Beazley plc Interim report On track. embracing risk reducing uncertainty

Beazley plc Interim report 2010 On track embracing risk reducing uncertainty

About Beazley: Beazley plc is the parent company of our specialist insurance business with operations in Europe, the US, Asia and Australia. Beazley is a proud participant in the Lloyd s market, the largest and oldest insurance market in the world. Through the Lloyd s broker network and the market s trading licenses, we are able to access a wide range of insurance and reinsurance business from around the world. Many of the lines of business we underwrite, such as marine and energy insurance, political risks insurance, and contingency insurance, were pioneered at Lloyd s. Beazley manages five Lloyd s syndicates: syndicates 2623 and 623 underwrite a broad range of insurance and reinsurance business worldwide; syndicate 3623 focuses on accident and health business; 3622 is a dedicated life syndicate; and 6107, our recently launched special purpose syndicate, writes reinsurance business. We also underwrite business directly in the US admitted market through Beazley Insurance Company, Inc., an admitted carrier licensed to write in all 50 states. In 2009 we incorporated an Irish reinsurer, Beazley Re Limited, which reinsures a proportion of the group s business. Contents 1 Group highlights 2 Key performance indicators 3 Interim results statement 8 Timeline 10 Performance by division 12 Income statement 13 Statement of comprehensive income 13 Statement of changes in equity 14 Statement of financial position 15 Statement of cash flows 16 Notes to the financial statements 25 Responsibility statement 26 Independent review report to Beazley plc 27 Glossary Company information Registered office and advisors Further information about us is available at www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements Highlights and key performance indicators Our vision is to become, and be recognised as, the highest performing specialist insurer. Highlights 6 months 6 months Full year 2010 2009 2009 Gross premiums written ($m) 940.6 894.9 1,751.3 Net premiums written ($m) 621.1 512.3 1,331.3 Net earned premiums ($m) 678.2 538.1 1,313.6 Profit before income tax ($m) 115.5 30.1 158.1 Claims ratio 55% 54% 55% Expense ratio 34% 36% 35% Combined ratio 89% 90% 90% Earnings per share (cents)* 18.8 7.3 28.9 Net assets per share (cents) 192.7 177.7 191.7 Net tangible assets per share (cents) 171.1 157.5 169.8 Earnings per share (pence)* 12.6 4.9 18.4 Net assets per share (pence) 128.4 107.7 119.0 Net tangible assets per share (pence) 114.1 95.5 105.5 Dividend per share (pence) 2.4 2.3 7.0 Premium renewal rate (reduction)/increase (2%) 5% 3% Annualised investment returns 0.5% 2.9% 2.7% Profit before income tax $ 115.5m Profit before income tax (excluding exceptional foreign exchange gain)* $ 81.8m Return on equity 19.7 % Return on equity (excluding exceptional foreign exchange gain)* 13.7 % * Profit before income tax and earnings per share includes an exceptional foreign exchange gain of $33.7m, described in notes 1 and 3 on pages 16 and 18. Beazley Interim Report 2010 1

Highlights and key performance indicators continued Key performance indicators Combined ratio (%) Gross premiums written ($m) Earnings per share (cents) 100 80 60 40 20 89 90 34 36 55 54 90 35 55 2000 1600 1200 800 400 940.6 894.6 1,751.3 30 24 18 12 6 18.8 7.3 28.9 0 HY 2010 HY 2009 FY 2009 Expense ratio Claims ratio 0 HY 2010 HY 2009 FY 2009 0 HY 2010 HY 2009 FY 2009 Our combined ratio has reduced to 89% in 2010 despite the Chilean earthquake. Gross premiums written have risen by 5% since the same period in 2009. Earnings per share has remained at a robust level throughout the reporting periods. Net assets per share (cents) Dividends per share (pence) Return on equity (%) 200 160 120 21.6 171.1 20.2 157.5 21.9 169.8 10.0 8.0 6.0 7.0 30 24 18 19.7 25.0 80 40 4.0 2.0 2.4 2.3 12 6 8.5 0 HY 2010 HY 2009 FY 2009 Tangible Intangible 0 HY 2010 HY 2009 FY 2009 0 HY 2010 HY 2009 FY 2009 Net assets per share continues to grow in 2009 and 2010, since the rights issue and placing in 2009 at 86p per share. The interim dividend per share has increased by 4% over 2009. Beazley has always delivered a positive return on equity to its shareholders. 2 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements Interim results statement Andrew Horton Chief executive Beazley delivered a strong result for the first half of the year, recording a pretax profit of $115.5m. Our performance was particularly impressive in a period marked by a series of catastrophe losses and continued intense competition in many lines of business. Gross written premiums rose by 5% from the same period last year, driven in large measure by the growth in our reinsurance and specialty lines divisions. Overall we achieved a combined ratio of 89% in an environment largely characterised by flat or declining premium rates. Premium rates fell slightly, by an average of 2%, across our portfolio. The dangers of the world we live in were abundantly reflected in the insurance industry s experiences during the first half of 2010, such as the explosion and blowout on the Deepwater Horizon oil rig in the Gulf of Mexico following windstorm Xynthia in Europe and a major earthquake in Chile. Our original loss estimates for the Chilean earthquake (between $55m and $75m, based on a market-wide loss of $5bn to $8bn) and Deepwater Horizon rig (approximately $6m) remain unchanged and Xynthia was not a significant loss event for Beazley. Beazley s reserving approach to catastrophe exposed classes showed its worth in the early months of this year. We do not release reserves from our catastrophe exposed accounts until premiums are substantially earned. This ensured that reserves from the 2009 underwriting year remain available to our property insurance and reinsurance underwriters to help meet claims arising from the Chilean earthquake. More generally our reserving continues to prove robust, enabling us to release $65.9m in prior year reserves in the first half. The group has maintained its surplus in net claims reserves over actuarial best estimate at around 7.3%, which is within our target range. Conservatism characterises our investment strategy at a time of continuing instability in financial markets. Our focus is on capital preservation and ensuring that the profits earned by our underwriters are not eroded by losses from high risk investments. Our investments produced an annualised return of 0.5% in the first half of this year (2009: 2.9%). We have no sovereign bond exposures to Greece, Portugal, Spain or Ireland. In January 2010, we matched our capital base to the principal underlying currencies of our written premiums. The US dollar component of our capital funds increased accordingly by $491.0m with an equivalent decrease in the sterling component. This change resulted in a one-off foreign exchange gain of $33.7m for the first half of the year, due to the strengthening of the dollar against sterling during the first quarter. In April 2010, we announced a change to our reporting currency to US dollars, reflecting the growth of our dollar denominated premiums and the fact that the capital supporting the business is largely held in dollars. We believe that this change will give investors and other stakeholders a clearer understanding of the group s performance over time. Accounting in dollars will significantly reduce the future volatility of Beazley s reported earnings due to foreign exchange movements and in particular due to foreign exchange on non-monetary items. This adjustment resulted in a difference of $74.7m between the 2009 pretax and underlying profits, as set out in note 3. Beazley Interim Report 2010 3

Fig 1: Cumulative rate changes since 2001 (%) 220 200 180 160 140 120 100 80 01 02 03 04 05 06 07 08 09 HY10 Underwriting year Marine Political risks and contingency Property Reinsurance Specialty lines All departments Rates on our renewal business reduced by 2% in the first six months of 2010 (2009: up 5%). A significant contribution to our profits in the first half came once again from our marine division, in spite of the tragic events surrounding the Deepwater Horizon explosion. The office we opened in Oslo in January to access local energy business got off to a very positive start. More broadly, our marine underwriters continued to see profitable business, notwithstanding the pressures on global trade. Specialty Lines, our largest division, faced a challenging market, with competition intensifying in many of our core lines, including directors & officers insurance and professional liability for lawyers, architects and engineers, and technology companies. As in the past, our underwriters were well served by a tried and tested approach to cycle management, flexing our portfolio to concentrate on the more profitable classes and reducing the less profitable, while focusing on careful risk selection and the adjustment of terms and conditions to meet our profitability objectives. The rate reduction across our Specialty Lines portfolio was a modest 1%. Our new data breach solution, Beazley Breach Response, has been selling briskly. Property insurance, which accounted for 22% of our gross written premiums, saw rates decline on average by 3%. The team of highly experienced underwriters and claims professionals who joined us in the US through the First State acquisition are now fully integrated into our US property team under the name Beazley E&S Property. Our London-based construction and engineering team, which insures some of the largest projects in the world, continued to see weak demand for cover due to the sluggish global economy but in the US our builders risk team began to access a sizeable new market. For our reinsurance team, the Chile earthquake loss is expected to be contained within existing reserves. Despite some downward movement in risk adjusted pricing due to insurer recapitalisation and model changes, we believe that margins, especially on US business, remain robust. The special purpose syndicate we established at the end of 2009, supported by third party capital, is having its desired effect of enabling us to increase our share of existing underwriting portfolios. By the end of June it had written $13.8m Our political risks and contingency team saw claims frequency fall, following an abnormal number of large loss notifications on trade credit risks in 2009. The contingency team, which focuses mainly on event cancellation insurance, recruited new underwriters in London and Australia. Beazley Access, our web-based trading platform for contingency risks, is bringing us access to smaller business than we would normally see at the box at Lloyd s. Investment performance Investment income for the first six months was $8.5m or an annualised return of 0.5%, compared with $40.5m (annualised 2.9%) over the same period in 2009. Beazley continues with its strategy of holding a large core portfolio (80-90% of the total) of principally sovereign bonds. This will be complemented by a portfolio of capital growth assets (10-20%). This strategy is aiming to produce good returns with below average volatility with the sovereign bonds performing well in periods of under-performance by risk assets. Investment conditions remain challenging this year with equity and credit markets exhibiting a high degree of volatility and interest rates at near record low levels. We have maintained our strategy of limiting risk on the investment portfolio. The core portfolio of cash and fixed income securities amounted to 90.2% of our overall portfolio. They are concentrated in short term high quality securities. The capital growth assets remain allocated to a well-diversified selection of alternative strategies and managers. 4 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements Fig 2: Investments portfolio split 3.3% 4.1% 9.8% 16.8% 41.5% 24.5% Cash and cash equivalents Govt, Govt Agency, Regional and Supranational Corp Bond Financial Gtd Corp Bond Financial Non-Gtd ABS, MBS, CMBS, Corp Bonds Other Alternative assets The breakdown of our investment portfolio at 30 June 2010 was: 30 June 31 December 2010 2009 $m % $m % Cash and cash equivalents 894.1 24.5 813.4 22.2 Government, Agency and Supranational 1,515.5 41.5 1,577.9 43.2 AAA 670.8 18.4 842.1 23.0 AA+ to AA- 145.4 4.0 82.3 2.2 A+ to A- 67.6 1.8 72.4 2.0 BBB+ to BBB- 0.2 4.8 0.1 Core portfolio 3,293.6 90.2 3,392.9 92.7 Capital growth assets 358.2 9.8 268.8 7.3 Total 3,651.8 100.0 3,661.7 100.0 The weighted average duration of our overall portfolio is 7 months (31 December 2009: 8 months). The weighted average yield to maturity of our overall portfolio is 0.7% (31 December 2009: 0.7%) Investment Return Analyses of returns on major asset classes are set out below: 30 June 30 June 2010 annualised 2009 annualised return return $m % $m % Core portfolio 8.8 0.6% 30.5 2.4% Capital growth assets (0.3) (0.1%) 10.0 11.4% Overall return 8.5 0.5% 40.5 2.9% Strategy Our strategy for profitable growth has three principal areas of focus: optimal capital allocation; building and maintaining the skills that are essential to the success of a specialist insurer; and ensuring that our operations are scalable to provide high quality client and broker service as we continue to grow. Capital allocation Capital allocation is driven by our cycle management strategy, which has delivered 24 years of unbroken profitability for Beazley. We allocate capital carefully to ensure that it is deployed only where we can see opportunities to make adequate returns across the cycle. As the market becomes tougher, these skills and disciplines become more important. We also closely monitor the overall levels of capital we hold, maintaining sufficient amounts to enable us to take advantage of underwriting opportunities as they arise. In the first half of 2010, we returned $12.0m to investors through share buybacks and we will continue to return funds to investors as the underwriting environment warrants. At this time, we see a broad-based upswing in premium rates as unlikely. Solvency II, the new solvency regime for all EU insurers and reinsurers that is due to come into effect in 2012, generates some additional uncertainty over the amount of capital that a diversified insurance and reinsurance group such as Beazley should maintain. We continue to monitor carefully our surplus capital position in the light of the need to maintain flexibility to respond to market opportunities and to the potential demands of Solvency II. We will plan to maintain surplus capital of at least 20% of our Lloyd s underwriting requirements while Solvency II uncertainties persist. Backed up by our banking facility and our continued robust profitability, we have access Beazley Interim Report 2010 5

to substantial additional underwriting resources if necessary. The table below highlights the group s available surplus capital position at the half year. The surplus, excluding the available banking facility of 100m, has increased to $195.7m from $152.0m. 2010 HY 2009 FY Sources of funds Shareholders funds 996.0 995.9 Tier 2 subordinated debt 225.0 241.5 Long-term subordinated debt 18.0 18.0 1,239.0 1,255.4 Uses of funds Lloyd s underwriting 719.0 738.0 US insurance company 110.9 110.9 829.9 848.9 Surplus 409.1 406.5 Unavailable surplus * (91.1) (128.6) Fixed and intangible assets (122.3) (125.9) 195.7 152.0 * The principal element of this is profit on business underwritten at Lloyd s that has not yet been released under the Lloyd s accounting system. Investing in skills Our growth strategy is simply stated. We invest in business lines that we understand and that offer opportunities for skilled underwriters and experienced claims professionals to add value in the eyes of clients and brokers. Some of these growth opportunities derive from making expertise that we have developed in London available in other locations. Thus we began underwriting construction and engineering risks in Singapore in 2006 and in the US this year, in both cases targeting local business that we would not expect to see in London. Other opportunities arise from the development of lines of business with which we are familiar but which have not in the past been significant revenue and profit streams. For example, John McNally, who joined our management liability team in London late last year, is focusing on building our book of M&A transaction-related insurance, principally for private equity investors who want to minimise contingent liabilities and facilitate exits. There is evidence that investors are more risk averse than was historically the case, meaning that a larger proportion of transactions is likely to be insured. As M&A activity picks up, this risk aversion should stimulate additional demand for cover. Finally, we have been developing our environmental risk capabilities in the US, where John Beauchamp s team now offers a range of products to engineering, consulting, project management, and contracting and remediation firms. The expertise of John and his team is relevant to many of our A&E (architects and engineers) clients as well as to our property clients. Broker and client service Maintaining high quality service during periods of rapid growth is a challenge for all companies and insurers are no exception. Beazley has grown significantly during the past five years. While current market conditions do not favour broad-based premium growth, we are determined to be ready to scale up our operations when more favourable conditions return. In our 2009 annual report we described the investments in systems that we had made to enhance our underwriting and claims service and accommodate future growth. But systems are not the whole picture and the 6 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements way we manage and coordinate our relationships with brokers is at least as important to the future profitable growth of our business. To this end, we were delighted to announce in early June that Dan Jones is to take charge of Beazley s strategic broker relations program. Dan, who has stood down as a non executive director on the Beazley plc board and joined the company s executive committee, will focus on deepening relationships with key business producers around the world. Strong, well-managed broker relationships are critical to the growth and profitability of our business. As our broker relationships have grown more numerous and more complex, the task of managing them effectively has also grown. With experience that includes a series of senior executive roles at Marsh, Dan is well equipped to help us address the changing needs and expectations of the brokers upon whom we rely for business. Board changes In addition to Dan Jones move into an executive role within Beazley, we were delighted in June to gain access to the experience and judgment of Rolf Tolle, who has joined the board of Beazley Furlonge Ltd, our Lloyd s managing agency. The high reputation that the Lloyd s market enjoys today around the world is in no small measure due to the discipline and judgment that Rolf brought to the job of Lloyd s first franchise performance director. Rolf retired as Lloyd s franchise performance director in December and his underwriting experience and deep knowledge of the global insurance market will be invaluable to us. Dividend The board has declared it will pay an increased first interim dividend of 2.4p (2009: 2.3p). This will be paid on 3 September 2010 to shareholders on the register at 5.00pm on 6 August 2010. Outlook Currently, with capacity in all our lines of business plentiful, we see little prospect of a broad-based reversal of recent price declines for commercial lines insurance in spite of investment yields which remain low and should place upward pressure on premium rates. At Beazley, we will respond to this softening market in a disciplined manner, as we have done in the past, concentrating on business that remains profitable and being prepared to reduce our book where this is not the case. We have a strong business that is in good shape for this challenging environment. Andrew Horton Chief executive Beazley Interim Report 2010 7

Timeline Our business has diversified steadily over time and we have achieved a profit every year since inception in 1986. 86 87 88 89 90 91 92 93 94 95 96 97 13.4m 22.1m 24.7m 24.1m 29.5m 42.5m 58.8m 101.4m 107.6m 135.2m 124.2m 128.4m Lloyd s Active members: 28,242 Capacity: 8,291m Syndicates: 370 Begin trading at the old 1958 Lloyd s building in 1985 Beazley Furlonge and Hiscox established and takes over managing Syndicate 623 UK windstorms US $3.5bn European storms US $10bn Lloyd s Active members: 26,539 Capacity: 11,063m Syndicates: 354 Commercial Property account started US hurricane Andrew US $17bn Total Beazley syndicates capacity UK Bishopsgate explosion US $750m Corporate capital introduced to Lloyd s US Northridge earthquake US $12.5bn Lloyd s Reconstruction and Renewal introduced Lloyd s Active members: 13,062 Capacity: 9,994m Syndicates: 167 Beazley Dedicated established APUA, based in Hong Kong, forms a strategic partnership with Beazley Furlonge Lloyd s Reconstruction and Renewal concluded Specialty lines and Treaty accounts started In 1986 Beazley Furlonge and Hiscox established and takes over managing Syndicate 623 Commercial Property account started in 1992 APUA, based in Hong Kong, forms a strategic partnership with Beazley Furlonge in 1997 * These figures have been retranslated to US dollars based on average exchange rates 8 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements 98 99 00 01 02 03 04 05 06 07 08 09 168.8m Recall, Contingency and Political Risk accounts started 217.1m Marine account started European storms US $12bn 256.1m 431.6m Management buyout of minority shareholders EPL and UK PI accounts started Lloyd s Active members: 3,746 Capacity: 11,263m Syndicates: 122 US 9/11 terrorist attack US $20.3bn 675.6m Flotation raised 150m to set up Beazley Group plc 1,148.7m 1,374.9m 1,485.1m 1,762.0m 1,919.6m 1,984.9m 2,121.7m 574.3m Group share $US* D&O Healthcare, Energy, Cargo and Specie accounts started SARS outbreak in Asia US $3.5bn 736.2m Group share $US* Engineering and Construction account started 1,015.6m 1,371.0m 1,561.0m 1,620.0m 1,751.3m Group share $US* Beazley MGA started in US Beazley acquires Omaha P&C and renames it Beazley Insurance Company, Inc. (BICI) US hurricane Katrina US $56.5bn Group share $US* Beazley takes full ownership of APUA and renames it Beazley Limited Expansion of Construction & Engineering team into Singapore Beazley opens new office in Paris Lloyd s Active members: 2,211 Capacity: 14,788m Syndicates: 65 Group share $US* BICI begins writing US admitted mid-market commercial property US hurricane Ike US $20bn Group share $US* Political Risk & Contingency Group formed as new division Acquisition of Momentum Underwriting Management. Accident & Life formed as a new division Group share $US* Raised 150m through rights issue to develop our business at Lloyd s and in the US Acquisition of First State Management Group, Inc., a US underwriting manager focusing on surplus lines commercial property business Beazley plc becomes the new holding company for the group, incorporated in Jersey and tax resident in Ireland Marine account started in 1999 Accident & Life formed as a new division This year we established a local underwriting presence in the US Beazley Interim Report 2010 9

Performance by division Our underwriters delivered a strong underwriting result in the first half of the year, achieving a combined ratio across our lines of business of 89%. Neil Maidment Chairman, Group underwriting committee Marine Political risks and contingency Clive Washbourn Head of marine 2010 2009 $m $m Gross premiums written 149.1 155.6 Net premiums written 123.4 123.2 Results from operating activities 35.1 29.1 Claims ratio 39% 43% Expense ratio 33% 34% Combined ratio 72% 77% Rate change (5%) 11% Adrian Lewers Head of political risks and contingency 2010 2009 $m $m Gross premiums written 55.3 72.0 Net premiums written 45.4 51.6 Results from operating activities 12.3 7.8 Claims ratio 45% 54% Expense ratio 32% 35% Combined ratio 77% 89% Rate change (2%) (1%) Combined ratio (%) 125 100 75 50 25 72 33 39 77 34 43 0 HY 2010 HY 2009 Claims ratio Expense ratio Combined ratio (%) 125 100 75 50 25 77 32 45 89 35 54 0 HY 2010 HY 2009 Claims ratio Expense ratio 10 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements Property Reinsurance Specialty lines Jonathan Gray Head of property Patrick Hartigan Head of reinsurance Adrian Cox Head of specialty lines 2010 2009 $m $m Gross premiums written 202.5 198.3 Net premiums written 109.6 74.0 Results from operating activities 11.3 7.3 Claims ratio 52% 55% Expense ratio 44% 46% Combined ratio 96% 101% Rate change (3%) 8% 2010 2009 $m $m Gross premiums written 180.5 145.5 Net premiums written 136.6 114.6 Results from operating activities 10.7 20.9 Claims ratio 57% 37% Expense ratio 35% 37% Combined ratio 92% 74% Rate change (2%) 10% 2010 2009 $m $m Gross premiums written 353.2 323.2 Net premiums written 209.7 148.9 Results from operating activities 29.1 46.2 Claims ratio 63% 62% Expense ratio 30% 32% Combined ratio 93% 94% Rate change (1%) (1%) Combined ratio (%) 125 100 75 50 25 0 96 44 52 101 46 55 HY 2010 HY 2009 Claims ratio Expense ratio Combined ratio (%) 125 100 75 50 25 0 92 35 57 74 37 37 HY 2010 HY 2009 Claims ratio Expense ratio Combined ratio (%) 125 100 75 50 25 93 30 63 94 32 62 0 HY 2010 HY 2009 Claims ratio Expense ratio Beazley Interim Report 2010 11

Income statement for the period ended 30 June 2010 6 months 6 months Year to ended ended 31 December 30 June 2010 30 June 2009 2009 Notes $m $m $m Gross premiums written 2 940.6 894.6 1,751.3 Written premiums ceded to reinsurers (315.9) (382.3) (420.0) Net premiums written 2 624.7 512.3 1,331.3 Change in gross provision for unearned premiums (63.5) (202.4) (97.5) Reinsurer s share of change in the provision for unearned premiums 117.0 228.2 79.8 Change in net provision for unearned premiums 53.5 25.8 (17.7) Net earned premiums 2 678.2 538.1 1,313.6 Net investment income 4 8.5 40.5 88.1 Other income 5 14.9 9.6 19.6 23.4 50.1 107.7 Revenue 2 701.6 588.2 1,421.3 Insurance claims 454.0 424.5 1,007.6 Insurance claims recovered from reinsurers (76.8) (110.3) (265.0) Net insurance claims 2,8 377.2 314.2 742.6 Expenses for the acquisition of insurance contracts 173.3 137.0 342.6 Administrative expenses 56.5 56.0 129.8 Foreign exchange (gain)/loss 3 (27.6) 44.4 34.4 Operating expenses 202.2 237.4 506.8 Expenses 2 579.4 551.6 1,249.4 Results of operating activities 122.2 36.6 171.9 Finance costs (6.7) (6.5) (13.8) Profit before income tax 115.5 30.1 158.1 Income tax 9 (17.6) 1.1 (19.3) Profit after income tax 97.9 31.2 138.8 Earnings per share (cents per share): Basic 6 18.8 7.3 28.9 Diluted 6 18.1 7.1 27.9 12 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements Statement of comprehensive income for the period ended 30 June 2010 31 December 30 June 2010 30 June 2009 2009 $m $m $m Profit after income tax 97.9 31.2 138.8 Other comprehensive income Change in net investment hedge (5.4) 10.1 11.9 Foreign exchange translation differences 10.1 (24.0) (24.0) Reversal of exceptional foreign exchange gain* (33.7) Foreign exchange difference arising on change in presentational currency* (22.0) 113.1 92.8 Total other comprehensive income (51.0) 99.2 80.7 Total comprehensive income recognised 46.9 130.4 219.5 Statement of changes in equity for the period ended 30 June 2010 Share Retained capital Reserves earnings Total $m $m $m $m Balance as at 1 January 2009 35.9 206.2 352.2 594.3 Total comprehensive income recognised 99.2 31.2 130.4 Dividends paid (21.8) (21.8) Issue of shares 13.5 207.1 220.6 Equity settled share-based payments 3.6 3.6 Acquisition of own shares held in trust (2.3) (2.3) Cancellation of treasury shares (1.5) 1.5 Transfer on scheme of arrangement and reverse acquisition (571.5) 571.5 Balance as at 30 June 2009 47.9 (56.2) 933.1 924.8 Total comprehensive income recognised (18.5) 107.6 89.1 Dividends paid (19.5) (19.5) Issue of shares 1.0 1.0 Equity settled share-based payments 4.5 4.5 Acquisition of own shares held in trust (4.0) (4.0) Purchase of treasury shares Balance as at 31 December 2009 47.9 (73.2) 1,021.2 995.9 Total comprehensive income recognised (51.0) 97.9 46.9 Dividends paid (38.1) (38.1) Issue of shares 0.1 0.1 Equity settled share-based payments (3.1) (3.1) Transfer out of own shares held in trust to employees 6.3 6.3 Purchase of treasury shares (12.0) (12.0) Balance as at 30 June 2010 48.0 (133.0) 1,081.0 996.0 * See note 3 Beazley Interim Report 2010 13

Statement of financial position as at 30 June 2010 30 June 30 June 31 December 2010 2009 2009 $m $m $m Assets Intangible assets 111.3 104.9 113.5 Plant and equipment 11.0 11.4 12.4 Investments in associates 1.3 1.4 Deferred acquisition costs 176.6 161.9 155.5 Deferred income tax 10.0 8.9 8.9 Financial investments 2,757.7 2,586.0 2,848.3 Derivative financial instruments 7.6 9.3 Insurance receivables 636.4 554.4 498.0 Reinsurance assets 1,216.8 1,133.2 1,156.1 Retirement benefit asset 3.0 1.6 Other receivables 27.0 51.4 25.6 Cash and cash equivalents 894.1 868.4 813.4 Total assets 5,845.2 5,488.1 5,644.0 Equity Share capital 48.0 47.9 47.9 Reserves (133.0) (56.2) (73.2) Retained earnings 1,081.0 933.1 1,021.2 Total equity 996.0 924.8 995.9 Liabilities Insurance liabilities 4,121.5 3,820.6 4,023.7 Borrowings 270.9 282.3 278.7 Deferred income tax 40.6 25.4 35.1 Current income tax liabilities 26.4 33.2 21.3 Creditors 389.8 401.8 289.3 Total liabilities 4,849.2 4,563.3 4,648.1 Total equity and liabilities 5,845.2 5,488.1 5,644.0 14 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements Statement of cash flows for the period ended 30 June 2010 6 months 6 months Year ended ended ended 31 December 30 June 2010 30 June 2009 2009 $m $m $m Cash flow from operating activities Profit before income tax 115.5 30.1 158.1 Adjustments for non-cash items: Amortisation of intangibles 0.9 1.1 2.2 Depreciation of plant and equipment 2.2 2.3 4.9 Equity settled share-based compensation 3.2 2.7 8.2 Retranslation of overseas net assets 3.3 5.9 5.8 Net fair value losses/(gains) on financial investments 4.3 (5.1) (10.4) Increase in insurance and other liabilities 208.1 342.0 509.5 Increase in insurance, reinsurance and other receivables (201.9) (348.2) (324.4) Increase in deferred acquisition costs (21.1) (10.9) (8.1) Financial income (28.1) (46.8) (63.6) Financial expense 6.7 6.5 13.8 Income tax paid (14.6) (30.0) (34.6) Contribution to pension fund (1.5) (1.4) Net cash from operating activities 77.0 (50.4) 260.0 Cash flow from investing activities Purchase of plant and equipment (0.5) (0.5) (5.0) Purchase of syndicate capacity (1.8) Purchase of subsidiary (net of cash acquired) (19.2) (21.2) Expenditure on software development (2.3) (3.3) (11.1) Purchase of investments (1,805.9) (10,513.6) (10,090.7) Proceeds from sale of investments 1,892.2 10,491.7 9,749.4 Investment in associate (1.5) Interest and dividends received 28.1 46.8 63.7 Net cash used in investing activities 111.6 1.9 (318.2) Cash flow from financing activities Proceeds from issue of shares 0.1 220.6 221.6 Purchase of treasury shares (12.0) Acquisition of own shares in trust (2.3) (6.3) Interest paid (6.7) (6.5) (13.8) Dividends paid (38.1) (21.8) (41.3) Net cash used in financing activities (56.7) 190.0 160.2 Net increase in cash and cash equivalents 131.9 141.5 102.0 Cash and cash equivalents at beginning of period 813.4 638.8 638.8 Effect of exchange rate changes on cash and cash equivalents (51.2) 88.1 (72.6) Cash and cash equivalents at end of period 894.1 868.4 813.4 Beazley Interim Report 2010 15

Notes to the financial statements for the period ended 30 June 2010 1 Statement of accounting policies Beazley plc is a group incorporated in Jersey and domiciled in the Republic of Ireland. The interim financial statements of the group for the six months ended 30 June 2010 comprise the parent company and its subsidiaries and the group s interest in associates. The preparation of 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 accounting policies applied by the group in these consolidated interim financial statements are the same as those applied by the group in its consolidated financial statements as at and for the year ended 31 December 2009 except for the change in presentation currency as detailed below. They have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Our full accounting policies are set out in the group s 2009 annual report. There have been no amendments to accounting policies as a result of new standards or interpretations that have become effective during 2010. Change in presentation currency From 1 January 2010 the group has changed its presentation currency to US dollars. Comparative information has been restated in US dollars in accordance with the guidance defined in IAS 21. The 2009 interim and full year income statements and associated notes have been retranslated from pounds sterling to US dollars using the procedures outlined below: Assets and liabilities were translated into US dollars at closing rates of exchange. Trading results were translated into US dollars at average rates of exchange. Differences resulting from the retranslation on the opening net assets and the results for the year have been taken to reserves; The cumulative translation reserve was set to nil at 1 January 2005 (i.e. the transition date to IFRS). Share capital, share premiums and other reserves were translated at historic rates prevailing at the dates of transactions; and All exchange rates used were extracted from the group s underlying financial records. Change in functional currency IAS 21 (foreign currency translations) describes functional currency as the currency of the primary economic environment in which entity operates. Taking into consideration all the changes listed, Beazley plc has concluded that its functional currency has changed to US dollars: The group s regulatory capital is primarily held in US dollars. On 5 January 2010 the group aligned its underwriting capital to US dollars. Consequently our funds at Lloyd s consisted of $491m and 152m, reflecting the currency mix of our underlying business in 2010. The group has increased the scale of its US operation. The group acquired Omaha Property and Casualty Inc. in 2005 which was renamed Beazley Insurance Company Inc., this entity is licensed to write insurance business in all 50 US states. The US managing general agent, Beazley USA Services Inc., was established at the same time and over the past 5 years has grown from a staff of 7 individuals in 2005 to 302 employees in 2010. The number of office locations in the US has increased from 2 in 2005 to 11 in 2010. The group has increased its locally written premiums in US dollars from $269.1m in 2008 to $370.7m in 2009. This increase has partly been driven by the acquisition of First State Management Inc., on 1 April 2009, which contributed $93.9m of premium in 2009. A proportionate increase over time in the relative amount of US dollar premiums written. US dollar premiums are then invested in US dollar denominated assets. In 2005, the group wrote 70% of its premiums in US dollars, this has grown to 76% in 2009 partly attributable to the expansion of our locally underwritten US business. A majority of costs are incurred in US dollars (i.e. claims, brokerage and operating expenses). In line with the point explained above on premium growth in US dollars, associated acquisition costs and claims will be incurred in US dollars. The group has grown its US dollar asset base. The group s exposure to US dollars has grown considerably since 2004, where around 40% of the group s total assets were US dollar denominated, this has grown to around 80% at the end of 2009. Following the events listed above, the group s board determined that the functional currencies of its principal operating entities had permanently changed to US dollars, effective 1 April 2010. In accordance with IAS 21 this change has been accounted for prospectively from this date. Foreign exchange volatility is expected to be significantly reduced following the transition as the group s currency exposures are more closely matched to its functional and reporting currency. The financial information included in this document does not comprise statutory accounts within the meaning of Companies (Jersey) Law 1991. The comparative figures for the financial year ended 31 December 2009 are not the company s statutory accounts for that financial year. Those accounts have been reported on by the company s auditors and delivered to the Jersey Financial Services Commission. The report of the auditors was unqualified. 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 entity level factors and do not relate to operating performance. 16 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements Political 30 June 2010 Total risks and Specialty reportable Marine contingency Property Reinsurance lines segments Unallocated Total $m $m $m $m $m $m $m $m Gross premiums written 149.1 55.3 202.5 180.5 353.2 940.6 940.6 Net premiums written 123.4 45.4 109.6 136.6 209.7 624.7 624.7 Net earned premiums 114.0 47.8 138.3 88.9 300.3 689.3 (11.1) 678.2 Net investment income 0.8 0.4 1.1 1.0 5.2 8.5 8.5 Other income 2.5 1.0 5.4 2.1 3.9 14.9 14.9 Revenue 117.3 49.2 144.8 92.0 309.4 712.7 (11.1) 701.6 Net insurance claims 44.7 21.6 71.8 50.6 188.5 377.2 377.2 Expenses for the acquisition of insurance contracts 29.9 11.2 49.3 20.4 70.5 181.3 (8.0) 173.3 Administrative expenses 7.7 4.1 12.6 10.5 21.6 56.5 56.5 Non recurring foreign exchange gain (33.7) (33.7) Foreign exchange (gain)/loss* (0.1) (0.2) (0.2) (0.3) (0.8) 6.9 6.1 Expenses 82.2 36.9 133.5 81.3 280.3 614.2 (34.8) 579.4 Segments result 35.1 12.3 11.3 10.7 29.1 98.5 23.7 122.2 Finance costs (6.7) Profit before income tax 115.5 Income tax expense (17.6) Profit after income tax 97.9 Claims ratio 39% 45% 52% 57% 63% 55% Expense ratio 33% 32% 44% 35% 30% 34% Combined ratio 72% 77% 96% 92% 93% 89% * see note 3 30 June 2009 Political Total risks and Specialty reportable Marine contingency Property Reinsurance lines segments Unallocated Total $m $m $m $m $m $m $m $m Gross premiums written 155.6 72.0 198.3 145.5 323.2 894.6 894.6 Net premiums written 123.2 51.6 74.0 114.6 148.9 512.3 512.3 Net earned premiums 108.3 51.6 106.8 62.4 256.6 585.7 (47.6) 538.1 Net investment income 4.3 2.0 5.7 2.9 25.6 40.5 40.5 Other income 1.0 0.5 2.4 2.2 3.5 9.6 9.6 Revenue 113.6 54.1 114.9 67.5 285.7 635.8 (47.6) 588.2 Net insurance claims 46.8 27.8 58.5 23.1 158.0 314.2 314.2 Expenses for the acquisition of insurance contracts 29.6 12.9 36.2 13.4 60.4 152.5 (15.5) 137.0 Administrative expenses 7.8 5.4 12.6 9.8 20.4 56.0 56.0 Foreign exchange loss 0.3 0.2 0.3 0.3 0.7 1.8 42.6 44.4 Expenses 84.5 46.3 107.6 46.6 239.5 524.5 27.1 551.6 Segments result 29.1 7.8 7.3 20.9 46.2 111.3 (74.7) 36.6 Finance costs (6.5) Profit before income tax 30.1 Income tax credit 1.1 Profit after income tax 31.2 Claims ratio 43% 54% 55% 37% 62% 54% Expense ratio 34% 35% 46% 37% 32% 36% Combined ratio 77% 89% 101% 74% 94% 90% Beazley Interim Report 2010 17

Notes to the financial statements continued 2 Segmental analysis continued 31 December 2009 Political Total risks and Specialty reportable Marine contingency Property Reinsurance lines segments Unallocated Total $m $m $m $m $m $m $m $m Gross premiums written 265.0 127.6 394.4 210.1 754.2 1,751.3 1,751.3 Net premiums written 228.9 98.6 283.1 180.7 540.0 1,331.3 1,331.3 Net earned premiums 239.9 112.9 272.4 152.4 571.3 1,348.9 (35.3) 1,313.6 Net investment income 8.5 4.1 10.8 6.4 58.3 88.1 88.1 Other income 2.4 1.1 6.3 1.7 8.1 19.6 19.6 Revenue 250.8 118.1 289.5 160.5 637.7 1,456.6 (35.3) 1,421.3 Net insurance claims 92.8 85.9 159.4 57.8 346.7 742.6 742.6 Expenses for the acquisition of insurance contracts 66.7 28.7 89.3 33.9 129.5 348.1 (5.5) 342.6 Administrative expenses 18.5 11.8 32.3 18.7 48.5 129.8 129.8 Foreign exchange (gain)/loss (1.4) (0.6) (2.0) (1.1) (3.8) (8.9) 43.3 34.4 Expenses 176.6 125.8 279.0 109.3 520.9 1,211.6 37.8 1,249.4 Segments result 74.2 (7.7) 10.5 51.2 116.8 245.0 (73.1) 171.9 Finance costs (13.8) Profit before income tax 158.1 Income tax expense (19.3) Profit after income tax 138.8 Claims ratio 39% 76% 58% 38% 61% 55% Expense ratio 35% 36% 45% 34% 31% 35% Combined ratio 74% 112% 103% 72% 92% 90% 3 Foreign exchange The following note is presented to explain the impact of foreign exchange differences on the group s reported results to the period ended 30 June 2010. During 2010 the group changed both the functional and presentation currencies of its underlying principal operating entities. Please refer to note 1 for further details. The foreign exchange components in the income statement for the period ended 30 June 2010, comprise: 1. A $33.7m non-recurring gain arising in the first quarter 2010. On 5 January 2010, the group more closely matched its capital base through the sale of sterling and the purchase of US $491.0m. The foreign exchange gain arose as a result of the US dollar strengthening against sterling in the first quarter, in entities that for the first quarter had a sterling functional currency. This gain should be viewed as one-off as it arose as part of the transition in matching our capital to its underlying US dollar exposures. With a functional currency of the US dollar going forward these currency fluctuations are not likely to recur. In the segmental analysis this gain has not been allocated to reportable segments and is included in the unallocated column. The gain is reversed in the statement of comprehensive income as part of the change in presentational currency. 2. A $0.8m foreign exchange gain arising in the second quarter. This relates to non-us dollar hedged items in the groups statement of financial position. This gain, as it relates to trading activity, has been allocated to the reportable segments. 3. A loss of $10.0m in respect of foreign exchange adjustments on non-monetary items in the second quarter. Of this loss, $3.1m is reported through net earned premiums and acquisition costs with the remaining $6.9m reported as fx loss. All foreign exchange differences on non-monetary items have been left unallocated. This has been separately disclosed as it provides a more transparent representation of the loss ratios, which would otherwise be distorted by the mismatch arising under IFRSs caused by unearned premium reserve, reinsurers share of unearned premium reserve and DAC being treated as non-monetary items while claims reserves are treated as monetary items. 4. The foreign exchange gain of $27.6m shown on the face of the income statement comprises: a gain of $33.7m arising from the change in functional currency, a gain of $0.8m arising in the second quarter and a loss of $6.9m in respect of the foreign exchange gain on non-monetary items. The foreign exchange movements recognised in other comprehensive income in the period ended 30 June 2010 include a foreign exchange loss on transition of $22.0m. This arises from the movement in the US dollar to sterling exchange rate between 1 January 2010 and 31 March 2010 being the end of the period prior to the change in functional currency of certain of the group s operating entities. In Beazley s case, the opening statement of financial position was translated at a US dollar to sterling exchange rate of 1.61, whilst the rate on the date of transition was 1.52. 18 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements 4 Net investment return 6 months 6 months Year ended ended 30 June ended 30 June 31 December 2010 2009 2009 $m $m $m Investment income at fair value through income statement 28.1 46.8 63.8 Realised (losses)gains on financial investments at fair value through income statement (10.8) (6.0) 23.2 Net fair value (losses)/gains on financial investments through income statement (4.3) 5.1 10.4 Investment management expenses (4.5) (5.4) (9.3) 8.5 40.5 88.1 5 Other income 6 months 6 months Year ended ended 30 June ended 30 June 31 December 2010 2009 2009 $m $m $m Profit commissions 5.0 2.6 8.0 Agency fees 0.9 0.6 1.6 Other income 9.0 6.4 10.0 14.9 9.6 19.6 6 Earnings per share 6 months 6 months Year ended ended 30 June ended 30 June 31 December 2010 2009 2009 Basic (cents) 18.8 7.3 28.9 Diluted (cents) 18.1 7.1 27.9 Basic (pence) 12.6 4.9 18.4 Diluted (pence) 12.0 4.7 17.8 Basic Basic earnings per share is calculated by dividing profit after income tax of $97.9m (2009: $31.2m) by the weighted average number of issued shares during the period of 519.6m (2009: 425.8m). The shares held in the ESOP have been excluded from the calculation until such time as they vest unconditionally with the employees. Diluted Diluted earnings per share is calculated by dividing profit after income tax of 97.9m (2009: $31.2m) by the adjusted weighted average number of shares of 541.8m (2009: 440.1m). The adjusted weighted average number of shares assumes conversion of all dilutive potential ordinary shares, being share options. The shares held in the ESOP have been excluded from the calculation until such time as they vest unconditionally with the employees. The weighted average has been adjusted for the effect of bonus shares issued at the time of the rights issue in March 2009 resulting from the discounted offer. Under IAS 33 the bonus element of the rights issue must be reflected in the calculation of earnings per share as though these bonus shares had always been in issue. The comparative figures have been accordingly re-stated for both basic and diluted calculations. 7 Dividends A first interim dividend of 2.4 pence/3.6 cents (2009: 2.3 pence/3.8 cents) per ordinary share is payable on 3 September 2010 to shareholders registered on 6 August 2010 in respect of the six months to 30 June 2010. These financial statements do not provide for the dividends as a liability. Beazley Interim Report 2010 19

Notes to the financial statements continued 8 Insurance claims The loss development tables on pages 21 and 22 provide information about historical claims development by the five segments marine, political risks and contingency, property, reinsurance and specialty lines. The tables are by underwriting year which in our view provides the most transparent reserving basis. We have supplied tables for both ultimate gross claims ratio and ultimate net claims ratio. The top part of the table illustrates how the group s estimated claims ratio for each underwriting year has changed at successive year-ends. The bottom half of the table reconciles the gross and net claims to the amount appearing in the statement of financial position. While the information in the table provides a historical perspective on the adequacy of the claims liabilities established in previous years, users of these financial statements are cautioned against extrapolating excesses or deficiencies of the past on current claims liabilities. The group believes that the estimates of total claims liabilities as at 30 June 2010 are adequate. However, due to inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to be adequate. 20 www.beazley.com

Highlights and key performance indicators Interim results statement Beazley timeline Performance by division Financial statements 2002ae 2003 2004 2005 2006 2007 2008 2009 2010 Gross ultimate claims % % % % % % % % Marine 12 months 59.1 62.3 82.6 57.0 58.0 69.0 55.9 24 months 45.1 65.6 80.4 42.4 60.0 65.3 36 months 39.0 62.4 70.8 32.6 50.5 48 months 36.2 61.9 68.9 28.9 60 months 35.8 60.7 66.6 72 months 35.7 56.2 84 months 34.9 Position at 30 June 2010 34.9 56.2 65.4 29.0 49.3 62.0 53.4 Political risks and contingency 12 months 59.1 67.2 60.9 57.6 57.2 57.5 61.1 24 months 36.2 55.6 38.1 36.2 38.6 68.1 36 months 31.6 52.3 28.4 32.7 56.3 48 months 28.7 38.1 25.0 43.2 60 months 31.2 37.1 17.9 72 months 25.3 28.3 84 months 24.4 Position at 30 June 2010 21.9 27.8 18.4 37.9 55.8 72.0 61.2 Property 12 months 50.9 65.6 87.9 58.4 58.3 70.9 55.5 24 months 37.4 65.2 84.5 44.0 56.4 66.7 36 months 34.6 65.9 83.1 42.9 53.9 48 months 34.0 64.0 88.1 50.1 60 months 33.7 64.5 87.6 72 months 33.7 63.2 84 months 34.8 Position at 30 June 2010 35.1 63.2 86.5 51.2 53.5 65.0 54.1 Reinsurance 12 months 58.7 88.1 198.0 52.4 59.6 59.9 60.7 24 months 34.3 82.4 189.9 25.3 26.1 51.9 36 months 28.5 77.0 187.8 24.9 21.6 48 months 28.7 74.6 181.0 23.3 60 months 25.6 72.6 177.1 72 months 25.6 71.6 84 months 24.5 Position at 30 June 2010 23.7 71.6 176.9 23.1 21.3 45.6 51.5 Specialty lines 12 months 73.0 72.1 72.0 72.6 72.8 72.0 73.0 24 months 70.1 71.3 72.0 72.7 72.4 72.0 36 months 68.9 67.6 69.7 72.7 72.4 48 months 60.0 64.4 66.3 72.7 60 months 53.2 59.4 62.8 72 months 52.3 58.3 84 months 50.5 Position at 30 June 2010 48.8 57.1 59.1 71.0 72.4 72.0 72.7 Total 12 months 63.0 69.2 90.8 62.9 63.5 68.7 63.7 24 months 52.6 69.3 88.1 53.0 59.1 67.7 36 months 49.5 66.5 84.4 50.7 58.1 48 months 44.8 63.6 82.8 52.4 60 months 41.5 61.0 80.0 72 months 40.8 59.0 84 months 40.0 Position at 30 June 2010 39.2 58.4 78.0 51.5 57.8 66.9 62.0 Total ultimate losses($m) 1,873.7 461.1 795.6 1,162.8 871.0 1,066.7 1,233.0 1,228.2 1,258.7 9,950.8 Less paid claims ($m) (1,618.1) (351.1) (604.8) (869.0) (401.8) (471.8) (400.3) (180.1) (35.4) (4,932.4) Less unearned portion of ultimate losses ($m) (38.5) (95.2) (966.3) (1,100.0) Gross claims liabilities (100% level) ($m) 255.6 110.0 190.8 293.8 469.2 594.9 794.2 952.9 257.0 3,918.4 Less unaligned share ($m) (48.6) (20.9) (36.2) (55.8) (87.4) (110.7) (141.5) (171.8) (43.0) (715.9) Gross claims liabilities, group share ($m) 207.0 89.1 154.6 238.0 381.8 484.2 652.7 781.1 214.0 3,202.5 Beazley Interim Report 2010 21