Beazley raises £247m to protect against virus claims and tap opportunities

Lloyd’s insurer Beazley has raised £247m in fresh capital, which it says will shore up the group’s capital position in light of the uncertainty surrounding the Covid-19 pandemic and, at the same time, enable it to take advantage of growth opportunities from the hardening market. The insurer announced this morning that it had successfully placed new shares in the company at a discount of 4.9% to the closing share price of 331.4 pence on 18 May 2020. The insurer said it is very keen to capitalise on the rapidly hardening markets worldwide. “Beazley is seeking to raise equity to continue to support ongoing organic growth. As a result of the elevated claim numbers in recent years, the company has seen rates rise steadily across its core markets. Rate changes for the three months ended 31 March 2020 were particularly encouraging, with an average rate increase of 8%, with three divisions achieving double-digit increases. This strong momentum is expected to continue. Certain markets, such as property and marine, have now experienced two consecutive years of rising rates and present attractive near-term opportunities. Beazley continues to maintain its strong underwriting discipline with a focus on risk quality and selection,” it stated. But the capital is also needed to help protect against the downside of the pandemic. “The board has considered the optimal capital structure for the group and believes that it is an appropriate time for the company to raise equity in order to position the business for future growth opportunities, as well as providing further strength to the balance sheet in light of the continued uncertainty from Covid-19. The net proceeds from the placing and subscription, along with an increased banking facility, demonstrate Beazley's continued commitment to maintaining a strong balance sheet that can support the company's growth ambitions and withstand a range of stress scenarios,” added the insurer. Beazley’s latest trading update estimates that Covid-19-related claims will amount to $170m and the company experienced an investment loss of $55m (1%) in the three months to 31 March 2020. The company also revealed that gross written premiums had increased by 13% to reach $840m in the quarter, and premium rates on renewal business were up 8%. “We discussed at the full year results that we write a contingency book of event cancellation and that, within a defined risk appetite, we provided communicable disease cover. This is covered by specific reinsurances designed for this type of exposure. The book has had a number of claims but the frequency of new notifications has been decreasing since the end of March,” explained Beazley in the trading update. “Our expectation is that the cost of Covid-19 across the political, accident and contingency division, which includes event cancellation, personal accident and accident and health, is about $70m net of reinsurance. The property team has also had a number of claims, mostly related to business interruption and mostly from US-domiciled companies. The majority of our business is written on an ISO form that does not extend cover for Covid-19, but we do provide such protection on some bespoke policies and our aim is to respond quickly to these claims,” continued the company. “Based on analysis to date across our marine, property and reinsurance divisions, we estimate our Covid-19 claims to be about $100m net of reinsurance. It is too early to say what the quantum of claims within our liability classes will be, as these will emerge as the impact of the pandemic is fully realised during the next one to two years. We have taken a number of underwriting actions, including the changes to our risk appetite approach mentioned above, which should reduce this impact,” it concluded.

Beazley raises £247m to protect against virus claims and tap opportunities

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