Beazley refuelling could trigger 30% top line gain on big renewals surge

A move by London specialist re/insurer  Beazley to fuel up on fresh capital ahead of the 1.1 reinsurance renewals and the new year could enable top line growth of nearly 30% in 2023, top equity market brokerages have indicated.

"We now estimate that Beazley can almost double the rate of growth in 2023E to 28.5%," analysts from the investment bank Berenberg told clients. The rationale for grabbing growth “makes perfect sense” and “the timing is fortuitous.”

Analysts at Jeffries concur in full, putting their estimate for 2023 growth in net premium earned at the 29% mark ahead of 16% in 2024.

Property and cyber lines are in focus, with management comments most recently focused on an attack in property. The opportunity in property “has emerged faster than we originally thought,” CEO Adrian Cox told investors at his company’s Q3 earnings call, just days ahead of the eventual book-building and sale.

That opportunity had been flagged very clearly mid-year as well. “This is the business we want to get more encouraged about,” Cox told investors mid-year, on the conviction that climate-change shortcomings of mainstream models had begun to scare off more naïve capital.

The upshot: gross written premium could rise by as much as 44% in the property space, led by 50% growth in reinsurance rates ahead of 15% growth in rates for primary coverage, Jeffries estimated for its investor clients.

Cyber may be the much-watched growth driver at Beazley, but management has cautioned not to expect runaway growth in the segment. Asked about cyber-segment growth, management continually steps back to say that the total book should only ever grow in rough proportion to its current shape.

Cyber gross premium written will likely rise by 26% in the Jeffries accounting, with reductions in reinsurance purchase likely to deliver an increase in net premium closer to 38%. Even more so at Berenberg: new net premium is tipped roughly 5:3 to property over cyber. Specialty lines pick up lingering sums in both brokerages’ forecasts.

By most measures, it’s a gain for shareholders. Both brokerages see earnings per share increases in 2024 despite the 10% increase in share count. For 2023, Jeffries said Beazley will deliver earnings growth to neutralise the impact on the EPS measure; Berenberg sees 0.8% EPS erosion on the share dilution.

Shares of Beazley have recovered from the roughly 7% decline they suffered on the 10% stake sale, priced at a similar discount to market. Shares have last traded with a roughly 1% gain to the local high hit the day prior to sale.

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