FTSE 250 listed specialist insurance firm Beazley (LON:BEZ) booked an almost 11% fall in its share price on Tuesday, as it announced it would have to revise its original Covid insurance claims cost estimate, to double its previous prediction.
In April, the company estimated that that the cost of Covid claims for its first party business (contingency, accident and health, marine, property and reinsurance) would be around US$170 million of reinsurance.
Within this, the company said, they had assumed that events would resume in September, which would lead to a normalisation in contingency claims. Instead, the situation with Covid and the potential for a second lockdown, means this is no longer the case.
With the bulk of Beazley’s business coming by way of US and UK-based conferences, and with most events being called off due to restrictions, the company has increased its loss estimates, with further further claims anticipated based on its exposure for events in 2021.
Due to these factors, the company said that its total estimate for first party Covid claims has been moved from US$170m to US$340m net of reinsurance, with Beazley attributing all of this increase to further event cancellations.
The company added that this revised estimate assumes that some semblance of normality will resume in the second half of 2021, though if this is not the case, it estimates it could add a further US$50 million of further claims net of reinsurance.
Beazley keeps a brave face
Speaking on the company’s forward-looking opportunities, its Statement read:
“We continue to see improving growth prospects across our portfolios of business. This is primarily driven by continuing rate improvements, with an overall rate change of 13% at the end of August. We estimate that the overall growth for 2020 will be in the mid-teens.”
“Looking towards next year we expect these rate improvements to continue, and are again planning for double digit growth in 2021. We have contemplated this growth within our capital planning and, following the equity raise and LOC extension earlier this year, are able to take full advantage of the opportunity that lies ahead of us.”
“Investments returned US$136m (or 2.2%) up to the end of August. Whilst we have benefited from recent improvements in investment markets, we remain relatively cautious on taking investment risk given the continued uncertainty surrounding the global economy.”
Investor notes
Following the announcement, Beazley shares dipped by 10.87% or 42.40p, to 347.60p a share 22/09/20 11:30 GMT. This is ahead of the company’s year-to-date nadir of 323.00p, but well short of analysts’ median 12-month price target of 501.68p. The current price is also more than 42% below the company’s share price on the same day last year.
Beazley currently has a p/e ratio of 11.21 and a dividend yield of 3.49%.
