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Best’s News & Research Service - July 02, 2021 10:43 AM (EDT)

AM Best Affirms Credit Ratings of Beazley’s Lloyd’s Syndicates and Beazley plc Subsidiaries

  • July 02, 2021 10:43 AM (EDT)

London //BestWire// - AM Best has affirmed the Financial Strength Ratings (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a+” (Excellent) of Lloyd’s Syndicate 2623, Lloyd’s Syndicate 623, Lloyd’s Syndicate 3623 and Lloyd’s Syndicate 3622 (the syndicates) (United Kingdom). Concurrently, AM Best has affirmed the FSRs of A (Excellent) and the Long-Term ICRs of “a” (Excellent) of Beazley Insurance Designated Activity Company (BIDAC) (Ireland), Beazley Insurance Company, Inc. (BICI) (Farmington, CT) and Beazley America Insurance Company, Inc. (Beazley America) (Farmington, CT). The outlook of these Credit Ratings (ratings) is stable.

The ratings of BIDAC, BICI and Beazley America reflect the consolidated balance sheet strength of Beazley plc (Beazley) [LSE: BEZ], which AM Best assesses as very strong, as well as the group’s strong operating performance, neutral business profile and appropriate enterprise risk management.

BIDAC, BICI and Beazley America are strategically important to and integrated with Beazley. These three companies are owned ultimately by Beazley, which is the non-operating holding company and consolidating rating unit for the group.

BIDAC reinsures 75% of the profit or loss of the distribution of Syndicates 2623 and 3623 to Beazley’s Lloyd’s corporate member (after a deductible) and is the group’s main regulated operating entity in the European Union, whereas BICI and Beazley America are Beazley’s admitted carriers in the United States.

The group’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Balance sheet strength is supported by a conservative investment strategy and a prudent reserving approach. In 2020, the group raised approximately USD 300 million of capital and did not pay a dividend. In AM Best’s view, the group has sufficient funds to absorb Beazley’s exposure to COVID-19-related losses and to support the projected growth in response to improving market conditions.

Beazley’s strong operating performance is evidenced by its five-year (2016-2020) weighted-average return on equity of 9.1% and a combined ratio of 98.6%. In 2020, Beazley reported a net loss of USD 50.4 million, driven by COVID-19-related losses and an increase in claims in its cyber and management liability books. This was offset partially by the impact of an improved pricing environment on premium revenue and prior-year reserve releases across most lines of business. Whilst Beazley’s earnings remain exposed to uncertainty relating to the ongoing pandemic and potential catastrophe losses, AM Best expects the group’s cross-cycle underwriting performance to remain strong, supported by its selective underwriting and positive investment returns.

Beazley has a well-established business profile, with a strong franchise as an internationally recognised insurance group operating principally at Lloyd’s. The group’s gross written premium base reached USD 3.6 billion in 2020 and is expected to continue to expand in the medium term. During the first quarter of 2021, premiums increased by 16% compared with the same period last year, driven largely by the favorable pricing environment.

The syndicates are managed by Beazley Furlonge Limited, and their ratings reflect the financial strength of the Lloyd’s market, which underpins the security of all syndicates. The capital of Syndicates 2623, 3623 and 3622 is provided by Beazley via its corporate member, whilst Syndicate 623 is supported by third-party capital.

Despite underwriting losses in 2020, Syndicates 2623 and 623 have a record of good performance and maintain a resilient position in the Lloyd’s market. Together, they underwrite business at Lloyd’s in parallel, with their shares of combined business split according to each syndicate’s portion of overall combined capacity. Syndicates 3623 and 3622 are much smaller in comparison. Syndicate 3623 writes personal accident and sports insurance and market facilities at Lloyd’s, in addition to providing reinsurance to Beazley’s U.S.-admitted carrier, BICI. Syndicate 3622 is a dedicated syndicate writing life insurance business associated with Syndicate 3623’s accident and sports portfolio.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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