Beazley, Hiscox and Lancashire Holdings Q3 Trading Updates

The last few days has seen Beazley, Hiscox and Lancashire Holdings all release their Q3 trading statements. Although none conducts all of its underwriting activities through Lloyd’s, and each has insurance and reinsurance entities in different jurisdictions, Lloyd’s is a substantial part of each of the operations. While Lancashire began as a reinsurance company, acquiring a Lloyd’s managing agent some years after its formation, both Hiscox and Beazley can be characterised as Lloyd’s businesses that have grown their operations both inside and outside the Lloyd’s market. As a reminder, syndicates managed by these companies with third party involvement are Syndicates 33 and SPA 6104 at Hiscox, Syndicates 623 and 5623 and SPA 6107 at Beazley and Syndicate 2010 at Lancashire. The trading statements have each been summarised below. Note that the companies do not need to provide full profit and loss statements at the 9 month stage. The expectation is for those syndicates supported by our clients, to provide similar trading updates and forecasts, which indicate that 2023 will prove to be another good year for the Lloyd’s insurance market.

Beazley

Lloyd’s largest insurer Beazley has reduced its gross written premium (GWP) expectations for the year but also says claims experience is better than expected. In its trading update on Wednesday, Beazley said the slowdown in growth was driven by extra competition in US SME cyber business and maturity in US large risks. CEO Adrian Cox said that cyber rates also continued to be squeezed – on average down 4% year-on-year – but he provided some reassurance saying “given the extraordinary rate rises since 2019, pricing remains adequate in this area”.

In contrast, property markets remain buoyant with the insurer noting that GWP was up 63% and average rates up 24%. The carrier’s property premiums rose to $1.13bn for the first nine months of the year, up from $691mn in the prior-year period. Overall written premiums increased by 9% to $4.33bn, up from $3.98bn for the first nine months of 2022. Although this was noted as being a deceleration on the premium growth achieved in the first half of the year, largely as a result of reductions in cyber business, Beazley said their claims performance was better than anticipated as natural catastrophe losses remained within reserve margins.

In the update, Cox said: “The insurance business is cyclical and market conditions are evolving quickly. We have chosen to exercise underwriting discipline meaning growth to date is less than we had planned at the start of the year. However, our agile underwriting and the strength of our platform strategy means we have delivered profitable growth to date and our claims experience is better than anticipated.”

Beazley reported investment income of $202mn for 9M 2023, a strong improvement on the loss of $99mn in the prior-year period. Its combined ratio guidance on an undiscounted basis remained in the “low 80s” for full year 2023, while growth guidance on a net basis remained in the mid-20s. On a gross basis growth is expected to be in line with year-to-date performance. Although there are some technical reasons relating to the difference between gross and net, a large part is down to the business retaining more of the risk it writes in attractive market conditions.

Hiscox

Hiscox’s main headline was that it expects a “very attractive” 1 January renewal after the London-listed carrier reported an acceleration in growth in its “big ticket” businesses during the third quarter. This was confirmed by its net premium growth which accelerated in the third quarter in both its London Market and Hiscox Re & ILS divisions. Hiscox London Market grew net premiums by 18.1% for the first nine months of the year, compared with 14.2% at mid-year, boosted by double-digit growth in both property and marine, energy and specialty. Hiscox Re & ILS saw even stronger growth, with net premiums up 23.6%, compared with 17.9% in the first half.

CEO Aki Hussain said the group was now in its “best position for many years” to continue this growth trajectory, with the London Market business seeing average rate increases of 8% during Q3, ahead of expectations. At Hiscox Re & ILS, average rate increases for the year to date now stand at 32% on a risk adjusted rate change basis (RARC), with cumulative rate increases since 2018 now totalling 91%. Despite an active third quarter of natural catastrophe events, Hiscox said losses remain within the group’s budget. The carrier also noted that its repositioning on attachment points (ie. where its risk exposure starts) meant a greater proportion came from Hiscox London Market, which included exposure to large man-made losses in its marine, energy and specialty division. Property and terrorism saw the most significant rate increases within the division, with the former seeing 26% increases for property binders and 23% for major property rates, while the latter saw double-digit growth.

Hard market conditions also helped Hiscox deliver 23.6% net insurance written contract premium growth in its Re & ILS segment. Hiscox indicated that ILS funds delivered record performance for the first nine months of the year, with assets under management of $1.7bn. It said it expects the market will remain disciplined at this year’s 1.1 renewals and opportunities will remain very attractive. Another positive aspect of the trading update was Hiscox retail, where insurance contract written premium grew 3.8% to $1.84bn, largely driven by strong growth in Europe – 11.1% on a constant-currency basis – and US digital partnerships and direct (DPD) growth of 8.3 %.

The insurer produced an investment result of $201.7mn, representing a return of 2.6% for the year to date.

Lancashire Holdings

Lancashire Holdings Limited released its Q3 trading statement on Thursday and in the narrative  update, group CEO Alex Maloney said the London-listed (re)insurer continued to implement its strategy to manage the market cycle and deliver profitable growth at a time when rates remain “extremely attractive” across its product lines. He stated “..we continue to expect a positive environment into 2024, with further opportunities for Lancashire,” and went on to say that “..during the first nine months of 2023, we have continued to successfully implement our long-term strategy to manage the market cycle and deliver strong profitable growth through a portfolio of diversified products.”

The Group has declared a 23.2% increase in gross written premium from $1.3bn to $1.6bn compared to the same 9 month period last year. This is in part driven by strong rating increases of 17% on the overall portfolio of insurance and reinsurance business. Lancashire said the build-out of its casualty reinsurance lines continued to be the “most significant” contributor to growth in the segment. It said the specialty reinsurance class also continued to add new business in a positive rating environment, with the property reinsurance class also benefiting from “significant” rate increases helping the segment achieve rate increase of 23%. The growth in the insurance section is primarily driven by the property direct and facultative account. This property account is continuing to see strong rate increases and the build out of the construction portfolio is also contributing to the growth. The carrier also noted an uptick in business written in the political risk class, while energy and marine continued to grow across its underwriting platforms, taking advantage of positive market conditions across most classes.

Lancashire reported no individual material cat loss despite overall loss activity in the first nine months of 2023 including US wind and convective storms, the Hawaiian wildfires, the Turkey earthquake, Hurricane Idalia, and cyclones and flooding in New Zealand. In spite of these losses Lancashire have not changed their net combined ratio view and will be returning capital up to $169m to shareholders, highlighting the strong performance currently being seen on the portfolio.

Lancashire has also declared a net investment return of 2.8% compared to -5% return for the first nine months of 2022. The positive returns were driven by higher yields on their investment portfolio totalling $79.6m.