Beazley’s cyber reserve releases could be “the most material” factor driving its earnings growth in the years to come.
Investment bank Jefferies estimates Beazley’s cyber releases to have risen 47% to over $40 million in 2017. It cited the policy of only releasing cyber reserves after three years, noting £10 million and £30 million from 2014 and 2015, respectively.
“Considering cyber premiums rose in excess of 25% in 2016 and have continued to rapidly grow since, the outlook for future cyber releases seems secure,” said Jefferies. “We estimate that releases will nearly double within three years (~$80m by 2020) and contribute 22.8% of PBT in 2020F, making cyber releases the most material driver of earnings growth.”
However, Jefferies added that while cyber remains the structural driver of earnings growth, it was the “phenomenal” 97% increase (to $80 million) in casualty reserve releases that caught the attention of the market.
“Finally, we were pleasantly surprised by updated management guidance that Beazley now expects ‘double digit growth in 2018’ as a result of firming rates,” it said. “We raise our gross written premium forecasts to factor in 10% growth for 2018.”
