Beazley Takes Hit On Cat And Investment Losses

London insurer Beazley Group plc said today that it has suffered losses from both catastrophes in the United States, and on its investments, and expects to see a drop in its underwriting for next year.

In an interim report on its nine month performance, Beasley said it expects Hurricanes Gustav and Ike to have a net profit impact of around ?20 million (U.S. $35 million at current exchange rate). The underwriter called the loss estimate conservative and based on current available information.

It said a number of divisions would be impacted, notably reinsurance, U.S. commercial property, and offshore energy insurance accounts.

On the investment side, Beazley said its investment portfolio in the third quarter incurred an estimated loss of ?26 million ($45 million), from mark-to-market losses in its equity, hedge fund and bond portfolios.

For nine months, cumulative investment losses amount to ?13 million ($23 million).

“Given the extreme volatility and uncertainty in markets, it is difficult to quantify the impact of further losses on likely investment income for the remainder of 2008,” Beazley said in a statement, adding that it hopes to break even on investments by the end of the year.

Beazley said it held senior debt from bankrupt Lehman Brothers of ?14 million ($24 million), which on a mark-to-market basis today was valued at ?1.7 million ($2.96 million).

The company said it increased gross premiums written by one percent to ?595 million ($1.04 billion). However, premiums in the United States increased 62 percent over the nine months compared to last year, rising from $123 million to $199 million.

Beazley said it expects underwriting to drop next year by almost 8 percent, or ?64 million ($112 million). Underwriting in 2008 is expected to come in at ?814 million ($1.43 billion), while projecting ahead, the company said underwriting will come in at ?750 million ($1.31 billion).

“The third quarter has presented tough challenges to Beazley and to the insurance industry in general,” said Andrew Horton, the company's chief executive in a statement. “We have a very well diversified business, strong balance sheet, highly experienced underwriters and a clear focus on underwriting profitability to help us weather the current market conditions.

“It is our belief that the events of the third quarter will prove a turning point in the market. In all capital markets the price of risk is rightly being reassessed. With our talent, access and operational platform the future looks very promising.”