reinsurance contracts held | (598.8) | (11.5) |
6 Net financial result
Finance income/(expense) from insurance contracts issued and reinsurance contracts held represents the interest accreted and the effect of changes in discount rates and other financial assumptions. The net financial result is comprised of the Group's net investment income/(loss) and its net insurance finance income/(expense).
|
|
2023 |
2022 |
|
| $m | $m |
| Interest and dividends on financial assets at fair value | 215.3 | 101.1 |
| Interest on cash and cash equivalents | 16.8 | 0.5 |
| Net realised fair value losses on financial assets at FVTPL | (69.2) | (7.6) |
| Net unrealised fair value gains/(losses) on financial assets at FVTPL | 325.2 | (266.8) |
| Investment income/(expense) from financial assets | 488.1 | (172.8) |
| Investment management expenses | (7.9) | (6.9) |
| Net investment income/(loss) | 480.2 | (179.7) |
| Interest accreted | (379.1) | (153.7) |
| Effect of changes in financial assumptions | 209.8 | 433.2 |
| Net finance (expense)/income from insurance contracts issued | (169.3) | 279.5 |
| Interest accreted | 84.4 | 28.5 |
| Effect of changes in financial assumptions | (68.5) | (125.0) |
| Net finance income/(expense) from reinsurance contracts held | 15.9 | (96.5) |
| Net insurance finance (expense)/income | (153.4) | 183.0 |
| Net financial result | 326.8 | 3.3 |
Investment income by category of financial asset
The tables below show the Group's investment income/(expense), split by category of financial asset. Note that 'Other financial assets' includes cash and cash equivalents and derivative financial assets.
|
| Debt securities and syndicate loans | Capital growth assets | Other financial assets | Total |
| 2023 | $m | $m | $m | $m |
| Interest and dividends received | 208.4 | 3.7 | 20.0 | 232.1 |
| Net realised (losses)/gains | (117.8) | 52.6 | (4.0) | (69.2) |
| Net unrealised fair value gains | 291.2 | 34.0 | - | 325.2 |
| Total investment income from financial assets | 381.8 | 90.3 | 16.0 | 488.1 |
|
| Debt securities and syndicate loans | Capital growth assets | Other financial assets | Total |
| 2022 | $m | $m | $m | $m |
| Interest and dividends received | 96.6 | 3.6 | 1.4 | 101.6 |
| Net realised (losses)/gains | (93.3) | 31.9 | 53.8 | (7.6) |
| Net unrealised fair value losses | (235.6) | (30.9) | (0.3) | (266.8) |
| Total investment expense from financial assets | (232.3) | 4.6 | 54.9 | (172.8) |
7 Other income
|
| 2023 | 2022 |
|
| $m | $m |
| Commissions received by Beazley service companies | 42.8 | 20.0 |
| Profit commissions from syndicates | 29.9 | 7.2 |
| Managing agent fees from third party syndicates | 3.6 | 4.0 |
| Other income | 2.2 | 0.9 |
| Total other income | 78.5 | 32.1 |
Commissions received by Beazley service companies
Commissions are received from non-Group syndicates by Group service companies writing business on their behalf. These are recognised as the services are provided, and therefore the performance obligations of the contracts are met. Commission is payable to the Group by syndicate 623 due to Group service companies writing business on behalf of the syndicate. While the commercial purpose of the contract is to pass business to syndicate 623, the remuneration is triggered by incurring expenses, irrespective of volume of business gained. Fees are recognised as the services are provided, and therefore the performance obligations of the contracts are met. In addition, the Group charges syndicates 5623 and 4321 for a portion of the profit-related remuneration paid to its underwriting staff. Payment is therefore triggered by the underlying profitability of the syndicate.
Profit commissions from syndicates
Profit commission agreements are in place between the third party capital syndicates managed by the Group and their managing agent, Beazley Furlonge Limited. Under these agreements, the transaction price represents a fixed percentage on profit by year of account. As such, the profitability of the syndicates is a performance criterion. No other variable consideration (for example: discounts, rebates, refunds, incentives) is attached. The value of each transaction price is derived at the reporting date from the actual profits made by the syndicates, and therefore represents the most likely amount of consideration at the reporting date.
8 Operating expenses
|
| 2023 | 2022 |
|
| $m | $m |
| Staff costs | 527.6 | 355.6 |
| Other administrative expenses | 401.2 | 325.0 |
| Total administrative expenses | 928.8 | 680.6 |
| Recharged to third party syndicates | (115.5) | (75.8) |
| Expenses reclassified within the insurance service result | (447.5) | (387.2) |
| Total operating expenses | 365.8 | 217.6 |
Depreciation of $17.1m (2022: $15.6m) and amortisation of $16.2m (2022: $14.3m) is included within other administrative expenses.
Net staff costs
|
| 2023 | 2022 |
|
| $m | $m |
| Wages and salaries | 259.8 | 215.8 |
| Short term incentive payments | 167.5 | 78.1 |
| Social security | 45.3 | 30.0 |
| Share based remuneration | 33.8 | 14.7 |
| Pension costs¹ | 21.2 | 17.0 |
| Staff costs | 527.6 | 355.6 |
| Recharged to third party syndicates | (78.2) | (53.1) |
| Net staff costs | 449.4 | 302.5 |
1 Pension costs primarily include contributions made under the defined contribution scheme.
Average number of employees
A breakdown by category of employee is disclosed below.
|
| 2023 | 2022 |
|
|
|
|
| Directors | 11 | 10 |
| Senior managers | 145 | 107 |
| Other employees | 1,988 | 1,691 |
| Total average number of employees | 2,144 | 1,808 |
9 Auditor's remuneration
|
| 2023 | 2022 |
|
| $m | $m |
| Operating expenses include amounts receivable by the Group's auditors in respect of: |
|
|
| - audit of the Group's annual report & accounts | 6.5 | 1.7 |
| - audit of subsidiaries pursuant to legislation | 3.6 | 3.1 |
| - audit-related assurance services | 1.1 | 1.4 |
| - other non-audit services | 0.9 | 0.7 |
| Total auditor's remuneration | 12.1 | 6.9 |
Other than the fees disclosed above, no other fees were paid to the Company's auditor. Audit-related assurance services primarily comprise the review and audit of regulatory reporting pursuant to legislation and review of the Group's condensed interim financial statements. Included within the 2023 audit fees are fees of $5.1m (2022: $0.5m) that relate to the audit of IFRS 17 balances and transition, including the opening balance sheet and 2022 restated comparatives. Fees incurred for other non-audit services primarily relate to reporting required by Regulators and additional assurance work performed on material included within the annual report.
10 Finance costs
|
| 2023 |
2022 |
|
| $m | $m |
| Interest expense on financial liabilities | 31.6 | 31.5 |
| Interest expense on lease liabilities | 3.1 | 3.1 |
| Interest and charges related to letters of credit | 5.9 | 4.1 |
| Equity raise costs not charged to share premium | - | 0.7 |
| Total finance costs | 40.6 | 39.4 |
11 Tax expense
|
| 2023 | 2022¹ |
|
| $m | $m |
| Current tax expense |
|
|
| Current tax expense | 121.8 | 53.2 |
| Prior year adjustment | 1.5 | (9.9) |
|
| 123.3 | 43.3 |
| Deferred tax expense |
|
|
| Origination and reversal of temporary differences | 97.3 | 58.5 |
| Difference between current and deferred tax rates | 6.8 | (1.0) |
| Prior year adjustments | 0.2 | (0.1) |
|
| 104.3 | 57.4 |
| Tax expense | 227.6 | 100.7 |
1 Restated for the year ended 31 December 2022 following the adoption of IFRS 17.
Reconciliation of tax expense
The Group makes the majority of its profit in Ireland, the UK and the US. The weighted average of statutory tax rates based on the profits earned in each country in which the Group operates is 17.6% (2022: 19.0%), whereas the tax charged for the year ending 31 December 2023 as a percentage of profit before tax is 18.1% (2022: 17.2%). The reasons for the difference are explained below:
|
| 2023 | 2023 | 20221 | 2022 |
|
| $m | % | $m | % |
| Profit before tax | 1,254.4 |
| 584.0 |
|
| Tax calculated at the weighted average of statutory tax rate | 221.4 | 17.6 | 111.0 | 19.0 |
|
|
|
|
|
|
| Effects of: |
|
|
|
|
| - non-deductible/(non-taxable) expenses | (2.0) | (0.2) | 1.9 | 0.3 |
| - losses not previously recognised | (1.2) | (0.1) | - | - |
| - tax charge/(relief) on remuneration | 0.9 | 0.1 | (1.2) | (0.2) |
| - under/(over) provided in prior years | 1.7 | 0.1 | (10.0) | (1.7) |
| - Difference between current and deferred tax rates2 | 6.8 | 0.6 | (1.0) | (0.2) |
| Tax expense for the year | 227.6 | 18.1 | 100.7 | 17.2 |
1 Restated for the year ended 31 December 2022 following the adoption of IFRS 17.
2 The Finance Act 2021 provided for an increase in the UK corporation tax rate from 19% to 25% effective from 1 April 2023. This tax rate change has been reflected in the calculation of the deferred tax balances as at 31 December 2023.
Global minimum tax rate
The Organisation for Economic Co-operation and Development ("OECD") released the Pillar Two framework to ensure that large multinational enterprises pay a minimum effective corporate tax rate of 15% on the income arising in each jurisdiction in which they operate. In June 2023, the UK enacted legislation to implement these new rules in respect of accounting periods beginning on or after 31 December 2023.
We continue to assess the development of Pillar Two and expect that the impact will not be significant as the Group mainly operates in jurisdictions with a statutory tax rate above 15%. We anticipate the main impact for the Group will be in Ireland, where the tax rate is 12.5%. In December 2023, Ireland enacted a Qualified Domestic Minimum Top-Up Tax such that in-scope businesses pay at least a 15% effective tax rate on their profits. Based on the FY 2023 results, the impact is estimated to be an additional $18m of corporate income tax payable in Ireland. The impact on the Beazley Group will depend on the actual profits in each period.
12 Earnings per share
|
| 2023 |
2022 |
| Profit after tax¹ ($m) | 1,026.8 | 483.3 |
| Weighted average number of shares in issue (m) | 663.8 | 611.7 |
| Adjusted weighted average number of shares in issue (m) | 678.3 | 619.7 |
| Basic (cents) | 154.7c | 79.0c |
| Diluted (cents) | 151.4c | 78.0c |
|
|
|
|
| Basic (pence) | 124.8p | 63.4p |
| Diluted (pence) | 122.1p | 62.6p |
1 The Profit after tax figure has been restated for the year ended 31 December 2022 following the adoption of IFRS 17. The adoption of IFRS 9 has not had a material impact on the Group's basic or diluted earnings per share in the year to 31 December 2023.
Basic earnings per share is calculated by dividing profit after tax of $1,026.8m (2022: $483.3m) by the weighted average number of shares in issue during the year of 663.8m (2022: 611.7m).
Diluted earnings per share is calculated by dividing profit after tax of $1,026.8m (2022: $483.3m) by the adjusted weighted average number of shares of 678.3m (2022: 619.7m) in issue. This assumes conversion of dilutive potential ordinary shares, being shares from equity settled employee compensation schemes. Share options with performance conditions attaching to them have been excluded from the weighted average number of shares to the extent that these conditions have not been met at the reporting date.
Note that both calculations exclude the shares held in the Employee Share Options Plan of 9.8m (31 December 2022: 5.7m) until such time as they vest unconditionally with the employees.
13 Dividends per share
An interim dividend of 14.2p covering the whole of 2023 (2022: 13.5p) will be payable on 3 May 2024 to Beazley plc shareholders registered on 22 March 2024. The Group expects the total amount to be paid in respect of the interim dividend to be approximately £95.5m (2022: £90.6m). These financial statements do not provide for the interim dividend as a liability.
14 Financial assets and liabilities
14a Carrying values of financial assets and liabilities
Set out below are the carrying values of the Group's 'financial assets at fair value' and 'financial liabilities' per the statement of financial position. These amounts exclude the following financial assets and liabilities which are presented separately:
• Cash and cash equivalents carried at amortised cost (refer to Section d and Note 15); and
• Amounts due from managed syndicates, other receivables, lease liabilities, and other payables, all of which are carried at amortised cost (per Section d).
|
| 2023 | 2022 |
|
| $m | $m |
| Debt securities: |
|
|
| - Government issued | 4,469.1 | 5,006.3 |
| - Corporate bonds |
|
|
| - Investment grade | 3,578.3 | 2,050.5 |
| - High yield | 489.0 | 308.7 |
| Syndicate loans | 34.1 | 32.5 |
| Total debt securities and syndicate loans | 8,570.5 | 7,398.0 |
| Equity funds | 282.7 | 159.4 |
| Hedge funds | 582.2 | 530.6 |
| Illiquid assets | 220.1 | 222.9 |
| Total capital growth assets | 1,085.0 | 912.9 |
| Total financial investments at fair value through statement of profit or loss | 9,655.5 | 8,310.9 |
| Derivative financial assets | 10.0 | 34.7 |
| Total financial assets at fair value | 9,665.5 | 8,345.6 |
Investment corporate bonds are rated BBB-/Baa3 or higher by at least one major rating agency, while high yield corporate bonds have lower credit ratings. Hedge funds are investment vehicles pursuing alternative investment strategies, structured to have minimal correlation to traditional asset classes. Equity funds are investment vehicles which invest in equity securities and provide diversified exposure to global equity markets. Illiquid assets are investment vehicles that predominantly target private lending opportunities, often with longer investment horizons. The fair value of these assets at 31 December 2023 excludes an unfunded commitment of $32.0m (2022: $30.5m).
|
| 2023 | 2022 |
|
| $m | $m |
| Tier 2 subordinated debt (2026) | 249.5 | 249.4 |
| Tier 2 subordinated debt (2029) | 298.8 | 298.6 |
| Derivative financial liabilities | 6.3 | 14.5 |
| Total financial liabilities | 554.6 | 562.5 |
The Group has given a fixed and floating charge over certain of its investments and other assets to secure obligations to Lloyd's in respect of its corporate member subsidiary.
14b Valuation hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy described as follows. If the inputs used to measure the fair value of an asset or a liability could be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
Fair value is the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. Fair value is a market-based measure and in the absence of observable market prices in an active market, it is measured using the assumptions that market participants would use when pricing the asset or liability.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. When the transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss depending on the individual facts and circumstances of the transaction but before the valuation is supported wholly by observable market data or the transaction is closed out.
Level 1 - Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date.
Level 2 - Valuations based on quoted prices in markets that are not active, or based on pricing models for which significant inputs can be corroborated by observable market data, directly or indirectly (e.g. interest rates and exchange rates). Level 2 inputs include:
• Quoted prices for similar assets and liabilities in active markets;
• Quoted prices for identical or similar assets and liabilities in markets that are not active, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly;
• Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable at commonly quoted intervals, implied volatilities and credit spreads); and
• Market corroborated inputs. Included within level 2 are government bonds and treasury bills, equity funds and corporate bonds which are not actively traded, hedge funds and senior secured loans.
Level 3 - Valuations based on inputs that are unobservable or for which there is limited market activity against which to measure fair value. The availability of financial data can vary for different financial assets and is affected by a wide variety of factors, including the type of financial instrument, whether it is new and not yet established in the marketplace, and other characteristics specific to each transaction. To the extent that valuation is based on models or inputs that are unobservable in the market, the determination of fair value requires more judgement. Accordingly the degree of judgement exercised by management in determining fair value is greatest for instruments classified in level 3. The Group uses prices and inputs that are current as of the measurement date for valuation of these instruments.
Valuation approach - level 2 instruments
a) For the Group's level 2 debt securities, our fund administrator obtains the prices used in the valuation from independent pricing vendors. The independent pricing vendors derive an evaluated price from observable market inputs. These inputs are verified in their pricing assumptions such as weighted average life, discount margins, default rates, and recovery and prepayments assumptions for mortgage securities.
b) For our hedge funds, the pricing and valuation of each fund is undertaken by administrators in accordance with each underlying fund's valuation policy. Individual fund prices are communicated by the administrators to all investors via the monthly investor statements. The fair value of the hedge fund portfolios are calculated by reference to the underlying net asset values of each of the individual funds. Our hedge funds are managed by Falcon Money Management Holdings Limited, an associate of the Group.
c) Subordinated debt and tier 2 subordinated debt fair value are based on quoted market prices.
Valuation approach - level 3 instruments
a) Our illiquid fund investments are generally closed ended limited partnerships or open ended funds. The Group relies on a third party fund manager to manage these investments and provide valuations. Note that while the funds report with full transparency on their underlying investments, the investments themselves are predominantly in private and unquoted instruments. The valuation techniques used by the fund managers to establish the fair values therefore require a degree of estimation. For example, these may incorporate discounted cash flow models or a more market-based approach, whilst the main inputs might include discount rates, fundamental pricing multiples, recent transaction prices, or comparable market information to create a benchmark multiple.
b) Syndicate loans are non-tradeable instruments provided by our Group syndicates to the Central Fund at Lloyd's in respect of the 2019 and 2020 underwriting years. These are valued internally using discounted cash flow models provided by Lloyd's to the market, designed to appropriately reflect the credit and illiquidity risk of the instruments. Valuation outputs are then validated using a control model, with the following inputs and assumptions. Note that these internally valued instruments are deemed by management to be inherently more subjective than external valuations.
• Cash flows are comprised of the notional cost of the loans, annual interest income, and the final repayment of the loans at the end of the 5-year term. The weighted average interest rate applicable across all syndicate loans is 3.8% (2022: 3.8%).
• A discount rate of 7.0% (2022: 9.2%) is applied. This is calculated using a combination of the long-term treasury bond risk-free rate, the industry/geographic average regression beta, and a selected risk premium.
There were no changes in the valuation techniques during the year compared to those described in the Group's 2022 Annual Report and Accounts.
14c Fair values of financial assets and liabilities
The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy.
|
| Level 1 | Level 2 | Level 3 | Total |
| 2023 | $m | $m | $m | $m |
| Financial assets carried at fair value |
|
|
|
|
| Fixed and floating rate debt securities |
|
|
|
|
| - Government issued | 3,291.9 | 1,177.2 | - | 4,469.1 |
| - Corporate bonds |
|
|
|
|
| - Investment grade | 1,596.7 | 1,981.6 | - | 3,578.3 |
| - High yield | 488.1 | 0.9 | - | 489.0 |
| Syndicate loans | - | - | 34.1 | 34.1 |
| Equity funds | 282.7 | - | - | 282.7 |
| Hedge funds | - | 582.2 | - | 582.2 |
| Illiquid assets | - | - | 220.1 | 220.1 |
| Derivative financial assets | 10.0 | - | - | 10.0 |
| Total financial assets carried at fair value | 5,669.4 | 3,741.9 | 254.2 | 9,665.5 |
| Financial liabilities carried at fair value |
|
|
|
|
| Derivative financial liabilities | 6.3 | - | - | 6.3 |
| Total financial liabilities carried at fair value | 6.3 | - | - | 6.3 |
| Fair value of financial liabilities carried at amortised cost |
|
|
|
|
| Tier 2 subordinated debt (2026) | - | 241.7 | - | 241.7 |
| Tier 2 subordinated debt (2029) | - | 271.9 | - | 271.9 |
| Total fair value of financial liabilities carried at amortised cost | - | 513.6 | - | 513.6 |
|
| Level 1 | Level 2 | Level 3 | Total |
| 2022 | $m | $m | $m | $m |
| Financial assets carried at fair value |
|
|
|
|
| Fixed and floating rate debt securities |
|
|
|
|
| - Government issued | 4,022.5 | 983.8 | - | 5,006.3 |
| - Corporate bonds |
|
|
|
|
| - Investment grade | 893.8 | 1,156.7 | - | 2,050.5 |
| - High yield | 34.2 | 274.5 | - | 308.7 |
| Syndicate loans | - | - | 32.5 | 32.5 |
| Equity funds | 159.4 | - | - | 159.4 |
| Hedge funds | - | 530.6 | - | 530.6 |
| Illiquid assets | - | - | 222.9 | 222.9 |
| Derivative financial assets | 34.7 | - | - | 34.7 |
| Total financial assets carried at fair value | 5,144.6 | 2,945.6 | 255.4 | 8,345.6 |
| Financial liabilities carried at fair value |
|
|
|
|
| Derivative financial liabilities | 14.5 | - | - | 14.5 |
| Total financial liabilities carried at fair value | 14.5 | - | - | 14.5 |
| Fair value of financial liabilities carried at amortised cost |
|
|
|
|
| Tier 2 subordinated debt (2026) | - | 240.3 | - | 240.3 |
| Tier 2 subordinated debt (2029) | - | 265.9 | - | 265.9 |
| Total fair value of financial liabilities carried at amortised cost | - | 506.2 | - | 506.2 |
14d Financial assets and liabilities measured at amortised cost
The tables above exclude the following financial assets and liabilities that are, in accordance with the Group's accounting policies, measured at amortised cost. For all of these, the carrying amounts included below are deemed to be reasonable approximations of fair values at the reporting date.
|
| 2023 | 2022 |
|
| $m | $m |
| Cash and cash equivalents | 812.3 | 652.5 |
| Amounts due from managed syndicates | 25.4 | 1.9 |
| Other receivables | 272.1 | 179.9 |
| Total financial assets at amortised cost 1 | 1,109.8 | 834.3 |
| Lease liabilities | 76.6 | 72.7 |
| Amounts due to managed syndicates | 304.3 | 308.0 |
| Other payables | 207.3 | 184.5 |
| Total financial liabilities at amortised cost | 588.2 | 565.2 |
1 The Group has recognised expected credit losses ("ECLs") of $1.8m against its financial assets held at amortised cost as at 31 December 2023.
14e Transfers
The Group determines whether transfers have occurred between levels in the fair value hierarchy by assessing categorisation at the end of the reporting period. The following transfers between levels 1 & 2 for the period ended 31 December 2023 reflect the level of trading activities including frequency and volume derived from market data obtained from an independent external valuation tool. There were no transfers into or out of level 3 in the year to 31 December 2023 (2022: no transfers).
|
| Level 1 | Level 2 |
| 31 December 2023 vs 31 December 2022 transfer from level 2 to level 1 | $m | $m |
| - Corporate Bonds - Investment grade | 446.0 | (446.0) |
|
| Level 1 | Level 2 |
| 31 December 2023 vs 31 December 2022 transfer from level 1 to level 2 | $m | $m |
| - Corporate Bonds - Investment grade | (525.3) | 525.3 |
The values shown in the transfer tables above are translated using spot foreign exchange rates as at 31 December 2023.
14f Level 3 investment reconciliations
The table below shows a reconciliation from the opening balances to the closing balances of level 3 fair values. All realised and unrealised gains/(losses) are recognised through net investment income in the statement of profit or loss (refer to Note 6).
|
| 2023 | 2022 |
|
| $m | $m |
| Opening position as at 01 January | 255.4 | 315.8 |
| Purchases | 21.8 | 13.0 |
| Sales | (37.4) | (81.4) |
| Realised gain | 20.2 | 13.2 |
| Unrealised loss | (6.6) | (2.7) |
| Foreign exchange gain/(loss) | 0.8 | (2.5) |
| Closing position as at 31 December | 254.2 | 255.4 |
14g Unconsolidated structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant activities are directed by means of contractual arrangements.
As part of its standard investment activities the Group holds fixed interest investments in high yield bond funds, as well as capital growth investments in equity funds, hedge funds and illiquid assets which in accordance with IFRS 12 are classified as unconsolidated structured entities. The Group does not sponsor any of the unconsolidated structured entities. The assets classified as unconsolidated structured entities are held at fair value on the statement of financial position. As at 31 December the investments comprising the Group's unconsolidated structured entities are as follows:
|
| 2023 | 2022 |
|
| $m | $m |
| High yield bond funds | 489.0 | 308.7 |
| Equity funds | 282.7 | 159.4 |
| Hedge funds | 582.2 | 530.6 |
| Illiquid assets | 220.1 | 222.9 |
| Investments through unconsolidated structured entities | 1,574.0 | 1,221.6 |
The majority of our unconsolidated structured entity exposures fall within our capital growth assets. The capital growth assets are held in investee funds managed by asset managers who apply various investment strategies to accomplish their respective investment objectives. The Group's investments in investee funds are subject to the terms and conditions of the respective investee fund's offering documentation and are susceptible to market price risk arising from uncertainties about future values of those investee funds. Investment decisions are made after extensive due diligence on the underlying fund, its strategy and the overall quality of the underlying fund's manager and assets.
The right to sell or request redemption of investments in high yield bond funds, asset backed securities, equity funds and hedge funds ranges in frequency from daily to semi-annually. The Group did not sponsor any of the respective structured entities. The Group's maximum exposure to loss from its interests in investee funds is equal to the total fair value of its investments in investee funds and unfunded commitments.
14h Currency exposures
The currency exposures of our financial assets held are detailed below:
|
| UK £ | CAD $ | EUR € | Sub Total | US $ | Total |
| 2023 | $m | $m | $m | $m | $m | $m |
| Financial assets at FVTPL: |
|
|
|
|
|
|
| - Fixed and floating rate debt securities | 789.6 | 432.5 | - | 1,222.1 | 7,314.3 | 8,536.4 |
| - Syndicate loans | 34.1 | - | - | 34.1 | - | 34.1 |
| - Equity Linked Funds | - | - | - | - | 282.7 | 282.7 |
| - Hedge funds | - | - | - | - | 582.2 | 582.2 |
| - Illiquid assets | 6.4 | - | 45.9 | 52.3 | 167.8 | 220.1 |
| - Derivative financial assets | - | - | - | - | 10.0 | 10.0 |
| Cash and cash equivalents | 125.8 | 51.5 | 93.5 | 270.8 | 541.5 | 812.3 |
| Amounts due from managed syndicates and other receivables | 27.6 | 9.4 | 51.4 | 88.4 | 209.1 | 297.5 |
| Total | 983.5 | 493.4 | 190.8 | 1,667.7 | 9,107.6 | 10,775.3 |
|
| UK £ | CAD $ | EUR € | Sub Total | US $ | Total |
| 2022 | $m | $m | $m | $m | $m | $m |
| Financial assets at FVTPL: |
|
|
|
|
|
|
| - Fixed and floating rate debt securities | 636.1 | 365.9 | - | 1,002.0 | 6,363.5 | 7,365.5 |
| - Syndicate loans | 32.5 | - | - | 32.5 | - | 32.5 |
| - Equity Linked Funds | - | - | - | - | 159.4 | 159.4 |
| - Hedge funds | - | - | - | - | 530.6 | 530.6 |
| - Illiquid assets | 0.1 | - | 46.2 | 46.3 | 176.6 | 222.9 |
| - Derivative financial assets | - | - | - | - | 34.7 | 34.7 |
| Cash and cash equivalents | 93.1 | 53.8 | 83.4 | 230.3 | 422.2 | 652.5 |
| Amounts due from managed syndicates and other receivables | 9.5 | 3.4 | 32.8 | 45.7 | 136.1 | 181.8 |
| Total | 771.3 | 423.1 | 162.4 | 1,356.8 | 7,823.1 | 9,179.9 |
15 Cash and cash equivalents
|
| 2023 | 2022 |
|
| $m | $m |
| Cash at bank and in hand | 812.3 | 652.5 |
|
| 812.3 | 652.5 |
Included within Cash and cash equivalents held by the Group are balances totalling $132.6m (31 December 2022: $184.0m) not available for immediate use by the Group outside of the Lloyd's syndicate within which they are held. Additionally, $73.1m (31 December 2022: $66.0m) is pledged cash held against Funds at Lloyd's, and $13.3m (31 December 2022: $43.6m) is held in Lloyd's Singapore trust accounts which are only available for use by the Group to meet local claim and expense obligations.
16 Deferred tax
|
| 2023 | 20221 |
|
| $m | $m |
| Deferred tax asset | 46.9 | 30.8 |
| Deferred tax liability | (202.2) | (79.2) |
| Net deferred tax liability | (155.3) | (48.4) |
1 Deferred tax amounts as at 31 December 2022 have been restated on adoption of IFRS 17. Refer below for further details.
|
| Balance 01 Jan 23 | Recognised in total comprehensive income | Recognised in equity | FX translation differences | Balance 31 Dec 23 |
|
| $m | $m | $m | $m | $m |
| Plant and equipment | (0.8) | (0.3) | - | - | (1.1) |
| Intangible assets | (1.8) | 0.5 | - | - | (1.3) |
| Underwriting profits | 7.4 | (101.6) | - | - | (94.2) |
| Deferred acquisition costs | 1.7 | (1.7) | - | - | - |
| Tax losses carried forward | 4.0 | 5.7 | - | - | 9.7 |
| Share based payments | 8.4 | 1.5 | (0.9) | - | 9.0 |
| Unrealised gains/(losses) on investments | 9.9 | (11.1) | - | - | (1.2) |
| IFRS 17 adjustments | (83.7) | (3.4) | - | - | (87.1) |
| Other | 6.5 | 6.8 | - | (2.4) | 10.9 |
| Net deferred tax asset/(liability) | (48.4) | (103.6) | (0.9) | (2.4) | (155.3) |
|
| Balance 01 Jan 22¹ | Recognised in total comprehensive income | Recognised in equity | FX translation differences | Balance 31 Dec 22 |
|
| $m | $m | $m | $m | $m |
| Plant and equipment | (1.2) | 0.4 | - | - | (0.8) |
| Intangible assets | (0.5) | (1.3) | - | - | (1.8) |
| Underwriting profits | 14.2 | (6.8) | - | - | 7.4 |
| Tax losses carried forward | 9.6 | (5.6) | - | - | 4.0 |
| Deferred acquisition costs | (7.8) | 9.5 | - | - | 1.7 |
| Share based payments | 2.6 | 3.1 | 3.1 | (0.4) | 8.4 |
| Unrealised gains/(losses) on investments | (1.7) | 11.6 | - | - | 9.9 |
| IFRS 17 adjustments | (13.4) | (70.3) | - | - | (83.7) |
| Other | 1.2 | 4.7 | 0.6 | - | 6.5 |
| Net deferred tax asset/(liability) | 3.0 | (54.7) | 3.7 | (0.4) | (48.4) |
1 Deferred tax amounts as at 01 January 2022 have been restated on adoption of IFRS 17.
Geographical analysis
Deferred tax assets and deferred tax liabilities relating to the same tax authority are presented net in the Group's balance sheet. A geographical analysis has been included below.
|
| 2023 | 2022 |
|
| $m | $m |
| UK | (152.8) | (35.3) |
| US | 46.7 | 29.8 |
| Ireland | (38.7) | (39.0) |
| Other¹ | (10.5) | (3.9) |
| Net deferred tax liability | (155.3) | (48.4) |
1 Includes Canada, France, Germany, Spain and Switzerland.
Under IFRS 17, the timing of the recognition of the Group's profits differs significantly from the basis on which corporate taxes are levied in the tax jurisdictions where the Group operates. None of the Group's material profit making entities pay corporate taxes based on IFRS 17 profits and therefore significant temporary differences arise. In some jurisdictions, such as the UK and Ireland, profits are recognised earlier under IFRS 17 and thus a deferred tax liability is recognised. The Group expects this to unwind over time as profits are recognised (offset by new profits on an IFRS 17 basis). In the US, profits are recognised more slowly on an IFRS 17 basis than under the US Stat basis on which tax is determined, with the Group recognising a deferred tax asset of $23.2m (2022: $13.1m). The Group is of the view that sufficient future profits will arise on an IFRS 17 basis to realise this deferred tax asset.
The Group has recognised a deferred tax liability of $94.2m (2022: asset of $7.4m) which relates to timing differences between the recognition of the Group's share of syndicate profits and when they are taxed. Profits or losses arising from membership of a syndicate are deferred for tax purposes until the year in which the result is declared. Typically, a year of account lasts for 36 months and is declared the following year. The deferred tax liability relates to the results of the 2021, 2022 and 2023 Years of Account. The 2020 Year of Account closed at the end of 2022 and was declared and taxed in 2023.
Additionally the Group recognises deferred tax assets of $9.7m (2022: $4.0m) which depend on the availability of future taxable profits to offset tax losses previously recognised. The Group has concluded that it is probable that these deferred tax assets will be recovered using estimated future taxable profits based on approved business plans. The losses which make up this part of the deferred tax asset can be carried forward indefinitely and have no expiry date. The Group has no unrecognised trading losses as at December 31 2023 (2022: nil) and has unrecognised capital losses of $4.0m (2022: $2.2m).
Pillar Two Taxes
No deferred taxes have been recognised by the Group in relation to the OECD's project to implement a global minimum tax rate. Refer to Note 11 for further details.
17 Subordinated liabilities
In November 2016, the Group issued $250m of subordinated Tier 2 notes due in 2026. Annual interest, at a fixed rate of 5.875%, is payable in May and November each year. In September 2019, the Group issued $300m of subordinated Tier 2 notes due in 2029. Annual interest, at a fixed rate of 5.5% is payable in March and September each year.
The carrying amounts of the subordinated liabilities are as follows. The total fair value of the Group's subordinated liabilities is $513.6m (2022: $506.2m).
|
| Tier 2 subordinated debt (2029) | Tier 2 subordinated debt (2026) | Total |
|
| $m | $m | $m |
| Opening balance at 01 January 2022 | 298.4 | 249.2 | 547.6 |
| Amortisation of capitalised borrowing costs | 0.2 | 0.2 | 0.4 |
| Closing balance at 31 December 2022 | 298.6 | 249.4 | 548.0 |
| Amortisation of capitalised borrowing costs | 0.2 | 0.1 | 0.3 |
| Closing balance at 31 December 2023 | 298.8 | 249.5 | 548.3 |
The annual interest expense on the Group's subordinated liabilities is included in Note 4.
18 Insurance and reinsurance contracts
18a Reconciliations by measurement component
This section shows how the net carrying amounts of insurance contracts issued and reinsurance contracts held by the Group have changed during the year, as a result of changes in cash flows and amounts recognised in profit or loss.
i) Insurance contracts issued
The tables below set out the estimated present value of future cash flows, the risk adjustment for non-financial risk and the CSM for insurance contracts issued.
|
| Present value of future cash flows | Risk adjustment for non-financial risk | CSM | Total |
| 31 December 2023 | $m | $m | $m | $m |
| Opening insurance contract assets | 123.5 | (12.9) | (26.5) | 84.1 |
| Opening insurance contract liabilities | (6,324.0) | (711.3) | (314.5) | (7,349.8) |
| Net insurance contract liabilities at 01 January 2023 | (6,200.5) | (724.2) | (341.0) | (7,265.7) |
|
|
|
|
|
|
| CSM recognised in profit or loss for services provided | - | - | 691.4 | 691.4 |
| Changes in the risk adjustment for non-financial risk for risk expired | - | 316.8 | - | 316.8 |
| Experience adjustments | 893.3 | (285.5) | - | 607.8 |
| Total changes relating to current service | 893.3 | 31.3 | 691.4 | 1,616.0 |
|
|
|
|
|
|
| Changes in estimates that adjust the CSM | 135.0 | (19.1) | (115.9) | - |
| Changes in estimates that result in onerous contract losses or reversal of such losses | 6.0 | (1.1) | 7.5 | 12.4 |
| Contracts initially recognised in the period | 870.2 | (264.2) | (616.6) | (10.6) |
| Total changes relating to future service | 1,011.2 | (284.4) | (725.0) | 1.8 |
|
|
|
|
|
|
| Total changes relating to past service - adjustments to the LIC | 16.2 | 215.8 | - | 232.0 |
|
|
|
|
|
|
| Recognised in insurance service result | 1,920.7 | (37.3) | (33.6) | 1,849.8 |
|
|
|
|
|
|
| Finance (expenses)/income from insurance contracts issued | (190.2) | (13.9) | 34.8 | (169.3) |
| Foreign exchange gains/(losses) | 1.9 | (0.6) | (4.2) | (2.9) |
| Other amounts recognised in total comprehensive income | (188.3) | (14.5) | 30.6 | (172.2) |
|
|
|
|
|
|
| Premiums received net of insurance acquisition cash flows | (4,526.4) | - | - | (4,526.4) |
| Claims and other directly attributable expenses paid | 2,223.8 | - | - | 2,223.8 |
| Total cash flows | (2,302.6) | - | - | (2,302.6) |
|
|
|
|
|
|
| Closing insurance contract assets | 103.8 | (1.2) | (1.1) | 101.5 |
| Closing insurance contract liabilities | (6,874.5) | (774.8) | (342.9) | (7,992.2) |
| Net insurance contract liabilities at 31 December 2023 | (6,770.7) | (776.0) | (344.0) | (7,890.7) |
|
| Present value of future cash flows | Risk adjustment for non-financial risk | CSM | Total |
| 31 December 2022 | $m | $m | $m | $m |
| Opening insurance contract assets | - | - | - | - |
| Opening insurance contract liabilities | (5,628.3) | (740.3) | (190.9) | (6,559.5) |
| Net insurance contract liabilities at 01 January 2022 | (5,628.3) | (740.3) | (190.9) | (6,559.5) |
|
|
|
|
|
|
| CSM recognised in profit or loss for services provided | - | - | 565.2 | 565.2 |
| Changes in the risk adjustment for non-financial risk for risk expired | - | 274.7 | - | 274.7 |
| Experience adjustments | 518.4 | (268.6) | - | 249.8 |
| Total changes relating to current service | 518.4 | 6.1 | 565.2 | 1,089.7 |
|
|
|
|
|
|
| Changes in estimates that adjust the CSM | 57.2 | 61.5 | (118.7) | - |
| Changes in estimates that result in onerous contract losses or reversal of such losses | 42.7 | (3.0) | 18.5 | 58.2 |
| Contracts initially recognised in the period | 898.3 | (324.8) | (607.6) | (34.1) |
| Total changes relating to future service | 998.2 | (266.3) | (707.8) | 24.1 |
|
|
|
|
|
|
| Total changes relating to past service - adjustments to the LIC | (517.3) | 237.9 | - | (279.4) |
|
|
|
|
|
|
| Recognised in insurance service result | 999.3 | (22.3) | (142.6) | 834.4 |
|
|
|
|
|
|
| Finance income/(expenses) from insurance contracts issued | 261.8 | 29.5 | (11.8) | 279.5 |
| Foreign exchange gains | 45.9 | 8.9 | 4.3 | 59.1 |
| Other amounts recognised in total comprehensive income | 307.7 | 38.4 | (7.5) | 338.6 |
|
|
|
|
|
|
| Premiums received net of insurance acquisition cash flows | (4,141.0) | - | - | (4,141.0) |
| Claims and other directly attributable expenses paid | 2,261.8 | - | - | 2,261.8 |
| Total cash flows | (1,879.2) | - | - | (1,879.2) |
|
|
|
|
|
|
| Closing insurance contract assets | 123.5 | (12.9) | (26.5) | 84.1 |
| Closing insurance contract liabilities | (6,324.0) | (711.3) | (314.5) | (7,349.8) |
| Net insurance contract liabilities at 31 December 2022 | (6,200.5) | (724.2) | (341.0) | (7,265.7) |
ii) Reinsurance contracts held
The tables below set out the estimates of the present value of future cash flows, risk adjustment for non-financial risk and CSM for reinsurance contracts held.
|
| Present value of future cash flows | Risk adjustment for non-financial risk | CSM | Total |
| 31 December 2023 | $m | $m | $m | $m |
| Opening reinsurance contract assets | 1,853.3 | 184.6 | 137.4 | 2,175.3 |
| Opening reinsurance contract liabilities | (193.8) | 12.7 | 19.9 | (161.2) |
| Net reinsurance contract assets at 01 January 2023 | 1,659.5 | 197.3 | 157.3 | 2,014.1 |
|
|
|
|
|
|
| CSM recognised in profit or loss for the services provided | - | - | (290.8) | (290.8) |
| Changes in the risk adjustment for non-financial risk for the risk expired | - | (105.2) | - | (105.2) |
| Experience adjustments | (139.0) | 84.2 | - | (54.8) |
| Total changes relating to current service | (139.0) | (21.0) | (290.8) | (450.8) |
|
|
|
|
|
|
| Changes in estimates that adjust the CSM | 91.6 | (16.1) | (75.5) | - |
| Contracts initially recognised in the period | (436.3) | 84.2 | 352.1 | - |
| Total changes relating to future service | (344.7) | 68.1 | 276.6 | - |
|
|
|
|
|
|
| Adjustments to incurred claims recovery | (110.9) | (41.3) | - | (152.2) |
| Effect of changes in the risk of reinsurers non-performance | 4.2 | - | - | 4.2 |
| Total changes relating to past service | (106.7) | (41.3) | - | (148.0) |
|
|
|
|
|
|
| Recognised in insurance service result | (590.4) | 5.8 | (14.2) | (598.8) |
|
|
|
|
|
|
| Finance income/(expenses) from reinsurance contracts held | 24.0 | 5.7 | (13.8) | 15.9 |
| Foreign exchange (losses)/gains | (20.6) | 15.8 | 0.3 | (4.5) |
| Other amounts recognised in total comprehensive income | 3.4 | 21.5 | (13.5) | 11.4 |
|
|
|
|
|
|
| Premiums paid net of ceding commissions and other directly attributable expenses paid | 1,080.4 | - | - | 1,080.4 |
| Recoveries from reinsurance | (413.9) | - | - | (413.9) |
| Total cash flows | 666.5 | - | - | 666.5 |
|
|
|
|
|
|
| Closing reinsurance contract assets | 2,143.4 | 166.2 | 117.1 | 2,426.7 |
| Closing reinsurance contract liabilities | (404.4) | 58.4 | 12.5 | (333.5) |
| Net reinsurance contract assets at 31 December 2023 | 1,739.0 | 224.6 | 129.6 | 2,093.2 |
|
| Present value of future cash flows | Risk adjustment for non-financial risk | CSM | Total |
| 31 December 2022 | $m | $m | $m | $m |
| Opening reinsurance contract assets | 1,453.7 | 177.0 | 43.6 | 1,674.3 |
| Opening reinsurance contract liabilities | (156.6) | 13.8 | 3.1 | (139.7) |
| Net reinsurance contract assets at 01 January 2022 | 1,297.1 | 190.8 | 46.7 | 1,534.6 |
|
|
|
|
|
|
| CSM recognised in profit or loss for the services provided | - | - | (195.3) | (195.3) |
| Changes in the risk adjustment for non-financial risk for the risk expired | - | (74.3) | - | (74.3) |
| Experience adjustments | (29.8) | 65.7 | - | 35.9 |
| Total changes relating to current service | (29.8) | (8.6) | (195.3) | (233.7) |
|
|
|
|
|
|
| Changes in estimates that adjust the CSM | 264.4 | 7.1 | (271.5) | - |
| Contracts initially recognised in the period | (646.2) | 74.1 | 572.1 | - |
| Total changes relating to future service | (381.8) | 81.2 | 300.6 | - |
|
|
|
|
|
|
| Adjustments to incurred claims recovery | 307.8 | (53.0) | - | 254.8 |
| Effect of changes in the risk of reinsurers non-performance | (32.6) | - | - | (32.6) |
| Total changes relating to past service | 275.2 | (53.0) | - | 222.2 |
|
|
|
|
|
|
| Recognised in insurance service result | (136.4) | 19.6 | 105.3 | (11.5) |
|
|
|
|
|
|
| Finance expenses from reinsurance contracts held | (82.6) | (10.7) | (3.2) | (96.5) |
| Foreign exchange (losses)/gains | (6.9) | (2.4) | 8.5 | (0.8) |
| Other amounts recognised in total comprehensive income | (89.5) | (13.1) | 5.3 | (97.3) |
|
|
|
|
|
|
| Premiums paid net of ceding commissions and other directly attributable expenses paid | 961.7 | - | - | 961.7 |
| Recoveries from reinsurance | (373.4) | - | - | (373.4) |
| Total cash flows | 588.3 | - | - | 588.3 |
|
|
|
|
|
|
| Closing reinsurance contract assets | 1,853.3 | 184.6 | 137.4 | 2,175.3 |
| Closing reinsurance contract liabilities | (193.8) | 12.7 | 19.9 | (161.2) |
| Net reinsurance contract assets at 31 December 2022 | 1,659.5 | 197.3 | 157.3 | 2,014.1 |
18b Analysis of the liability for remaining coverage and the liability for incurred claims
i) Insurance contracts issued
The tables below analyse insurance contract assets and liabilities between the LRC and the LIC for insurance contracts issued.
|
| LRC | LIC | Total | |
|
| Excluding Loss Component | Loss Component | ||
| 31 December 2023 | $m | $m | $m | $m |
| Opening insurance contract assets | 87.2 | - | (3.1) | 84.1 |
| Opening insurance contract liabilities | (824.7) | (10.1) | (6,515.0) | (7,349.8) |
| Net insurance contract liabilities at 01 January 2023 | (737.5) | (10.1) | (6,518.1) | (7,265.7) |
|
|
|
|
|
|
| Insurance revenue | 5,442.4 | - | - | 5,442.4 |
| Insurance service expenses: |
|
|
|
|
| - Incurred claims and other directly attributable expenses | (86.3) | - | (2,825.3) | (2,911.6) |
| - Changes that relate to past service - adjustments to the LIC | - | - | 232.0 | 232.0 |
| - Losses on onerous contracts and reversal of those losses | - | 1.8 | - | 1.8 |
| - Insurance acquisition cash flows amortisation | (914.8) | - | - | (914.8) |
| Recognised in insurance service result | 4,441.3 | 1.8 | (2,593.3) | 1,849.8 |
|
|
|
|
|
|
| Finance income/(expenses) from insurance contracts issued | 70.8 | - | (240.1) | (169.3) |
| Foreign exchange gains/(losses) | 4.7 | - | (7.6) | (2.9) |
| Other amounts recognised in total comprehensive income | 75.5 | - | (247.7) | (172.2) |
|
|
|
|
|
|
| Premiums received net of insurance acquisition cash flows | (4,526.4) | - | - | (4,526.4) |
| Claims and other directly attributable expenses paid | - | - | 2,223.8 | 2,223.8 |
| Total cash flows | (4,526.4) | - | 2,223.8 | (2,302.6) |
|
|
|
|
|
|
| Closing insurance contract assets | 101.7 | - | (0.2) | 101.5 |
| Closing insurance contract liabilities | (848.8) | (8.3) | (7,135.1) | (7,992.2) |
| Net insurance contract liabilities at 31 December 2023 | (747.1) | (8.3) | (7,135.3) | (7,890.7) |
|
|
| LRC | LIC | Total | |||
|
|
| Excluding Loss Component | Loss Component | ||||
|
| 31 December 2022 | $m | $m | $m | $m | ||
|
| Opening insurance contract assets | - | - | - | - | ||
|
| Opening insurance contract liabilities | (688.1) | (34.3) | (5,837.1) | (6,559.5) | ||
|
| Net insurance contract liabilities at 01 January 2022 | (688.1) | (34.3) | (5,837.1) | (6,559.5) | ||
|
|
|
|
|
|
| ||
|
| Insurance revenue | 4,848.4 | - | - | 4,848.4 | ||
|
| Insurance service expenses: |
|
|
|
| ||
|
| - Incurred claims and other directly attributable expenses | (41.0) | - | (2,867.6) | (2,908.6) | ||
|
| - Changes that relate to past service - adjustments to the LIC | - | - | (279.4) | (279.4) | ||
|
| - Losses on onerous contracts and reversal of those losses | - | 24.1 | - | 24.1 | ||
|
| - Insurance acquisition cash flows amortisation | (850.1) | - | - | (850.1) | ||
|
| Recognised in insurance service result | 3,957.3 | 24.1 | (3,147.0) | 834.4 | ||
|
|
|
|
|
|
| ||
|
| Finance income from insurance contracts issued | 129.5 | - | 150.0 | 279.5 | ||
|
| Foreign exchange gains | 4.8 | 0.1 | 54.2 | 59.1 | ||
|
| Other amounts recognised in total comprehensive income | 134.3 | 0.1 | 204.2 | 338.6 | ||
|
|
|
|
|
|
| ||
|
| Premiums received net of insurance acquisition cash flows | (4,141.0) | - | - | (4,141.0) | ||
|
| Claims and other directly attributable expenses paid | - | - | 2,261.8 | 2,261.8 | ||
|
| Total cash flows | (4,141.0) | - | 2,261.8 | (1,879.2) | ||
|
|
|
|
|
|
| ||
|
| Closing insurance contract assets | 87.2 | - | (3.1) | 84.1 | ||
|
| Closing insurance contract liabilities | (824.7) | (10.1) | (6,515.0) | (7,349.8) | ||
|
| Net insurance contract liabilities at 31 December 2022 | (737.5) | (10.1) | (6,518.1) | (7,265.7) | ||
|
|
|
|
| ||||
ii) Reinsurance contracts held
The tables below analyse reinsurance contract assets and liabilities between the ARC and AIC for reinsurance contracts held.
|
| ARC¹ | AIC | Total |
| 31 December 2023 | $m | $m | $m |
| Opening reinsurance contract assets | 24.9 | 2,150.4 | 2,175.3 |
| Opening reinsurance contract liabilities | (254.7) | 93.5 | (161.2) |
| Net reinsurance contract assets at 01 January 2023 | (229.8) | 2,243.9 | 2,014.1 |
|
|
|
|
|
| Expected claims and other expenses recovery | (1,419.8) | 679.3 | (740.5) |
| Changes in the risk adjustment recognised for the risk expired | (189.4) | 84.2 | (105.2) |
| CSM recognised for the services received | (290.8) | - | (290.8) |
| Other amounts including experience adjustments | 9.2 | - | 9.2 |
| Allocation of reinsurance premium | (1,890.8) | 763.5 | (1,127.3) |
| Effect of changes in the risk of reinsurers' non-performance | (1.3) | 5.5 | 4.2 |
| Claims recovered | 767.1 | (87.0) | 680.1 |
| Other incurred directly attributable expenses | (0.5) | (3.1) | (3.6) |
| Changes that relate to past service - adjustments to incurred claims recovery | - | (152.2) | (152.2) |
| Amounts recoverable from reinsurers for incurred claims | 765.3 | (236.8) | 528.5 |
| Net expenses from reinsurance contracts held | (1,125.5) | 526.7 | (598.8) |
|
|
|
|
|
| Finance (expenses)/income from reinsurance contracts held | (40.9) | 56.8 | 15.9 |
| Foreign exchange (losses)/gains | (6.1) | 1.6 | (4.5) |
| Other amounts recognised in total comprehensive income | (47.0) | 58.4 | 11.4 |
|
|
|
|
|
| Premiums paid net of ceding commissions and other directly attributable expenses paid | 1,080.4 | - | 1,080.4 |
| Recoveries from reinsurance | - | (413.9) | (413.9) |
| Total cash flows | 1,080.4 | (413.9) | 666.5 |
|
|
|
|
|
| Closing reinsurance contract assets | 758.4 | 1,668.3 | 2,426.7 |
| Closing reinsurance contract liabilities | (1,080.3) | 746.8 | (333.5) |
| Net reinsurance contract assets at 31 December 2023 | (321.9) | 2,415.1 | 2,093.2 |
1 Includes loss recovery component of $3.8m at 01 January 2023 and $0.9m at 31 December 2023.
|
| ARC¹ | AIC | Total |
| 31 December 2022 | $m | $m | $m |
| Opening reinsurance contract assets | (29.0) | 1,703.3 | 1,674.3 |
| Opening reinsurance contract liabilities | (223.4) | 83.7 | (139.7) |
| Net reinsurance contract assets/(liabilities) at 01 January 2022 | (252.4) | 1,787.0 | 1,534.6 |
|
|
|
|
|
| Expected claims and other expenses recovery | (1,002.1) | 270.3 | (731.8) |
| Changes in the risk adjustment recognised for the risk expired | (140.0) | 65.7 | (74.3) |
| CSM recognised for the services received | (195.3) | - | (195.3) |
| Other amounts including experience adjustments | 36.0 | - | 36.0 |
| Allocation of reinsurance premium | (1,301.4) | 336.0 | (965.4) |
| Effect of changes in the risk of reinsurers' non-performance | (1.4) | (31.2) | (32.6) |
| Claims recovered | 368.3 | 365.1 | 733.4 |
| Other incurred directly attributable expenses | 5.1 | (6.8) | (1.7) |
| Changes that relate to past service - adjustments to incurred claims recovery | - | 254.8 | 254.8 |
| Amounts recoverable from reinsurers for incurred claims | 372.0 | 581.9 | 953.9 |
| Net expenses from reinsurance contracts held | (929.4) | 917.9 | (11.5) |
|
|
|
|
|
| Finance expenses from reinsurance contracts held | (22.5) | (74.0) | (96.5) |
| Foreign exchange gains/(losses) | 12.8 | (13.6) | (0.8) |
| Other amounts recognised in total comprehensive income | (9.7) | (87.6) | (97.3) |
|
|
|
|
|
| Premiums paid net of ceding commissions and other directly attributable expenses paid | 961.7 | - | 961.7 |
| Recoveries from reinsurance | - | (373.4) | (373.4) |
| Total cash flows | 961.7 | (373.4) | 588.3 |
|
|
|
|
|
| Closing reinsurance contract assets | 24.9 | 2,150.4 | 2,175.3 |
| Closing reinsurance contract liabilities | (254.7) | 93.5 | (161.2) |
| Net reinsurance contract assets/(liabilities) at 31 December 2022 | (229.8) | 2,243.9 | 2,014.1 |
1 Includes loss recovery component of $3.4m at 01 January 2022 and $3.8m at 31 December 2022.
18c New business
i) Impact of insurance contracts issued in the year
The following tables show the impact of new insurance contracts issued in the period. These are broken down by contracts which were/were not deemed to be onerous on initial recognition.
|
| Non-onerous contracts originated | Onerous contracts originated | Total |
| Year ended 31 December 2023 | $m | $m | $m |
| Estimated present value of future cash outflows: |
|
|
|
| - Insurance acquisition cash flows | (759.3) | (68.1) | (827.4) |
| - Claims and other directly attributable expenses | (2,489.8) | (176.7) | (2,666.5) |
| Estimated present value of future cash inflows | 4,115.0 | 249.1 | 4,364.1 |
| Risk adjustment for non-financial risk | (249.3) | (14.9) | (264.2) |
| Contractual service margin | (616.6) | - | (616.6) |
| Net increase in insurance contract liabilities | - | (10.6) | (10.6) |
|
| Non-onerous contracts originated | Onerous contracts originated | Total |
| Year ended 31 December 2022 | $m | $m | $m |
| Estimated present value of future cash outflows: |
|
|
|
| - Insurance acquisition cash flows | (531.9) | (112.1) | (644.0) |
| - Claims and other directly attributable expenses | (1,720.7) | (391.2) | (2,111.9) |
| Estimated present value of future cash inflows | 3,077.9 | 576.3 | 3,654.2 |
| Risk adjustment for non-financial risk | (217.7) | (107.1) | (324.8) |
| Contractual service margin | (607.6) | - | (607.6) |
| Net increase in insurance contract liabilities | - | (34.1) | (34.1) |
ii) Impact of reinsurance contracts held in the year
The following table shows the impact of new reinsurance contracts initially recognised in the period which were not deemed to originate with a loss recovery component. Contracts originating with a loss recovery component are $0.3m (2022: $12.1m).
|
| 2023 | 2022 |
|
| $m | $m |
| Estimated present value of future cash outflows | (1,253.5) | (1,671.6) |
| Estimated present value of future cash inflows | 817.2 | 1,025.4 |
| Risk adjustment for non-financial risk | 84.2 | 74.1 |
| Contractual service margin | 352.1 | 572.1 |
| Net increase in reinsurance contract assets | - | - |
18d Future CSM release
The tables below show when the Group expects to release the closing CSM to the profit or loss in appropriate future time bands. It is presented for both insurance contracts issued and reinsurance contracts held.
|
| 2023 | 2022 |
| Insurance contracts issued | $m | $m |
| Number of years until expected to be recognised |
|
|
| 1 | 299.0 | 301.7 |
| 2 | 14.7 | 12.5 |
| 3 | 10.5 | 8.9 |
| 4 | 7.6 | 6.6 |
| 5 | 5.1 | 4.8 |
| 6-10 | 7.1 | 6.5 |
| >10 | - | - |
| Total | 344.0 | 341.0 |
|
| 2023 | 2022 |
| Reinsurance contracts held | $m | $m |
| Number of years until expected to be recognised |
|
|
| 1 | 118.7 | 143.0 |
| 2 | 3.7 | 4.4 |
| 3 | 2.6 | 3.0 |
| 4 | 1.8 | 2.2 |
| 5 | 1.2 | 1.7 |
| 6-10 | 1.6 | 3.0 |
| >10 | - | - |
| Total | 129.6 | 157.3 |
18e Claims development
The following tables show the estimates of cumulative ultimate claims for each successive underwriting year from five years prior to the reporting date, reconciled back to LIC. This information has been provided on a gross of reinsurance basis and separately for reinsurance contracts held. As the Group has not previously published claims development information on an IFRS 17 basis, only claims development from the 2019 underwriting year onward (being five years before the end of the annual reporting period in which IFRS 17 was first applied by the Group) has been disclosed below. In the below tables, historic periods have been revalued using current exchange rates. The cumulative estimate of claims and recoveries comprise expected claims and reinsurance recovery cash flows only and do not include the risk adjustment, premiums or acquisition costs.
|
| Underwriting year | |||||
| Insurance contracts issued | 2019 | 2020 | 2021 | 2022 | 2023 | Total |
| 2023 | $m | $m | $m | $m | $m | $m |
| At end of underwriting year | 1,712.5 | 2,309.3 | 2,699.4 | 3,123.8 | 3,112.0 |
|
| 1 year later | 2,205.2 | 2,696.3 | 2,966.1 | 3,030.4 |
|
|
| 2 years later | 2,236.2 | 2,802.2 | 2,782.1 |
|
|
|
| 3 years later | 2,231.5 | 2,649.2 |
|
|
|
|
| 4 years later | 2,221.9 |
|
|
|
|
|
| Cumulative gross estimate of claims | 2,221.9 | 2,649.2 | 2,782.1 | 3,030.4 | 3,112.0 | 13,795.6 |
| Cumulative payments to date | (1,696.9) | (1,765.3) | (1,319.5) | (941.9) | (287.3) | (6,010.9) |
| Carrying amount relating to 2018 and prior underwriting years |
|
|
|
|
| 1,102.7 |
| Less liability for remaining coverage claims only |
|
|
|
|
| (1,835.6) |
| Impact of discounting (LIC) |
|
|
|
|
| (555.5) |
| LIC risk adjustment for non-financial risk |
|
|
|
|
| 639.0 |
| Gross discounted LIC |
|
|
|
|
| 7,135.3 |
|
| Underwriting year | |||||
| Reinsurance contracts held | 2019 | 2020 | 2021 | 2022 | 2023 | Total |
| 2023 | $m | $m | $m | $m | $m | $m |
| At end of underwriting year | (290.9) | (455.4) | (700.1) | (934.1) | (520.9) |
|
| 1 year later | (412.1) | (635.1) | (708.9) | (884.2) |
|
|
| 2 years later | (376.4) | (700.0) | (708.1) |
|
|
|
| 3 years later | (394.9) | (577.1) |
|
|
|
|
| 4 years later | (423.5) |
|
|
|
|
|
| Cumulative gross estimate of claims recoveries | (423.5) | (577.1) | (708.1) | (884.2) | (520.9) | (3,113.8) |
| Cumulative payments to date | 263.5 | 347.1 | 119.0 | 69.5 | 13.8 | 812.9 |
| Carrying amount relating to 2018 and prior underwriting years |
|
|
|
|
| (451.9) |
| Less asset for remaining coverage claims only |
|
|
|
|
| 338.7 |
| Impact of discounting (AIC) |
|
|
|
|
| 190.4 |
| AIC risk adjustment for non-financial risk |
|
|
|
|
| (191.4) |
| Reinsurance discounted AIC |
|
|
|
|
| (2,415.1) |
Alternative performance measures ("APMs")
Beazley plc uses APMs to help explain its financial performance and position. These measures are not defined under IFRS. The Group is of the view that the use of these measures enhances the usefulness of our financial reporting and allows for improved comparison to industry peers.
Information on APMs used by the Group is set out below. Unless otherwise stated, amounts are disclosed in millions of dollars ($m). As a result of the adoption of IFRS 17, comparative information has been restated for the year ended 31 December 2022. This applies to income statement figures in addition to net assets (total equity). Amounts which have been restated are indicated with an asterisk (*).
Insurance written premiums & net insurance written premiums
Insurance written premiums ($m) is calculated by deducting the reinstatement premiums and profit commissions from the gross premiums written. Net insurance written premiums ($m) is calculated by adding insurance ceded premiums to this result. These APMs represent management's view of premiums written in each period, similar to the previous "Gross premiums written" metric reported under IFRS 4. The primary difference between insurance written premiums and insurance revenue relates to the deferral and earning of income over the period in which coverage is provided.
|
| 2023 | 2022 |
|
| $m | $m |
| Insurance written premiums | 5,601.4 | 5,246.3 |
| Earnings adjustment | (159.0) | (397.9) |
| Insurance revenue | 5,442.4 | 4,848.4 |
|
| 2023 | 2022 |
|
| $m | $m |
| Insurance ceded premiums | (905.2) | (1,473.9) |
| Earnings adjustment | (222.1) | 508.5 |
| Allocation of reinsurance premiums | (1,127.3) | (965.4) |
|
| 2023 | 2022 |
|
| $m | $m |
| Insurance written premiums | 5,601.4 | 5,246.3 |
| Add insurance ceded premiums | (905.2) | (1,473.9) |
| Net insurance written premiums | 4,696.2 | 3,772.4 |
Claims, expense & combined ratios
Claims ratio (%) is calculated as insurance service expenses less directly attributable expenses, net of reinsurance recoveries, divided by insurance revenue net of reinsurance ceded revenue. Expense ratio (%) is calculated as the sum of insurance acquisition cash flows amortisation and other directly attributable expenses, divided by insurance revenue net of reinsurance ceded revenue. Combined ratio (%) is calculated as insurance service expenses net of reinsurance recoveries, divided by the insurance revenue net of reinsurance ceded revenue. This is also the sum of the claims and expense ratios. The combined ratio below is shown with and without the impact of discounting.
|
| 2023 |
2022 |
| Insurance service expenses ($m) | 3,592.6 | 4,014.0 |
| Less directly attributable expenses ($m)1 | (1,362.6) | (1,217.6) |
| Amounts recoverable from reinsurers for incurred claims ($m) | (528.5) | (953.9) |
| Net claims ($m) | 1,701.5 | 1,842.5 |
| Insurance revenue ($m) | 5,442.4 | 4,848.4 |
| Allocation of reinsurance premium ($m) | (1,127.3) | (965.4) |
| Divided by net insurance revenue ($m) | 4,315.1 | 3,883.0 |
| Claims ratio | 39% | 47% |
| Directly attributable expenses ($m)1 | 1,362.6 | 1,217.6 |
| Divided by net insurance revenue ($m) | 4,315.1 | 3,883.0 |
| Expense ratio | 32% | 32% |
| Combined ratio | 71% | 79% |
| Effect of discounting | 3% | 3% |
| Combined ratio (undiscounted) | 74% | 82% |
1 Directly attributable expenses are comprised of insurance acquisition cash flows amortisation, other directly attributable expenses, and share of expenses and other amounts per Note 2.
Net assets per share & net tangible assets per share
Net assets per share is the ratio (in pence and cents) calculated by dividing the net assets or total equity of the Group by the number of shares in issue at the end of the period, excluding those held by the employee benefits trust. Net tangible assets per share excludes intangible assets from net assets in the above calculation.
|
|
2023 | 2022 |
| Net assets* ($m) | 3,882.1 | 2,955.0 |
| Less intangible assets ($m) | (165.3) | (128.8) |
| Net tangible assets* ($m) | 3,716.8 | 2,826.2 |
| Divided by the shares in issue at the period end (millions)1: | 662.7 | 665.4 |
| Net assets per share (cents)* | 585.8 | 444.1 |
| Net tangible assets per share (cents)* | 560.9 | 424.7 |
| Converted at spot rate: | 0.80 | 0.82 |
| Net assets per share (pence)* | 468.6 | 364.2 |
| Net tangible assets per share (pence)* | 448.7 | 348.3 |
1 Shares in issue at the period end exclude those held by the employee benefits trust.
Return on equity
Return on equity (%) is calculated by dividing the consolidated profit after tax by the average equity for the period. Average equity for the period was previously calculated as the monthly weighted average closing equity position. We have updated our approach to use an average of the opening and closing equity positions, and this is reflected in both the current and comparative periods.
|
| 2023 |
2022 |
| Profit after tax* ($m) | 1,026.8 | 483.3 |
| Divided by average total equity* ($m) | 3,418.6 | 2,572.6 |
| Return on equity* | 30% | 19% |
Investment return
Investment return (%) is calculated by dividing the net investment income by the average financial assets at fair value and cash and cash equivalents held by the Group over the period.
|
|
2023 |
2022 |
| Net investment income/(loss) ($m) | 480.2 | (179.7) |
| Opening invested assets: |
|
|
| Financial assets at fair value ($m) | 8,345.6 | 7,283.5 |
| Cash and cash equivalents ($m) | 652.5 | 591.8 |
| Invested assets at the beginning of the period ($m) | 8,998.1 | 7,875.3 |
| Closing invested assets: |
|
|
| Financial assets at fair value ($m) | 9,665.5 | 8,345.6 |
| Cash and cash equivalents ($m) | 812.3 | 652.5 |
| Invested assets at the end of the period: ($m) | 10,477.8 | 8,998.1 |
| Divided by average invested assets ($m) | 9,738.0 | 8,436.7 |
| Annualised investment return | 4.9% | (2.1)% |
ENDS
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