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  • 1. Generic title white Results for the year ended 31 December 2013 Thursday, 6 February 2014
  • 2. Disclaimer notice Certain statements made in this presentation, both oral and written, are or may constitute “forward looking statements” with respect to the operation, performance and financial condition of the Company and/or the Group. These forward looking statements are not based on historical facts but rather reflect current beliefs and expectations regarding future events and results. Such forward looking statements can be identified from words such as “anticipates”, “may”, “will”, “believes”, “expects”, “intends”, “could”, “should”, “estimates”, “predict” and similar expressions in such statements or the negative thereof or other variations thereof or comparable terminology. These forward looking statements appear in a number of places throughout this document and involve significant inherent risks, uncertainties and other factors, known or unknown, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Given these uncertainties, such forward looking statements should not be read as guarantees of future performance or results and no undue reliance should be placed on such forward looking statements. A number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements. The information and opinions contained in this presentation, including any forward looking statements, are provided, and reflect knowledge and information available, as at the date of this presentation and are subject to change without notice. There is no intention, nor is any duty or obligation assumed by the Company, the Group or the Directors to supplement, amend, update or revise any of the information, including any forward looking statements, contained in this presentation. All subsequent written and oral forward-looking statements attributable to the Company and/or the Group or to persons acting on its behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this document. 2
  • 3. Contents Pages Overview of 2013 4-8 Financials Performance Investments Reserves Capital 10 11-12 13-14 15-16 Underwriting review 17-21 Our vision 22 Outlook 23 Appendix 25-35 3
  • 4. Generic title white Overview of 2013
  • 5. Exceptional underwriting result • Profit before income tax of $313.3m (2012: $251.2m) • Return on equity of 21% (2012: 19%) • Gross written premiums increased by 4% to $1,970.2m (2012: $1,895.9m) • Combined ratio of 84% (2012: 91%) • Rate increase on renewal portfolio of 1% (2012: 3%) • Prior year reserve releases of $218.0m (2012: $126.0m) • Net investment income of $43.3m (2012: $82.6m) • Second interim dividend of 5.9p taking full year dividend to 8.8p (2012: Full year 8.3p). Special dividend of 16.1p (2012: 8.4p) 5
  • 6. Sustained high performance Cover Gross premiums written ($m) 2500 Combined ratio (%) 125% 99% 2000 100% 1500 75% 1000 90% 91% 88% 84% 37% 50% 1,751.3 1,741.6 1,712.5 1,895.9 1,970.2 500 2009 2010 2011 2012 2013 38% 36% 55% 39% 62% 52% 2009 25% 0 35% 2010 Dividends per share (p) 2011 2013 Combined ratio 25% 20.0 20% 16.1 15.0 15% 8.4 10.0 5.0 Claims ratio 2012 Return on equity (%) 30% 25.0 45% 0% Expense ratio 30.0 53% 10% 2.5 7.0 7.5 7.9 8.3 8.8 2009 2010 2011 2012 2013 24% 19% 19% 21% 5% 6% 0% 0.0 Special 2009 2010 2011 2012 2013 Interim and final 6
  • 7. A year of significant achievement • Record low combined ratio of 84%, with 90% average over the last 5 years • Rate increases were achieved in specialty lines (3%) and property (3%) • Continuing investments in: • People • Products – 2013: Aviation and growth of Beazley Breach Response 2014: Satellite • Geography – offices in Dallas, Miami, Dubai and Rio de Janeiro • Continue to deliver excellent claims service - we have won two industry awards • NAV growth achieved consistently over the last four years and active capital management has continued 7
  • 8. Excellent total shareholder return (TSR) and NAV growth 250% 225% 200% 175% 150% 125% 100% 75% 50% 25% 0% 31 December 2009 31 December 2010 NAV target range (RFR +10% p.a. to RFR +15% p.a.) 31 December 2011 NAV growth (Including dividends) 31 December 2012 31 December 2013 TSR growth (1 month average) 8
  • 9. Generic title white Financials
  • 10. Strong performance across all metrics Year ended 31 Dec 2013 Year ended 31 Dec 2012 % increase Gross premiums written ($m) 1,970.2 1,895.9 4% Net premiums written ($m) 1,676.5 1,542.7 9% Net earned premiums ($m) 1,590.5 1,478.5 8% Profit before income tax ($m) 313.3 251.2 25% Earnings per share 33.6p 26.7p Dividend per share 8.8p 8.3p 16.1p 8.4p Net assets per share (pence) 160.6p 147.5p Net tangible assets per share (pence) 149.6p 133.4p Special dividend 10
  • 11. Portfolio delivered 1.0% in the second half as expected 100.0 7.0% 90.0 70.0 6.0% 46.9 ($m) Investment Return 5.0% 60.0 46.5 4.0% 50.0 40.0 3.0% 16.8 30.0 2.0% 20.0 43.5 29.0 Annualised Investment Return 80.0 43.3 36.1 1.0% 10.0 22.5 8.5 0.0 0.0% 2009 2010 2011 2nd half 1st half 2012 2013 Return 11
  • 12. Portfolio mix remains stable Dec-13 Other Credit, 2.1% Capital Growth Assets, 11.7% Investment Grade Credit, 30.5% Dec-12 Cash and Cash Equivalents, 8.7% Fixed Income: Sovereign and Supranational, 47.0% Other Credit, 1.7% Capital Growth Assets, 9.7% Cash and Cash Equivalents, 7.3% Fixed Income: Sovereign and Supranational, 56.2% 12
  • 13. Strong prior year reserve releases 15.0% 225 14.0% 210 13.0% 195 12.0% 180 11.0% 165 10.0% 150 9.0% ($m) 135 120 8.0% 105 7.0% 90 6.0% 75 5.0% 60 4.0% 45 3.0% 30 2.0% 15 1.0% 0 0.0% -15 2009 Specialty lines 2010 Political risks and contingency 2011 Life accident and health 2012 Marine Property 2013 Reinsurance -1.0% % of NEP 13
  • 14. Whole account reserve strength within our target range % above actuarial estimate Preferred upper end 8.2% 7.5% 6.7% 6.1% 2003 2004 6.4% 2005 8.2% 7.9% 7.4% 7.4% 6.9% 6.7% 2006 2007 2008 2009 2010 2011 2012 2013 Financial year 14
  • 15. Capital management discipline is maintained • We have returned capital of $579.7m in the past 5 years • This represents 87% of our post 2009 rights-issue market capitalisation 100% 600 90% 500 80% 450 70% ($m) 400 350 60% 300 50% 250 40% 200 30% 150 20% 100 10% 50 0 2009 2010 Interim and final dividends 2011 Special dividend 2012 Share buybacks 2013 Percentage of market capitalisation at 2009 rights issue 5 year capital return track record 550 0% % of market capital (03/04/2009) 15
  • 16. Strong capital position Sources of funds Year ended 31 Dec 2013 Year ended 31 Dec 2012 Shareholders funds ($m) 1,338.7 1,204.5 Subordinated debt ($m) 145.0 184.3 Retail bond ($m) 124.5 122.3 1,608.2 1,511.1 Lloyd’s underwriting ($m) 935.4 876.0 US Insurance Company ($m) 107.7 107.7 1,043.1 983.7 565.1 527.4 (248.4) (267.1) Available surplus ($m) 316.7 260.3 Un-utilised banking facility ($m) 225.0 225.0 Total Sources of Funds Uses of funds Surplus ($m) Unavailable surplus ($m) 16
  • 17. Generic title white Underwriting review
  • 18. Underwriting review – 2013 achievements • Combined ratio of 84% in line with earlier guidance • Gross premiums written achieved 4% growth in 2013 • 2013 rate increase on renewals of 1% • Favourable claims experience including lower than average catastrophe activity • We continue to reserve consistently, maintaining our surplus over actuarial estimate between 5-10% 18
  • 19. Underwriting review Year Ended 31 Dec 2013 Year Ended 31 Dec 2012 Gross premiums written ($m) 1,970.2 1,895.9 Net premiums written ($m) 1,676.5 1,542.7 Net earned premiums ($m) 1,590.5 1,478.5 Expenses ratio 39% 38% Claims ratio 45% 53% Combined ratio 84% 91% 1% 3% Rate change on renewals 19
  • 20. Cumulative rate changes since 2001 250% 200% Rate Change 150% 100% 50% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Underwriting Year Life, accident & health Marine Political risks & contingency Property Reinsurance Specialty lines All divisions 20
  • 21. Underwriting review – 2014 plans • Increasing competitive headwinds in catastrophe-driven, short tail lines • Specialty lines continues to enjoy a more favourable rating environment • Continued opportunities for moderate growth: • Marine division – marine liability, aviation, satellite • Property division – smaller risks • Political & contingency division – political risks • Specialty lines – employment practices liability, cyber 21
  • 22. Growing through Lloyd’s Europe Innovation and Product Development Broker Relations Asia Pacific Managing for Performance US Our vision and strategic priorities To become, and be recognised as, the highest performing specialist insurer 22
  • 23. The outlook for 2014 • Well positioned in a changing and increasingly competitive market place • We expect an annualised 2% investment yield going forward • Premium growth of 5-10% is planned in 2014 • We continue to identify opportunities for profitable growth 23
  • 24. Questions? Any questions?
  • 25. Generic title white Appendix
  • 26. Specialty lines incurred claims remain in line with expectations Net incurred loss ratio at each development year 140% Development Year 6 5 120% 4 114% 3 2 ULR Net incurred loss ratio 100% 85% 80% 74% 62% 57% 60% 65% 53% 41% 42% 41% 52% 45% 38% 40% 20% 12% 0% 19931996 19972000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 426 459 414 443 429 452 Underwriting Year Net ultimate premium $m 81 110 53 92 269 323 340 348 26
  • 27. Locally underwritten US business grows 17% to $451.8m 170 GWP by major product category 160 150 140 130 120 110 ($m) 100 90 80 70 60 50 40 30 20 10 0 2009 2010 Architects and Engineers professional indemnity 2011 Technology, Media & Business Services 2012 2013 Other specialty lines Property 27
  • 28. Zoom on rate changes since 2008 120% 115% Rate Change 110% 105% 100% 95% 90% 2008 2009 2010 2011 2012 2013 Underwriting Year Life, accident & health Specialty lines Marine Reinsurance Political risks & contingency All divisions Property 28
  • 29. Portfolio management achieves consistent combined ratio through market cycles 160 140 120 100 80 60 40 2009 2010 2011 2012 2013 Year 29
  • 30. Life accident & health Year ended 31 December 2013 2012 100.3 94.4 Net premiums written ($m) 96.1 75.3 Net earned premiums ($m) 95.4 80.3 Claims ratio 74% 58% (1%) - 73% 73% Gross premiums written ($m) Rate change on renewals Percentage of business led • 6% increase in gross premiums • Losses in Australian business, although renewal secured at significant rate increase 30
  • 31. Marine Year ended 31 December 2013 2012 Gross premiums written ($m) 315.9 311.2 Net premiums written ($m) 282.1 283.1 Net earned premiums ($m) 264.4 279.6 Rate change on renewals Percentage of business led 34% 42% (5%) • Combined ratio of 72% continues recent outstanding performance Prior year reserve releases of $47.3m (2012: $27.7m) - 44% Gross premiums increased by 2% • Claims ratio • 48% 31
  • 32. Political risks and contingency Year ended 31 December 2013 2012 Gross premiums written ($m) 131.2 116.6 Net premiums written ($m) 110.1 102.3 Net earned premiums ($m) 98.6 98.1 Rate change on renewals Percentage of business led 5% 12% (1%) • Combined ratio 50% (2012: 52%) Strong prior year reserve release of $39.4m (2012: $33.1m) (1%) 69% Growth in gross premiums of 13% due to development in our political books • Claims ratio • 64% 32
  • 33. Property Year ended 31 December 2013 2012 Gross premiums written ($m) 371.4 376.7 Net premiums written ($m) 308.7 275.7 Net earned premiums ($m) 302.6 266.4 Rate change on renewals Percentage of business led 6% 74% Combined ratio of 84% (2012: 101%) 53% 3% Rate change on renewals of 3% • 40% Increase in net premiums of 12% with improved contribution to group result of $65m • Claims ratio • 73% 33
  • 34. Reinsurance Year ended 31 December 2013 2012 Gross premiums written ($m) 221.6 188.6 Net premiums written ($m) 171.5 146.7 Net earned premiums ($m) 165.3 139.0 Rate change on renewals Percentage of business led 18% 5% 38% Combined ratio of 49% (2012: 92%) 63% (3%) Increase in gross premiums of 17% in spite of rate decreases on renewals of (3%) • Claims ratio • 37% 34
  • 35. Specialty lines Year ended 31 December 2013 2012 Gross premiums written ($m) 829.8 808.4 Net premiums written ($m) 708.0 659.6 Net earned premiums ($m) 664.2 615.1 61% 61% 3% 3% 96% 96% Claims ratio Rate change on renewals Percentage of business led • Positive rate change on renewals • 3% increase in gross premiums written • Prior year reserve releases of $46.6m (2012: $51.5m) 35