Shareholder Information

Glossary

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  Aggregates/aggregations

  Accumulations of insurance loss exposures which result from underwriting multiple risks that are exposed to common causes of loss.

  Aggregate excess of loss

  The reinsurer indemnifies an insurance company (the reinsured) for an aggregate (or cumulative) amount of losses in excess of a specified aggregate amount.

  Alternative performance measures (APMs)

  The group uses APMs to help explain its financial performance and position. These measures, such as combined ratio, expense ratio, claims ratio and investment return, are not defined under IFRS. The group is of the view that the use of these measures enhances the usefulness of the financial statements. Definitions of key APMs are included within the glossary.

  A.M. Best

  A.M. Best is a worldwide insurance-rating and information agency whose ratings are recognised as an ideal benchmark for assessing the financial strength of insurance related organisations, following a rigorous quantitative and qualitative analysis of a company’s statement of financial position strength, operating performance and business profile.

  Binding authority

  A contracted agreement between a managing agent and a coverholder under which the coverholder is authorised to enter into contracts of insurance for the account of the members of the syndicate concerned, subject to specified terms and conditions.

  Capacity

  This is the maximum amount of premiums that can be accepted by a syndicate. Capacity also refers to the amount of insurance coverage allocated to a particular policyholder or in the marketplace in general.

  Capital growth assets

  These are assets that do not pay a regular income and target an increase in value over the long term. They will typically have a higher risk and volatility than that of the core portfolio. Currently these are the hedge funds, equity funds and illiquid credit assets.

  Catastrophe reinsurance

  A form of excess of loss reinsurance which, subject to a specified limit, indemnifies the reinsured company for the amount of loss in excess of a specified retention with respect to an accumulation of losses resulting from a catastrophic event or series of events.

  Claims

  Demand by an insured for indemnity under an insurance contract.

  Claims ratio

  Ratio, in percentage terms, of net insurance claims to net earned premiums. The calculation is performed excluding the impact of foreign exchange. In 2017, this ratio was 58% (2016: 48%). This represented total claims of $1,075.7m (2016: $855.6m) divided by net earned premiums of $1,869.4m (2016: $1,768.2m).

  Combined ratio

  Ratio, in percentage terms, of the sum of net insurance claims, expenses for acquisition of insurance contracts and administrative expenses to net earned premiums. This is also the sum of the expense ratio and the claims ratio. The calculation is performed excluding the impact of foreign exchange. In 2017, this ratio was 99% (2016: 89%). This represents the sum of net insurance claims of $1,075.7m (2016: $855.6m), expenses for acquisition of insurance contracts of $519.7m (2016: $472.5m) and administrative expenses of $254.7m (2016: $247.8m) to net earned premiums of $1,869.4m (2016: $1,768.2m). This is also the sum of the expense ratio 41% (2016: 41%) and the claims ratio 58% (2016: 48%).

  Coverholder

  A firm either in the United Kingdom or overseas authorised by a managing agent under the terms of a binding authority to enter into contracts of insurance in the name of the members of the syndicate concerned, subject to certain written terms and conditions. A Lloyd’s broker can act as a coverholder.

  Deferred acquisition costs (DAC)

  Costs incurred for the acquisition or the renewal of insurance policies (e.g. brokerage, premium levy and staff related costs) which are capitalised and amortised over the term of the contracts.

  Earnings per share (EPS) – basic/diluted

  Ratio, in pence and cents, calculated by dividing the consolidated profit after tax by the weighted average number of ordinary shares issued, excluding shares owned by the group. For calculating diluted earnings per share the number of shares and profit or loss for the year is adjusted for certain dilutive potential ordinary shares such as share options granted to employees.

  Economic Capital Requirement (ECR)

  The capital required by a syndicate’s members to support their underwriting. Calculated as the uSCR ‘uplifted’ by 35% to ensure capital is in place to support Lloyd’s ratings and financial strength.

  Excess per risk reinsurance

  A form of excess of loss reinsurance which, subject to a specified limit, indemnifies the reinsured company against the amount of loss in excess of a specified retention with respect to each risk involved in each loss.

  Expense ratio

  Ratio, in percentage terms, of the sum of expenses for acquisition of insurance contracts and administrative expenses to net earned premiums. The calculation is performed excluding the impact of foreign exchange on non-monetary items. In 2017, the expense ratio was 41% (2016: 41%). This represents the sum of expenses for acquisition of insurance contracts of $519.7m (2016: $472.5m) and administrative expenses of $254.7m (2016: $247.8m) to earned premiums of $1,869.4m (2016: $1,768.2m).

  Facultative reinsurance

  A reinsurance risk that is placed by means of a separately negotiated contract as opposed to one that is ceded under a reinsurance treaty.

  Gross premiums written

  Amounts payable by the insured, excluding any taxes or duties levied on the premium, including any brokerage and commission deducted by intermediaries.

  Hard market

  An insurance market where prevalent prices are high, with restrictive terms and conditions offered by insurers.

  Horizontal limits

  Reinsurance coverage limits for multiple events.

  Incurred but not reported (IBNR)

  These are anticipated or likely claims that may result from an insured event although no claims have been reported so far.

  International Accounting Standards Board (IASB)

  An independent accounting body responsible for developing IFRS (see below).

  International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS)

  Standards formulated by the IASB with the intention of achieving internationally comparable financial statements. Since 2002, the standards adopted by the IASB have been referred to as International Financial Reporting Standards (IFRS). Until existing standards are renamed, they continue to be referred to as International Accounting Standards (IAS).

  Investment return

  Ratio, in percentage terms, calculated by dividing the net investment income by the average financial assets at fair value, including cash. In 2017, this was calculated as net investment income of $138.3m (2016: $93.1m) divided by average financial assets at fair value, including cash, of $4,796.4m (2016: $4,610.9m).

  Lead underwriter

  The underwriter of a syndicate who is responsible for setting the terms of an insurance or reinsurance contract that is subscribed by more than one syndicate and who generally has primary responsibility for handling any claims arising under such a contract.

  Line

  The proportion of an insurance or reinsurance risk that is accepted by an underwriter or which an underwriter is willing to accept.

  Managing agent

  A company that is permitted by Lloyd’s to manage the underwriting of a syndicate.

  Managing general agent (MGA)

  An insurance intermediary acting as an agent on behalf of an insurer.

  Medium tail

  A type of insurance where the claims may be made a few years after the period of insurance has expired.

  Net assets per share

  Ratio, in pence and cents, calculated by dividing the net assets (total equity) by the number of shares issued.

  Net premiums written

  Net premiums written is equal to gross premiums written less outward reinsurance premiums written.

  Private enterprise

  The private enterprise team offers specialised professional and general liability coverage supported by a high service proposition, focusing on meeting the needs of small businesses with assets up to $35.0m and up to 500 employees.

  Provision for outstanding claims

  Provision for claims that have already been incurred at the reporting date but have either not yet been reported or not yet been fully settled.

  Rate

  The premium expressed as a percentage of the sum insured or limit of indemnity.

  Rate change

  The percentage change in premium income we are charging relative to the level of risk on renewals.

  Reinsurance special purpose syndicate

  A special purpose syndicate (SPS) created to operate as a reinsurance ‘sidecar’ to Beazley’s treaty account, capitalising on Beazley’s position in the treaty reinsurance market.

  Reinsurance to close (RITC)

  A reinsurance which closes a year of account by transferring the responsibility for discharging all the liabilities that attach to that year of account (and any year of account closed into that year), plus the right to buy any income due to the closing year of account, into an open year of account in return for a premium.

  Retention limits

  Limits imposed upon underwriters for retention of exposures by the group after the application of reinsurance programmes.

  Retrocessional reinsurance

  The reinsurance of the reinsurance account. It serves to ‘lay off’ risk.

  Return on equity (ROE)

  Ratio, in percentage terms, calculated by dividing the consolidated profit after tax by the average daily total equity. In 2017, this was calculated as profit after tax of $130.0m (2016: $251.0m) divided by average equity of $1,429.5m (2016: $1,381.6m).

  Risk

  This term may refer to:
  a) the possibility of some event occurring which causes injury or loss;
  b) the subject matter of an insurance or reinsurance contract; or
  c) an insured peril.

  Short tail

  A type of insurance where claims are usually made during the term of the policy or shortly after the policy has expired. Property insurance is an example of short tail business.

  Sidecar special purpose syndicate

  Specialty reinsurance company designed to provide additional capacity to a specific insurance company. It operates by purchasing a portion or all of a group of insurance policies, typically cat exposures. These companies have become quite prominent in the aftermath of Hurricane Katrina as a vehicle to add risk-bearing capacity, and for investors to participate in the potential profits resulting from sharp price increases.

  Soft market

  An insurance market where prevalent prices are low, and terms and conditions offered by insurers are less restrictive.

  Solvency Capital Requirement on an ultimate basis (uSCR)

  The capital requirement under Solvency II calculated by Beazley’s internal model which captures the risk in respect of the planned underwriting for the prospective year of account in full covering ultimate adverse development and all exposures.

  Surplus lines insurer

  An insurer that underwrites surplus lines insurance in the USA. Lloyd’s underwriters are surplus lines insurers in all jurisdictions of the USA except Kentucky and the US Virgin Islands.

  Total shareholder return (TSR)

  The increase in the share price plus the value of any first and second dividends paid and proposed during the year.

  Treaty reinsurance

  A reinsurance contract under which the reinsurer agrees to offer and to accept all risks of certain size within a defined class.

  Unearned premiums reserve

  The portion of premium income in the business year that is attributable to periods after the reporting date in the underwriting provisions.

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