- Premium growth forecast lowered
- Through-the-cycle profit the priority
- Shares were trading at life-high
Investors are usually supportive of Beazley’s (BEZ) cautious approach to delivering growth through the insurance cycle, which explains why the shares have been trading at record highs, but on this occasion they seem to have taken exception to the firm’s decision to rein in expectations.
The shares fell 68p or 7.5% to 844p, making them the worst performer in the FTSE 100 by some way on a day when stocks were largely trading higher.
PROACTIVE APPROACH
The Lloyds of London insurer lowered its full-year premium growth guidance from a mid-single digit rise to a low-to-mid single digit rise to reflect ‘current market conditions’.
‘The first half of 2025 confirms geopolitical uncertainty remains, technology is transforming business, and the effects of climate change are ever present, all of which are creating new risks and decreasing predictability,’ commented chief executive Adrian Cox.
‘Specialty insurance companies have an important contribution to make during this time of transition and change and our focus remains on how we can support growth by utilising our powerful expertise, managing the market cycle as pricing conditions normalise.’
In the first half of the year, the firm reported just a 2% increase in insurance premiums written, which it said reflected its disciplined approach and was ‘fully aligned with our strategy of prioritising rate adequacy and long-term profitability over short-term income’.
‘Our depth of experience in operating within a cyclical environment means we know when to take risk, and when to pull back. This phase is no exception,’ added Cox.
The firm did, however, reaffirm its commitment to a full-year combined ratio of mid-80s percent in line with its first-half performance.
SOFTER MARKET
Jefferies’ financials analyst Philip Kett suggested Beazley’s results were ‘perhaps a precursor of what lies ahead more broadly’.
‘On the one hand, investors have been delivered a strong underwriting result which beat consensus. On the other hand, softening rates have prompted revenue to miss, and management's prudent cycle management has led them to reduce revenue guidance.’
While investors ought to be pleased with the firm’s commitment to profitability ahead of growth, adds Kett, ‘the lack of growth is likely to weigh on the shares, and we would not be surprised if they fell today’.
