Shares in Lloyds market specialist insurer Beazley (BEZ) leapt as much as 15% to 370p in early trading after the firm posted a smaller than expected loss for last year and a positive outlook for this year thanks to a substantial rise in insurance rates.
For the year to 31 December, the company registered a loss of $50.4 million compared with market estimates of over $100 million, helped by a strong investment performance in the final quarter and a slightly better combined ratio.
There was no change to the forecast for Covid losses of $340 million, with the firm assuming restrictions remain in place through the first half of this year. Similarly, there was no change in the $50 million provision for event cancellation.
RISING RATES
Despite a challenging year, gross written premiums rose by an impressive 19% to $3.56 billion with rates on renewals up by 15% compared with just a 6% rise in 2019.
Chief executive Andrew Horton was bullish on the outlook: ‘I am very positive about the year ahead. We have the capital strength to support our growth plans and look forward to a continued favourable rate environment and expansion of our specialist products globally. I am confident we can return to paying dividends during the course of 2021.’
Having raised capital in May and passed its 2020 dividend, the firm’s coverage ratio of 123% is at the top end of its usual target range of 115% to 125%, meaning it is well placed to put up more ‘canvas’ to take advantage of the rise in insurance rates.
EXPERT VIEWS
Numis analyst Nick Johnson was positive on the results, keeping his buy call and 520p per share price target. He said, ‘Overall we think these results provide plenty of much-needed reassurance, and we see good recovery potential in the depressed rating.’
RBC analyst Kamran Hossain flagged the firm’s surplus capital guidance which was ‘far stronger than we had expected’ and had been ‘the number one concern with investors’ since its September trading update.
Like Johnson, he sees potential for the shares to re-rate ‘as the market gets back onside with the company as it repairs its balance sheet and delivers stronger underwriting returns’.
