Period ended 30 Period ended 30 June 2016

Transcription

1 Press Release Beazley s profits rise London, 21 July Beazley plc results for period Profit before tax of $158.7m ( : $150.2m) Return on equity of 18 ( : 19) Gross premiums written increased by 2 to $1,149.3m ( : $1,124.1m) Combined ratio of 90 ( : 90) Rate reduction on renewal portfolio of 2 ( : reduction of 2) Prior year reserve releases of $83.4m ( : $77.4m) Net investment income of $79.4m ( : $62.7m) First interim dividend of 3.7p ( : 3.5p) Period 30 Period 30 June June movement Gross premiums written () 1, , Net premiums written () Profit before tax () Earnings per share (pence) Net assets per share (pence) Net tangible assets per share (pence) Earnings per share (cents) Net assets per share (cents) Net tangible assets per share (cents) Dividend per share (pence) Andrew Horton, Chief Executive Officer, said: Beazley delivered another good performance in the first half, against a backdrop of continuing competition. Our US operations performed strongly and our newly authorised Dublin based insurance company will support our growth plans in Europe, where we see opportunities to distribute our specialty products. For further information, please contact: Beazley plc Finsbury Martin Bride Guy Lamming/Humza Vanderman Tel: +44 (020) Tel: +44 (020)

2 Note to editors: Beazley plc (BEZ.L), is the parent company of specialist insurance businesses with operations in Europe, North America, Latin America, Asia and the Middle East. Beazley manages six Lloyd s syndicates and, in, underwrote gross premiums worldwide of $2,195.6 million. All Lloyd s syndicates are rated A by A.M. Best. Beazley s underwriters in the United States focus on writing a range of specialist insurance products. In the admitted market, coverage is provided by Beazley Insurance Company, Inc., an A.M. Best A rated carrier licensed in all 50 states. In the surplus lines market, coverage is provided by the Beazley syndicates at Lloyd s. Beazley is a market leader in many of its chosen lines, which include professional indemnity, property, marine, reinsurance, accident and life, and political risks and contingency business. For more information please go to: Interim results statement Overview Beazley performed well during the first half of, with a strong underwriting result boosted by an excellent investment return. Pre-tax profits rose 6 to $158.7m (: $150.2m) on gross premiums that, at $1,149.3m, were 2 higher than for the comparable period last year (: $1,124.1m). Our combined ratio was 90 (: 90). With market conditions for large, catastrophe exposed risks continuing to deteriorate, our specialty lines division, which is less focused on such risks, has been growing as a proportion of our underwriting portfolio. Specialty lines is itself a very diversified book, comprising professional liability, management liability, and environmental business as well as our market-leading cyber insurance practice. Most of our specialty lines clients are currently located in the US with large risks frequently underwritten in London and smaller risks commonly underwritten locally in the US. Our other divisions are also represented in the US, although on a smaller scale. We saw locally underwritten US premiums grow 9 in the first half of the year, relative to the same period last year. We have also been laying the foundations for future growth elsewhere. In February we expanded our presence in Canada with the acquisition of the specialist managing general agent, Creechurch International Underwriters Limited (now Beazley Canada Limited). We have also continued to hire underwriters in Europe, Singapore and Miami: the latter two locations are now well recognised regional hubs for Asian and Latin American business respectively. These investments in the future of the business have led to an increased expense ratio, but we remain focused on managing costs actively in order to minimise such effects. Continental Europe currently accounts for just over 5 of our total business, but we have growth ambitions there too, supported by the establishment of a new Dublin-based insurance company and by the measures Lloyd s is taking to preserve the market s access to European business following Britain s future departure from the European Union. We were therefore pleased to receive approval from the Central Bank of Ireland for our Irish-domiciled reinsurance company, Beazley Re dac, to transact insurance. To that end the company has been renamed Beazley Insurance dac. Earlier, in March, Lloyd s announced plans to establish a new Brussels-based insurance company capable of writing European business for the 1 January 2019 renewal season, subject to regulatory approval. We should accordingly be able to grow our presence in Europe unimpeded, offering clients the specialist products and service we know they value. Despite our continued success in generating strong underwriting profits, conditions for many of our underwriters remain exceptionally difficult. Premium rates for our business as a whole decreased by 2 but this masked steep declines for war (8), energy (9) and terrorism (11). Rates for these lines of business have been falling steadily for several years. Our underwriters continue to succeed in writing profitable business against the backdrop of ever more challenging conditions, particularly in the marine market, but they are having to walk away from underpriced business with increasing frequency. The following table shows the cumulative rate changes () since 2008 by business division HY

3 Marine Political, accident & contingency Property Specialty Lines Reinsurance All divisions For as long as current market conditions prevail we expect growth opportunities for our London underwriters, who often specialise in catastrophe exposed risks, to be limited. By contrast, we continue to see attractive growth opportunities across our specialty lines portfolio. Demand continues for high quality cyber insurance, a market in which Beazley is very well known. Regulations concerning the handling of data breaches are tightening: the long awaited General Data Protection Regulation will come into force across the European Union next spring. Also, illustrations of why companies need to have protection continue, most recently with the internationally coordinated WannaCry malware attacks. Together these trends continue to drive demand for cyber insurance among businesses of all sizes. Beazley is well equipped to meet this demand. Our Beazley Breach Response product is adapted to the needs of small and mid-sized businesses and Vector, our partnership with Munich Re, helps the world s largest companies build the substantial towers of insurance they are now seeking. When underwriting cyber insurance we recognise the potential for systemic events, as we do in areas exposed to natural catastrophes, and seek to limit our aggregate exposure as well as purchasing substantial reinsurance. In cyber, as in other business areas, our risk management team, led by Andrew Pryde, works closely with our underwriters to monitor and manage aggregation risk. Other growth markets for Beazley in the first half, and areas in which we see continuing strong potential, were healthcare risks and environmental risks. Healthcare expenditures account for nearly 18 of the US economy and the market is constantly evolving, generating new risks for healthcare providers. Earlier this year, our US healthcare team launched Beazley Virtual Care, a pioneering insurance policy to cover organisations involved in the provision of telemedicine, a fast growing sector of the healthcare market. Outside the US, financial institutions business is another market that we see as offering strong growth potential for our specialty lines underwriters. In May we launched a new package product in London for financial institutions, combining crime and professional indemnity cover with Beazley s data breach capability. We have also opened a new office in Barcelona and our hiring plans for the underwriters who will write business for the newly formed Beazley Insurance dac across Europe are well advanced. Not all markets offer equal promise of course. In May we sold the renewal rights to our Australian accident and health business to Blend Insurance Solutions, a Sydney-based Lloyd s service company. We will continue to focus on the growth of our accident and health business in London as well as in the US where, in May, we welcomed Brian Thompson to lead our US A&H team. These measures should enable us to improve the combined ratio of the team which has been higher than planned. The divisional structure of Beazley also changed in the first half of the year, spurred by the decision of Adrian Lewers, head of our political risks and contingency division, to retire from the business. This division has now been merged with our life, accident & health division under the leadership of Christian Tolle. My colleagues and I are enormously grateful to Adrian for his many contributions to Beazley, not least the creation of three successful specialist underwriting teams focusing on political, terrorism and contingency risks. Our recruitment and business development efforts around the world continue to be supported by the strength of the Beazley brand within our markets. We have largely grown organically, with rare exceptions for relatively small scale acquisitions of firms, such as Creechurch, that we know well and

4 with which we have long term relationships. The success of this strategy has fostered Beazley s reputation across our industry as an entrepreneurial company where talented individuals can build rewarding long term careers. At times of market dislocation, such as we have recently seen, this makes us a magnet for talent. Although talent is a necessary condition for success in today s insurance markets, we are well aware that it is not a sufficient condition. The way in which insurers amass and interpret data, to support underwriting and enhance customer service, is also of critical importance. Our chief operating officer, Ian Fantozzi, has been leading our newly established data and analytics strategic initiative to ensure that Beazley is a beneficiary of the exciting developments in this arena. Investment performance Our investments returned $79.4 m, or 1.7 in the first half of ( : $62.7 m, 1.4). Investments have been volatile in this period, largely as a result of political uncertainty in the US. Overall however, US sovereign yields are little changed from the beginning of the year whilst credit spreads have continued to narrow and equity markets have risen strongly, reflecting underlying optimism about global economic prospects. As a result, our return in the year to date is higher than we had anticipated, helped by the shift from sovereign to corporate bond investments that we made in as well as modest additions to our equity exposures in and. However, risk assets have been rallying for an ext period and are increasingly vulnerable to disappointing economic news. The breakdown of our investment portfolio at was: Cash and cash equivalents Government, quasi-government and supranational , Asset backed securities Corporate bonds - Investment grade 2, , High yield Senior secured loans Derivative financial assets Core portfolio 3, , Equity linked funds Hedge funds Illiquid credit assets Capital growth assets Total 4, , At the average duration of our fixed income portfolios was 2.0 years (31 December : 1.2 years) and the average credit rating of these exposures was A. Investment return by asset type Analysis of returns on the core portfolio and the capital growth assets are set out below: annualised return annualised return

5 Core portfolio Capital growth assets Overall return The increased return on capital growth assets is driven by: a much improved return from equities compared to the first six months of on a larger portfolio; and an increasing return on the illiquid credit assets as this portfolio matures. Capital position Our funding comes from a mixture of our own equity (on a Solvency II basis) alongside $248.4 m of tier 2 subordinated debt, $18.0 m of subordinated long term debt and a $95.5 m retail bond. We also have an undrawn banking facility of $225.0 m. The following table sets out the group s sources of funds: Shareholders funds 1, ,379.2 Tier 2 subordinated debt (2026) recalled in Tier 2 subordinated debt (2026) issued in Retail bond (2019) Long term subordinated debt (2034) Total 1, ,600.0 Our specialty lines business is likely to play a larger role in driving our capital requirements in the future as it is becoming a larger percentage of the total, thanks to its own growth, and because we continue to reduce our peak natural catastrophe exposure to reflect the rating environment. As a consequence, we would expect the rate of growth of our Lloyd s ECR to be close to double digits over the next few years. In November we issued $250.0 m of subordinated debt to facilitate this planned growth, and these funds remain available to meet our increasing capital requirement. The following table sets out the group s capital requirement including a provisional projection based upon the first version of our 2018 business plan of the year end Lloyd s ECR which is 7 higher than the previous year. Projected 31 December 31 December Lloyd s economic capital requirement (ECR) 1, ,489.2 Capital for US insurance company Total 1, ,596.9 At we have surplus capital (on a Solvency II basis) of 31 of the projected year end ECR. Dividend The board has declared a first interim dividend of 3.7 pence (: 3.5 pence), in line with our strategy of delivering 5-10 dividend growth. This will be paid on 31 August to shareholders on the register at 5.00pm on 4 August. Outlook For most insurers, current market conditions are not conducive to growth. For some, any growth at all is proving elusive. I believe that Beazley can continue to grow in the mid single digits while

6 generating underwriting profits. However in the absence of any market-turning catastrophe events (which would of course generate sizeable short term losses), the challenge of achieving this growth will increase. Our priorities in this environment are clear. We will not sacrifice profitability for growth, which means that we will continue to walk away from underpriced business. We will also continue to invest in the skills and infrastructure needed to succeed in any rating environment. We hired 29 people in the first half of the year to fill newly created underwriting roles but this was just one facet of our investment in the future of our business. It takes many skills to compete effectively in a crowded insurance market that is awash with capacity and targeted by numerous would-be disrupters. To meet both short term and long term challenges, we will continue to invest broadly in talent from inside and outside our industry. Andrew Horton Chief executive 20 July Condensed consolidated statement of profit or loss for the six months Year to 31 December Gross premiums written 1, , ,195.6 Written premiums ceded to reinsurers (212.9) (193.7) (341.6) Net premiums written ,854.0 Change in gross provision for unearned premiums (100.1) (103.5) (83.4) Reinsurer s share of change in the provision for unearned premiums (2.4) Change in net provision for unearned premiums (49.7) (69.0) (85.8) Net earned premiums ,768.2 Net investment income Other income Revenue ,894.0 Insurance claims ,027.3 Insurance claims recovered from reinsurers (102.4) (99.1) (171.7) Net insurance claims Expenses for the acquisition of insurance contracts Administrative expenses Foreign exchange loss Operating expenses

7 Expenses ,585.4 Share of profit/(loss) in associates (0.2) Results of operating activities Finance costs (10.9) (7.3) (15.2) Profit before income tax Income tax expense (27.0) (21.4) (42.2) Profit after income tax all attributable to equity shareholders Earnings per share (cents per share): Basic Diluted Earnings per share (pence per share): Basic Diluted Condensed consolidated statement of comprehensive income for the six months 30 June 30 June Year to 31 December Profit after income tax Other comprehensive income Items that will never be reclassified to profit or loss: Gains on remeasurement of retirement benefit obligations (6.1) Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences (0.8) (5.6) (10.1) Total other comprehensive income (0.8) (5.6) (16.2) Total comprehensive income recognised Condensed consolidated statement of changes in equity for the six months Share capital Merger reserve Foreign currency translation reserve Other reserves Retained earnings Total Balance as at 1 January (628.5) (87.3) 6.7 1, ,441.4 Total comprehensive income recognised (5.6) Dividends paid (188.3) (188.3) Issue of shares (2.3) 0.2

8 Capital reduction 2 (631.5) Equity settled share-based payments Acquisition of own shares held in trust (9.7) (9.7) Transfer of shares to employees (2.1) Balance as at 37.7 (92.2) 7.1 1, ,379.2 Total comprehensive income recognised (4.5) Dividends paid (23.9) (23.9) Equity settled share-based payments Acquisition of own shares held in trust Tax on share option vestings Transfer of shares to employees 2.5 (1.6) 0.9 Balance as at 31 December 37.7 (96.7) , ,483.7 Total comprehensive income recognised (0.8) Dividends paid (110.8) (110.8) Equity settled share-based payments Issue of shares Acquisition of own shares held in trust (16.2) (16.2) Tax on share option vestings Transfer of shares to employees (7.7) 7.6 (0.1) Balance as at 37.8 (97.5) , , During the first half of, 1.9 m new ordinary shares were issued, as well as 0.1m of preference shares prior to the scheme of arrangement. 2 The subsequent capital reduction involved a reduction in the nominal value of the shares in the new parent to 5 pence per share. Condensed consolidated statement of financial position as at 31 December Assets Intangible assets Plant and equipment Deferred tax asset Investments in associates Deferred acquisition costs Reinsurance assets 1, , ,082.1 Financial assets at fair value 4, , ,195.4 Insurance receivables Current income tax assets Other receivables Cash and cash equivalents Total assets 7, , ,008.5 Equity Share capital

9 Foreign currency translation reserve (97.5) (92.2) (96.7) Other reserves Retained earnings 1, , ,519.3 Total equity 1, , ,483.7 Liabilities Insurance liabilities 4, , ,657.7 Financial liabilities Retirement benefit liability Deferred tax liabilities Other payables Total liabilities 5, , ,524.8 Total equity and liabilities 7, , ,008.5 Condensed consolidated statement of cash flows for the six months Year to 31 December Cash flow from operating activities Profit before income tax Adjustments for: Amortisation of intangibles Equity settled share based compensation Net fair value gain on financial investments (45.1) (34.8) (28.9) Share of (profit)/loss in associates (0.1) (0.2) 0.2 Depreciation of plant and equipment Impairment of reinsurance assets recognised/(written back) 0.7 (1.1) Increase in insurance and other liabilities Increase in insurance, reinsurance and other receivables (181.8) (194.1) (59.3) Increase in deferred acquisition costs (31.3) (20.9) (16.6) Financial income (37.4) (31.8) (71.5) Finance expense Income tax paid (17.9) (20.0) (39.8) Net cash from operating activities Cash flow from investing activities Purchase of plant and equipment (1.2) (1.1) (2.9) Expenditure on software development (0.7) (1.9) (4.7) Purchase of investments (1,215.4) (3,573.4) (5,985.4) Proceeds from sale of investments 1, , ,666.0 Investment in associate (0.1) Cash acquired on sale of Australian accident and health business 0.8 Net cash spent in business combinations (31.2) (8.0)

10 Interest and dividends received Net cash from investing activities 62.5 (43.0) (263.6) Cash flow from financing activities Acquisition of own shares in trust (16.2) (9.7) (9.7) Proceeds from issue of shares 0.3 Repayment of borrowings (107.1) Proceeds of debt issue Interest paid (10.9) (7.3) (15.2) Dividends paid (110.8) (188.3) (212.2) Net cash used in financing activities (137.9) (205.0) (95.5) Net decrease in cash and cash equivalents (48.0) (235.0) (165.2) Cash and cash equivalents at beginning of period Effect of exchange rate changes on cash and cash equivalents 2.2 (0.1) (4.5) Cash and cash equivalents at end of period Statement of accounting policies Beazley plc is a company incorporated in England and Wales and is resident for tax purposes in the United Kingdom. The condensed consolidated interim financial statements of the group for the six months comprise the parent company, its subsidiaries and the group s interest in associates. The condensed consolidated interim financial statements have been prepared and approved by the directors in accordance with IAS 34 Interim Financial Reporting as adopted by the EU ( Adopted IFRS ). The condensed consolidated interim financial statements of Beazley plc have been prepared on a going concern basis. The directors of the company have a reasonable expectation that the group and the company have adequate resources to continue in operational existence for the foreseeable future. The principal risks and uncertainties faced by the group remain consistent with those risks and uncertainties discussed and disclosed on pages 52 to 57 of the group s annual report and accounts. The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made by management in applying the group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at, and for, the year 31 December. As required by IFRS 13 (Fair Value Measurement) information relating to the fair value measurement of financial assets and liabilities is outlined in note 9 to the condensed consolidated interim financial statements. The accounting policies applied in the condensed consolidated interim financial statements are the same as those applied in the group s consolidated financial statements for the year 31 December. There have been no additional standards endorsed by the EU since the year 31 December, thus no additional standards have been applied by the group. The financial information included in this document does not comprise statutory financial statements within the meaning of Companies Act New holding company On 13 April, under a scheme of arrangement involving a share exchange with the members of Beazley Ireland Holdings plc, Beazley plc became the new holding company for the Beazley group. For further details on this please refer to pages 135 and 136 of the group s annual report and accounts.

11 2 Segmental analysis Segment information is presented in respect of reportable segments. This is based on the group s management and internal reporting structures and represents the level at which financial information is reported to the board, being the chief operating decision maker as defined in IFRS 8. Finance costs and taxation have not been allocated to operating segments as these items are determined by group level factors and do not relate to operating performance. Marine Political, accident & contingency 1 Property Reinsurance Specialty lines Total Gross premiums written ,149.3 Net premiums written Net earned premiums Net investment income Other income Revenue Net insurance claims Expenses for the acquisition of insurance contracts Administrative expenses Foreign exchange loss Expenses Share of (loss)/profit in associates (0.2) Segment result 10.9 (0.6) Finance costs (10.9) Profit before income tax Income tax expense (27.0) Profit after income tax Claims ratio Expense ratio Combined ratio Segment assets and liabilities Segment assets 1, , , , ,175.7 Segment liabilities (899.0) (913.2) (887.1) (264.6) (2,705.7) (5,669.6) Net assets , During, the life, accident and health division and political risks and contingency division were combined to form the political, accident and contingency division. Comparative figures for and 31 December have been re-presented to reflect this change in structure and allow comparability. Marine Political, accident & contingency 1 Property Reinsurance Specialty lines Total

12 Gross premiums written ,124.1 Net premiums written Net earned premiums Net investment income Other income Revenue Net insurance claims Expenses for the acquisition of insurance contracts Administrative expenses Foreign exchange loss Expenses Share of profit in associates Segment result Finance costs (7.3) Profit before income tax Income tax expense (21.4) Profit after income tax Claims ratio Expense ratio Combined ratio Segment assets and liabilities Segment assets 1, , , , ,821.1 Segment liabilities (804.9) (872.6) (849.3) (247.9) (2,667.2) (5,441.9) Net assets , During, the life, accident and health division and political risks and contingency division were combined to form the political, accident and contingency division. Comparative figures for and 31 December have been represented to reflect this change in structure and allow comparability. 31 December Marine Political, accident & contingency 1 Property Reinsurance Specialty lines Total Gross premiums written , ,195.6 Net premiums written ,854.0 Net earned premiums ,768.2 Net investment income Other income Revenue ,894.0

13 Net insurance claims Expenses for the acquisition of insurance contracts Administrative expenses Foreign exchange loss Expenses ,585.4 Share of loss in associates (0.2) (0.2) Segment result Finance costs (15.2) Profit before income tax Income tax expense (42.2) Profit after income tax Claims ratio Expense ratio Combined ratio Segment assets and liabilities Segment assets 1, , , , ,008.5 Segment liabilities (840.2) (880.1) (859.3) (245.4) (2,699.8) (5,524.8) Net assets , During, the life, accident and health division and political risks and contingency division were combined to form the political, accident and contingency division. Comparative figures for and 31 December have been represented to reflect this change in structure and allow comparability. 3 Net investment income Year to 31 December Interest and dividends on financial investments at fair value through profit or loss Interest on cash and cash equivalents Net realized gains/(losses) on financial investments at fair value through profit or loss 5.4 (4.0) (4.9) Net unrealised fair value gains on financial investments at fair value through profit or loss Investment income from financial investments Investment management expenses (3.1) (3.9) (7.3) Other income Year to 31 December Commission income Profit commissions

14 Agency fees Other income In May the group sold its Australian accident and health business, previously included in the PAC segment, to Blend Insurance Solutions PTY Limited, a Sydney-based Lloyd s service company, for total consideration of $0.8 m. The gain on the disposal of $0.8 m is included in the other income line. 5 Finance costs Year to 31 December Interest expense Earnings per share Year to 31 December Basic (cents) Diluted (cents) Basic (pence) Diluted (pence) Basic Basic earnings per share are calculated by dividing profit after income tax of $131.7 m ( : $128.8 m; 31 December : $251.0 m) by the weighted average number of shares in issue during the six months of m ( : m; 31 December : m). The shares held in the Employee Share Options Plan (ESOP) of 5.0 m ( : 6.8 m; 31 December : 6.1 m) have been excluded from the calculation until such time as they vest unconditionally with the employees. Diluted Diluted earnings per share are calculated by dividing profit after income tax of $131.7 m ( : $128.8 m; 31 December : $251.0 m) by the adjusted weighted average number of shares of m ( : m; 31 December : m). The adjusted weighted average number of shares assumes conversion of dilutive potential ordinary shares, being shares from the SAYE (Save As You Earn), retention and deferred share schemes. The shares held in the ESOP of 5.0 m ( : 6.8 m; 31 December : 6.1 m) have been excluded from the calculation until such time as they vest unconditionally with the employees. 7 Dividends A first interim dividend of 3.7p per ordinary share (: 3.5p) is payable in respect of the six months to. These financial statements do not provide for this dividend as a liability. The first interim dividend will be payable on 31 August to shareholders registered at 5.00pm on 4 August. A second interim dividend of 7.0p per ordinary share and a special dividend of 10.0p was paid on 29 March to shareholders registered at 5.00pm on 3 March in respect of the six months 31 December. 8 Income tax expense

15 Year to 31 December Current tax expense Current year Prior year adjustments Deferred tax expense Origination and reversal of temporary differences (6.0) (4.6) 2.1 Impact of change in UK tax rates (0.2) (0.8) Prior year adjustments (0.4) (0.7) 1.7 (6.4) (5.5) 3.0 Income tax expense Year to 31 December Year to 31 December Profit before tax Tax calculated at the weighted average of statutory tax rates Effects of: Non-deductible expenses Non-taxable gains on foreign exchange (0.7) (0.4) (3.4) (2.3) (5.6) (1.9) Tax relief on share based payments current and future years (0.6) (0.2) Under/(over) provided in prior years Change in UK tax rates 1 (0.2) (0.1) (0.8) (0.3) Tax charge for the period The Finance Act 2015, which provides for reduction in the UK Corporation tax rate down to 19 effective from 1 April was substantively enacted on 26 October The Finance Act, which provides for reduction in the UK Corporation tax rate down to 17 effective from 1 April 2020 was substantively enacted on 6 September. These rate reductions to 19 and 17 will reduce the company s future current tax charge and have been reflected in the calculation of the deferred tax balance as at. The group has assessed the potential impact of diverted profits tax (DPT) following the enactment of new legislation in April 2015 and is of the view that no liability arises. The ultimate outcome may differ and any profits that did fall within scope of DPT would potentially be taxed at a rate of 25 rather than 12.5 (the current rate of tax on corporate earning in Ireland). 9 Financial assets and liabilities 31 December Financial assets at fair value Government issued , ,180.0 Quasi-government Supranational Asset backed securities

16 Senior secured loans Corporate bonds Investment grade 2, , ,158.0 High yield Total fixed and floating rate debt securities 3, , ,617.4 Equity linked funds Hedge funds Illiquid credit assets Total capital growth Total financial investments at fair value through statement of profit or loss 4, , ,183.2 Derivative financial assets Total financial assets at fair value 4, , ,195.4 Quasi-government securities include securities which are issued by government agencies or entities supported by government guarantees. Supranational securities are issued by institutions sponsored by more than one sovereign issuer. Asset backed securities are backed by financial assets, including corporate loans. Investment grade corporate bonds include debt instruments of corporate issuers rated BBB-/Baa3 or better by one or more major rating agency and high yield corporate bonds have credit ratings below this level. Equity linked funds are investment vehicles which are predominantly exposed to equity securities. Our illiquid credit assets are described in further detail below. The fair value of these assets at excludes an unfunded commitment of $59.6m ( : $91.0 m). The amount expected to mature before and after one year are: 31 December Within one year , After one year 2, , , , , ,629.6 Our capital growth assets have no defined maturity dates and have thus been excluded from the above maturity table. However, 92 ( : 89) of equity linked funds could be liquidated within two weeks and 8 within six months, 80 ( : 96) of hedge fund assets within six months and the remaining 20 ( : 4) of hedge fund assets within 18 months. Illiquid credit assets are not readily realisable and principal will be returned over the life of these assets, which may be up to ten years. Financial liabilities 31 December Retail bond Subordinated debt Tier 2 subordinated debt (2026) - recalled in Tier 2 subordinated debt (2026) - issued in Derivative financial liabilities Total financial liabilities The amount expected to mature before and after one year are: 31 December

17 Within one year After one year Fair value measurement The table below summarises financial assets carried at fair value using a valuation hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1 Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Included within level 1 are bonds and treasury bills of government and government agencies which are measured based on quoted prices. Level 2 Valuations based on quoted prices in markets that are not active, or based on pricing models for which significant inputs can be corroborated by observable market data (e.g. interest rates, exchange rates). Included within level 2 are government bonds and treasury bills which are not actively traded, corporate bonds, asset backed securities and mortgage-backed securities. Level 3 Valuations based on inputs that are unobservable or for which there is limited market activity against which to measure fair value. The availability of financial data can vary for different financial assets and is affected by a wide variety of factors, including the type of financial instrument, whether it is new and not yet established in the marketplace, and other characteristics specific to each transaction. To the extent that valuation is based on models or inputs that are unobservable in the market, the determination of fair value requires more judgement. Accordingly the degree of judgement exercised by management in determining fair value is greatest for instruments classified in level 3. The group uses prices and inputs that are current as of the measurement date for valuation of these instruments. If the inputs used to measure the fair value of an asset or a liability could be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Level 2 investments The group has an established control framework and valuation policy with respect to the measurement of fair values. For the group s level 2 debt securities our fund administrator obtains the prices used in the valuation from independent pricing vendors such as Bloomberg, Standard & Poor s, Reuters, Markit and International Data Corporation. The independent pricing vendors derive an evaluated price from observable market inputs. The market inputs include trade data, two-sided markets, institutional bids, comparable trades, dealer quotes, news media, and other relevant market data. These inputs are verified in their pricing engines and calibrated with the pricing models to calculate spread to benchmarks, as well as other pricing assumptions such as Weighted Average life (WM), Discount Margins (DM), Default rates, and recovery and prepayments assumptions for mortgage securities. While such valuations are sensitive to estimates, it is believed that changing one or more of the assumptions to reasonably possible alternative assumptions would not change the fair value significantly. The group records the unadjusted price provided and validates the price through various tolerance checks, such as comparison with prices provided by investment custodians and investment managers, to assess the reasonableness and accuracy of the price to be used to value each security. In the rare case that a price fails the tolerance test, it is escalated and discussed internally. We would not normally override a price retrospectively, but we would work with the administrator and pricing vendor to investigate the difference. We also review our valuation policy on a regular basis to

18 ensure it is fit for purpose. As at, no adjustments have been made to the prices obtained from the independent administrator. For our hedge funds and equity linked funds, pricing and valuation is undertaken by independent administrators in accordance with the valuation policy of each fund. Regulated equity linked fund prices are published on a daily or weekly basis via Bloomberg and other market data providers such as Reuters. Hedge fund values are communicated by the independent administrators to all investors via monthly investor statements. Additional information is obtained from fund managers relating to the underlying assets within individual hedge funds and equity linked funds. This shows that 67 ( : 73, 31 December : 77) of these underlying assets were level 1 and the remainder level 2. This enables us to categorise our hedge fund and equity linked fund investments as level 2. Prior to any new hedge fund investment, extensive due diligence is undertaken on each fund to ensure that pricing and valuation is undertaken by an independent administrator and that each fund s valuation policy is appropriate for the financial instruments the manager will be employing to execute the investment strategy. Fund liquidity terms are reviewed prior to the execution of any investment to ensure that there is no mismatch between the liquidity of the underlying fund assets and the liquidity terms offered to fund investors. Level 3 investments The level 3 categorisation applies only to some of our illiquid credit investments. These are generally participations in limited partnership vehicles which hold diverse, typically illiquid, investments. While these funds provide full transparency of their underlying investments, the investments themselves are in many cases private and unquoted, and are therefore classified as level 3 investments. Valuation inputs can be subjective and may include a discount rate applied to the investment based on market factors and expectations of future cash flows, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance relative to benchmarks, financial condition, and financing transactions subsequent to the acquisition of the investment. We take the following steps to ensure accurate valuation of these level 3 assets: a substantial part of the pre-investment due diligence process is dedicated to a comprehensive review of each fund s valuation policy and the internal controls of the manager. In addition to this, confirmation that the investment reaches a minimum set of standards relating to the independence of service providers, corporate governance, and transparency is sought prior to approval. Post investment, unaudited capital statements confirming the fair value of the Limited Partner interests are received and reviewed on a quarterly (or more frequent) basis. Audited financial statements are received on an annual basis, with the valuation of each transaction being confirmed. The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. Financial assets measured at fair value Level 1 Level 2 Level 3 Government issued Quasi-government Supranational Asset backed securities Senior secured loans Corporate bonds Investment grade , ,322.1 High yield Equity linked funds Hedge funds Total

19 Illiquid credit assets Derivative financial assets Total financial assets measured at fair value , ,177.7 Financial liabilities measured at fair value Derivative financial liabilities Financial liabilities not measured at fair value Retail bond Tier 2 subordinated debt (2026) - issued in Total financial liabilities not measured at fair value Level 1 Level 2 Level 3 Total Financial assets measured at fair value Government issued 1, ,170.4 Quasi-government Supranational Asset backed securities Senior secured loans Corporate bonds Investment grade , ,928.8 High yield Equity linked funds Hedge funds Illiquid credit assets Derivative financial assets Total financial assets measured at fair value 1, , ,952.8 Financial liabilities measured at fair value Derivative financial liabilities Financial liabilities not measured at fair value Retail bond Tier 2 subordinated debt Total financial liabilities not measured at fair value December Level 1 Level 2 Level 3 Total Financial assets measured at fair value Government issued 1, ,180.0 Quasi-government Supranational Asset backed securities Senior secured loans Corporate bonds

20 Investment grade , ,158.0 High yield Equity linked funds Hedge funds Illiquid credit assets Derivative financial assets Total financial assets measured at fair value 1, , ,195.4 Financial liabilities measured at fair value Derivative financial liabilities Financial liabilities not measured at fair value Retail bond Tier 2 subordinated debt (2026) issued in Total financial liabilities not measured at fair value The table above does not include financial assets and liabilities that are, in accordance with the group s accounting policies, recorded at amortised cost, if the carrying amount of these financial assets and liabilities approximates their fair values at the reporting date. Unconsolidated structured entities A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant activities are directed by means of contractual arrangements. As part of its standard investment activities the group holds investments in high yield bond funds, asset backed securities, equity linked funds, hedge funds and illiquid credit assets which in accordance with IFRS 12 are classified as unconsolidated structured entities. The group does not sponsor any of the unconsolidated structured entities. The assets classified as unconsolidated structured entities are held at fair value on the balance sheet. The investments comprising the group s unconsolidated structured entities are as follows: 31 December High yield bond funds Asset backed securities Equity linked funds Hedge funds Illiquid credit assets Investments through unconsolidated structured entities Transfers and level 3 investment reconciliations There were no transfers in either direction between level 1, level 2 and level 3 in either or. The table below shows a reconciliation from the opening balances to the closing balances of level 3 fair values. The total net unrealised gains recognised in the $9.8m ( : $4.7 m) are included in the net investment income number of $79.4m ( : $62.7 m) shown in the condensed consolidated statement of profit or loss. 31 December

21 As at 1 January Purchases Sales (8.5) (13.5) (21.6) Total net unrealised gains recognised in profit or loss As at period end The currency exposures of our financial assets held at fair value are detailed below: Financial assets at fair value UK CAD $ EURO Subtotal US $ Total Fixed and floating rate debt securities , ,485.7 Equity linked funds Hedge funds Illiquid credit assets Derivative financial assets Total , ,177.7 UK CAD $ EURO Subtotal US $ Total Financial assets at fair value Fixed and floating rate debt securities , ,427.4 Equity linked funds Hedge funds Illiquid credit assets Derivative financial assets Total , , December UK CAD $ EURO Subtotal US $ Total Financial assets at fair value Fixed and floating rate debt securities , ,617.4 Equity linked funds Hedge funds Illiquid credit assets Derivative financial assets Total , ,195.4 The above qualitative and quantitative disclosures, along with the risk management disclosure included in note 2 of the annual report for the year ending 31 December, enables more comprehensive evaluation of Beazley s exposure to risks arising from financial instruments. 10 Cash and cash equivalents 31 December Cash at bank and in hand Short-term deposits and highly liquid investments