The British insurer Beazley announced that shareholders would receive an extra $300 million in returned capital after it experienced better than expected claims last year.
The Lloyds insurer said in a trading update that its undiscounted combined ratio, a measure of profitability used by insurers, had surpassed its forecast last year.
As a result it updated its guidance on the ratio to be in the mid-70s, rather than the low 80s as previously expected. A ratio below 100 per cent indicates underwriting profitability.
The additional capital returns will be paid to shareholders alongside ordinary dividends and will be confirmed when the company announces its year-end results on March 7.
Abid Hussain, an analyst at Panmure Gordon, said that the reinsurance market had been “experiencing excellent conditions” recently.
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He added: “We think the improved combined ratio adds over $300 million to earnings for the financial year 2023 expected and hence represents genuine excess capital that facilitates the additional return to shareholders. We continue to expect management to deploy the existing available capital into the favourable reinsurance and primary insurance market over the financial year 2024 expected.”
However, until the full annual report is published many questions will remain, according to Nick Johnson, an analyst at Numis, who added that the market “will want to know how much of the combined ratio outperformance is one-off and how much has positive read-forward implications”.
Johnson added: “However, one significant takeaway from the combined operating ratio upgrade is that Beazley is unlikely to have experienced reserve deterioration that featured for some US peers this reporting season. A lowering of this risk should be positive for the valuation.”
On Tuesday, Beazley announced the launch of a cybersecurity arm through the merger of its in-house cyberservices team with Lodestone to form Beazley Security.
The new company combines risk management services provided in the insurer’s cyberinsurance policy with Lodestone’s technical services. Alton Kizziah, the chief executive of Lodestone, will take charge.
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Last month, Beazley was at risk of being eliminated from the FTSE 100 when its stock price sank but it has steadily climbed since. Its shares rose 52p, or 8.9 per cent, to close at £6.34.
