Beazley plc

Good morning and welcome to BASELY's 2025 Interim Results Presentation. If you would like to ask a question via the conference call, the signal number pressing star one on your telephone keypad. I will now hand over to Chief Executive Officer Adrian Cox. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to the 2025 BASELY Interim Results Presentation and thank you for dialing in. I will begin with an overview of our performance for the half year. Paul Bantic, our CEO, will take us through the underwriting section. Barbara Plattner-Jensen, our CFO, the financials, and I will finish with some thoughts on the outlook for the rest of the year. So on to the performance overview. I'm very pleased with this year's half-year results. We've generated a profit of 503 million, which is significantly above consensus. an annualized return on equity of over 18%, and a combined revenue share of just under 85%. That stands up very well against the cohort of specialty insurers across the globe with whom we compare ourselves. Last year's profit was a record for us that still stands, but that reflected a very benign period for large and catastrophe losses, which wasn't the case this year, which so far is probably more normal in this period of elevated risk. So far we've seen wildfires in California, Canada and now Europe, a very high number of severe convective storms in the US, a number of airline disasters, large individual fires, cyber attacks across the globe and so forth. The 84.9% combined ratio then is a very strong result and demonstrates both our ability to maintain margin throughout the cycle and the quality of profits that we're producing from the recent years of strong growth. When we compare that to the DMP, the Dowling and Partners Composite Index of Spectrum Insurers, that puts us in the top quartile of retail and equity. And whilst large and catastrophic losses have been more prevalent in 2025 so far, what is pleasing is that our attritional losses have continued to run better than expected, as they have done for the last three years now, which is testament to the uprising in claims management of the business we have been building. As many of you know, we don't like U.S. casualty business, by which I mean general liability, auto liability, umbrella, and excess casualty, et cetera, which means we don't have the issues going around U.S. casualty reserving, both pre- and post-COVID, that are causing such concern in the market. This is deliberate from us, and it's showing its value. We are and always have been very careful about what products we use to write and what we do not. Our focus remains on business where expertise where there is decent margin across the cycle, in pools of risk that are naturally growing fast, and most importantly, where there is little latency. We like to know at the end of the policy period whether or not we have a claim. It makes reserving significantly easier. It's also the primary reason why our growth rate this year is relatively modest. Much of the premium growth across the insurance world has been driven by rate increases in casualty business. And as I said, we're not in that business. We grew by 2%, this half, which is a reflection both of the further increased competition across a lot of our products and the underwriting discipline which we always exercise. We guided at the end of 2024 to a mid-single-digit growth rate, commenting that the marketplace was competitive but unstable. and that there were many risks bubbling under the surface, and that we wouldn't be surprised if opportunities emerged. Well, nothing has happened so far this year that has been significant or unexpected enough to impact market sentiment. So, we've grown less than expected in the second quarter. However, we are seeing signs of change in some important segments. DNO rate decreases have slowed down materially. The Aon survey in June, for example, showed just under 2% decline in June, and that's encouraging. The cyber market in the US also flattened in the summer. We remarked that margins had been compressed over the last couple of years, driven by both rate decreases and a rise in both cyber crime and liability losses. And this is feeding its way into underwriting behavior, also encouraging. Our team deliberately went out with flat renewals at the 1-7 renewal season, and that stuck. And that gives us some optimism for the second half of the year. And in the U.S. property market, which has been very competitive for the last 12 months or so, we're also seeing signs of stabilization. So the market is behaving relatively rationally. And we're optimistic that there will be further opportunities in the second half. It is easier to grow when underwriting pricing is more consistent across the market. Paul will take you through the results by division. But I wanted to highlight the fastest-growing platform was our European one, in line with our strategy. And the fastest-growing division is M80, fueled by rising demand, particularly in contingency and political risks, terrorism, and war. The latter a reflection of the high levels of geopolitical risk that we've been narrating for a little while now. In other news, despite a quite volatile period in the investment world, our team have managed to gain an investment profit of just over $300 million. equivalent to 5.4% annualised return and we're just under halfway through our $500 million share buyback. And I'm trying to complete that programme by the end of the year at Strand. And with that, I'll hand over to Paul.

Thanks, Richard. Morning, everyone. I look forward to walking you through how our underlying trading teams are progressing, as well as a few other highlights and of course, a few extra cyber details. of the deliberate strategic decisions we make around our product set. And so we thought we'd show some additional granularity on our set. We typically show you our four main trading divisions, cyber, property, map, and specialty. When we refer to our product portfolio, today we're going to a level below that. And what you can see here is a chart that breaks down our distinct 18 lines of business within those divisions. This granularity is extremely important. It affects the true breadth of the business we write, and importantly the diversification that we have, which spans over 50 individual products and business bands that we work on each year. These are products and business lines that we have strategically selected because they align with our specialty expertise, but also are the best mix to drive long-term growth as well as profitability. Through the market cycles, we optimize our portfolios so that it includes a healthy mix of both short-tail and long-tail lines of business. which is spread across a wide range of geographies and products. This enables us to manage risk dynamically and respond to some of the market conditions Adrian's been talking about with agility. What we're really highlighting to you here is the optionality that we have with such a broad and balanced product we're rarely locked into any single market cycle. Instead, we have the flexibility, when we need to, to lead into areas where the risk reward meet our requirements. That's a key part of how we manage the cycle, how we deliver consistent performance and even in some volatile conditions. It's not just our product portfolio that provides strategic flexibility. Now I'm going to turn to how our platform position across key specialty markets enables us to deploy that optionality effectively in response to varying market conditions and cycles. It's not just about what we write, it's also where we write it. Different products can and do Europe, our newest platform, currently offers strong growing conditions, as Adrian mentioned, with great adequacy supporting disciplined expansion that we've been underway there on for a few years. North America, the largest specialty insurance market for the type of the risk we write, provides scale and diversity, with both our admitted and E&S carriers domiciled in the US, we're really well positioned to respond across the full spectrum of market conditions. And finally, global wholesale, predominantly by alloys, remains a consistent contributor to profitability. The greater our geographical reach, the more flexibility we have in order to respond to changing conditions, pivoting quickly when needed and maintaining discipline where required. This is really essential to our ability to manage the market cycles effectively. Moving on to property, so our most property risk continues to evolve in response to market conditions and the changing shape of our business. It's a business that the team grew fantastically well in recent times and there continues to be good opportunities. The global wholesale platform, particularly in London and Lloyds, has faced the most challenging competitive and rating environment. This is where we typically see larger, more complex risks and where we've been managing our exposures and thus premiums due to rating adequacy. This is something we've managed before and it's not unusual with market cycles in a wholesale platform. In contrast, we've seen 6% growth in North America where conditions remain more attractive. As the E&S carrier that originally accessed this market via Lloyds, we've historically worked closely with wholesale brokers in North America, but we've been rapidly expanding our engagement with retail brokers, which is broadening our access to risk and opening up a new distribution channel for us. That said, the risks we're running in North America tend to be smaller in scale and premium than those coming to London and the wholesale market, particularly during the recent harder market cycle. So while we're increasing opportunity and reach, the overall impact on group growth is more modest at this stage, driven by the lower average premiums. Importantly, our long-term view of the opportunity remains undimmed. We're building a more balanced and resilient property for photo, one that gives us more flexibility our underwriting performance. We've now fully established a team in Europe that will start to write more from the 1st of January next year. Shifting to cyber. Our cyber portfolio continues to reflect the varied marketing dynamics across chocolate business. Europe, UK, and Asia Pacific have continued growth drivers this year, supported by a stronger rate adequacy and discipline expansion. The book has been growing well. but it can't remain a smaller part of our overall cyber portfolio. So while the conditions are attractive, the impact on group-level growth is still modest, but the international book is rapidly becoming more significant in total. North America, which represents the largest portion of our cyber book, has faced the most challenging race environment for some time, so to say. It's a crowded marketplace with intense competition and elevated claims activities. Since 2023, the market has experienced a rise in frequency and severity, leading to sustained margin pressure. Many reports suggest the US cyber market shrank in total clearance size in the past year. While we can't pinpoint exactly when the broader market will react, but we recently focused on our July renewals for change, which is the biggest renewal period of the year. They showed early signs of this change, with rates beginning to tap in North America, and retention of accounts stayed within our normal acceptable range. And that's very encouraging after many quarters of negative rate since the late in 2022. We're going to continue to monitor these conditions closely as we move into September and October. The cyber team has still delivered a very strong combined ratio. The recent lower levels experienced were driven by the hard market rate we achieved in 2021 and 2022, combined with reduced frequency and severity of claims. We never anticipated combined ratios in the 70s would continue indefinitely, and we are now seeing a normalisation but 85.3 is a significantly strong result for the line, still well within our hurdle rates for cross-cycle ROE targets, and considering rate pressure, one we're very pleased with and we think demonstrates our discipline and expertise. What's clear from the high-profile events reported in the first half is that the claims environment is far from benign in cyber. These incidents have reinforced the need for cyber insurance and the importance of maintaining rate adequacy. Risk selection, discipline, and the cyber services ecosystem that we've been so hard building over the recent years to protect long-term profitability. And speaking about high-profile events, we wanted to dig into the threat environment a bit and provide a reminder of how we manage our cyber work in response to the evolving risk. What we've seen in the first half of 2025 is a different dynamic in the nature of cyber losses. In 2024, the most widely reported and picked up events were systemic in nature. Our exposure to the event was well managed and in total remain at low levels that I will detail shortly. In contrast, 2025, we have seen more attritional losses involving individual insureds affected by ransomware with the beta breaches. These on the right-hand side here are examples of the big public losses and does not mean we are the insurer. Another notable change is geographic. In 2025, we've initially seen more cyber attacks outside of North America. particularly in Europe and other international markets. This is as we predicted and our expert Cyber Council suggested to us at the start of the year. The cyber threat can shift reasonably quickly to the geophysical environment around the world, and given some recent changes, we do anticipate it may bring back to be more focused on North America in the coming months. Managing this evolving threat landscape requires deep expertise, It's not just about underwriting discipline, it's about understanding how different types of events behave, how they aggregate, how the thread is moving, agility in your underwriting, and how to structure and protect you accordingly. To help clarify, systemic losses can trigger multiple policies and accumulate quickly, but we've been managing exposures for years and have a well-established approach for these events. For example, if you look at the 2024 systemic events, our net loss This demonstrates our ability to manage potential aggregates effectively. Attritional losses, on the other hand, are typically one-limit losses. While headlines may reference policies with coverage in tens or hundreds of millions of dollars, the reality is that our net average line size is $1.7 million, and even our maximum net limits are below 10 million in 99% of cases. As Adrian said earlier, our attritional losses continues to perform well across the business, and this disciplined approach combined with expertise ensures that even in a more active claims environment, our exposures remain well managed. Moving on to talk about cyber protection a little bit. Our cyber protections are designed to respond to both systemic and attritional risks using a layered approach that reflects the evolving threat landscape. For attritional risks, frequent, insurance, which shares premium and losses with our partners, helping smooth volatility, cyber aggregate stock loss, which tracks the total cyber related losses over a period, protecting against cumulative attritional impacts. For systemic risk, events that impact multiple insurers simultaneously, we deploy excessive loss cover, which protects us above a set threshold, fast free insurance, which responds when multiple policies are triggered by a single event, Cyber catastrophe bonds, which has extreme risk to capital markets. We've spoken about these many times in our D&D days as well. Our industry loss warranties, which trigger based on market-wide loss events. Cyber aggregate stop loss, which also acts as a buffer against systemic accumulation. And man-made catastrophe loadings within our reserves, which feel resilient against human-driven systemic events, very similar to how you would in natural catastrophe of property. The systemic events described on the previous slide were relatively modest in impact, but it's important to recognise that systemic events have the potential to result in higher losses. Whether we're dealing with the modest events or something approaching a 1 in 250 like scenario, this is a risk we're constantly thinking about in our pricing, modelling and overall portfolio management. As we already showed at our Capital Markets Day, we built over a billion in systemic cap protections. whether it's a single ransomware attack or widespread platform faker. Moving on to specialty risks. Specialty risks have shown a variable growth profile over the past 12 months, closely tied to the broader market conditions that they've been experiencing. In half to 2024, the divisions surprised us with stronger than expected growth, given by a short-term surge in capital markets activity, particularly IPOs and M&A. However, the first quarter of 25 was notably challenged as volatility in capital markets were due, demand for many of the products in this division had the same impact. Q2 provided a window of opportunity with improved conditions supporting a rebounding activity. That said, we do expect the second half to moderate with four-year growth anticipated to be flat to very modest. It's important to know The starting point for the premium in half two is significantly higher than it was a year ago, which will naturally subdue year-on-year growth comparisons for the second half. On the profitability side, the half year 25 combined ratio has improved compared to last year, largely because we've seen the impact of adverse development as a result of some changes to our insurance contract, which was a one-off impact that we described last year. We remain extremely various to social inflation exposed parties and have continued to reduce our exposure further, and we have been doing this for some time now. Overall, this is a division that responds quickly to shifts in market sentiment. While the outlook for H2 is more muted, we remain confident in the long-term relevance of our specialty offerings and our ability to respond dynamically to the changes in demand and the increases to be anticipated to come. As Adrian already said, we're extremely pleased with the performance of our map division in the first half, and while the result is excellent, it's not entirely unexpected. We've been saying for some time that there is strong and sustained demand for the map policy, which includes cover for war, terrorism, political violence and continuity. Given the ongoing geopolitical uncertainty and global conflicts, this demand has intensified. What's different this year is that the underlying performance is now clearly visible in the group numbers. In recent years, MAP's results have been impacted by the re-platforming work we've been undertaking, which has masked the true performance of the team. This is the first time in a while that a reported result is fully aligned with the team's delivery, and as you can see, it's excellent. The combined ratio of 82.4% is a standout result, especially in a class of business that is built with such complex and potentially volatile risks. It again reflects our discipline in underwriting, our ability to manage aggregates and commitments to long-term profitability. It's also worth noting that last year's call was flattered by prior year releases, a legacy of the COVID years when claims activity was unusually low due to grounded aircraft, full shipping and cancelled events. That environment has since normalised, so this year's result is a much clearer reflection of the underlying strength of the MAP portfolio. I'll now hand over to Barbara to walk through the financial performance.