Beazley profits from currency moves

Beazley is struggling to make money from investing its premiums, but it is still nicely in profit thanks to clever underwriting and helpful moves in the currency markets.

The Lloyds of London insurer today reported a leap in half year profits to $115 million (£75 million), up from $30 million a year ago, largely thanks to a one-off foreign exchange gain of $34 million.

It took in premiums of $940 million over the six months to June, but made an annualised return of just 0.5% on that money. That is a function of the insurer's highly conservative investment policy that sees 90% of its funds in cash and super safe bonds.

Chief executive Andrew Horton admits the investment side of the business is "challenging" but says there is no plans to take more risks.

He points to a combined ratio of 89% as evidence that the insurer is well run. The ratio means Beazley pays out 89p in claims for every £1 it takes in. Last year the ratio was 90%.
Beazley has an exposure to the BP oil leak disaster that it estimates at $6 million. The earthquake in Chile is expected to set it back a more punishing amount of between $55 million and $75 million.

The low returns on investment ought to force up rates, but competition for business remains strong, says Horton.

"We are concentrating on business that remains profitable and are prepared to reduce our book where this is not the case," he said.

The shares were up 1.4p to 123.4p.