Beazley emerges as best Lloyd’s performer, Hiscox, Munich Re tipped to improve

Beazley was the best performing Lloyd’s underwriter in 2019 and has also posted the best performance over the past 10 years, according to new research. Meanwhile, Asta, Hiscox, Hannover Re's Argenta and SCOR's Channel syndicates all posted a disappointing performance in 2019.

Those are some of the conclusions of an analysis of the market by Jefferies International. This showed that, in 2019, although Beazley underwrites just 6.6 percent of the market's premiums, the group's syndicates produced a net result equivalent to 21.4 percent of the market total in 2019.

In FY2018 Beazley was the second-best insurer, with 5.5 percent of the premium and earning a net profit, while most peers (and the wider market) produced a net loss. In a separate report, Jefferies also referenced analysis done by Lancashire in the context of its recent capital raising. This highlighted Beazley as the best performing insurer over the last 10 years, with a compound ROE of nearly 16 percent, almost double the peer average of just over 8 percent.

The research paper noted that with Lloyd’s as a whole having posted three consecutive years of underwriting losses (with a probability of a fourth), this ongoing period (from 3Q 2017) of high catastrophe claims is sorely testing the market.

But the performance of individual players varies widely. While Beazley has performed very well, it notes that Asta remains the market's laggard, while Hiscox's profit warning put the group deep in the bottom quartile in 2019 for reasons identified during the November profit warning. But Jefferies notes: “In the context of the management actions Hiscox took in 4Q and given their long-term track record, we expect Hiscox's London Market's business to improve its position in 2020.”

Meanwhile, AXA's Catlin makes the top quartile, which Jefferies describes as a reassuring indicator of its potential, while noting that years of work remains ahead around the integration of AXA and XL.

Both Hannover Re's Argenta and SCOR's Channel syndicates recorded a net loss for FY2019 (-£15m and -£19m) respectively, the report notes. “Given that Hannover Re only purchased Argenta in 2017 and we had high hopes for its performance, such losses are disappointing.

SCOR's losses in Channel are equally disappointing given that growth in specialty (primary) lines had been a significant part of their strategy. Nevertheless, as both reinsurers are arguably over-capitalised, we do not expect either to change their approach.”

Jefferies notes that Munich Re performed well in 2019 finishing roughly in the middle quartile but has suffered in 1Q 2020. “However, it should noted that this Syndicate writes a considerable amount of the group's event cancellation risk, leading us to presume that the syndicate has suffered heavily in 1Q 2020 from quarantines,” the analysts noted.

The report also recognised that the market is rapidly hardening. “Thus, although the risks are high, we'd argue that the potential rewards are greater and reiterate our buy recommendations (in order of preference) for Beazley, Munich Re, AXA and Hiscox.”