Beazley Plc’s shares slumped by the most in more than two years after the Lloyd’s of London insurer reported a drop in first-half profit, eroded by U.S. bond investments.
Beazley sank 7 percent to 225.7 pence in London trading, the biggest selloff since March 2011. The Dublin-based company posted a 27 percent drop in pretax profit to $82.3 million, below the $95 million median estimate of three analysts surveyed by Bloomberg. Net investment income slumped to $300,000 from $36.1 million.
“The last six weeks of the half were marked by significant rises in U.S. interest rates,” Beazley said in a statement today. “The rise in rates created mark-to-market losses in the fixed-income portfolio that canceled out the profits we had made earlier in the year.”
Beazley, the first of the Lloyd’s insurers to report first-half earnings, said further increases in U.S. interest rates will “suppress” earnings from investments, though the company will benefit from higher yields in the longer term.
“Our underwriting performance has improved so analyst forecasts should not materially change from where they are now,” Chief Executive Officer Andrew Horton said in a telephone interview today. “From a company point of view we are still comfortable with our full-year outlook.”
Beazley said its combined ratio, or claims and expenses as a percentage of premiums, declined to 89 percent from 91 percent, indicating improved underwriting in the period. The company also raised its first-half dividend by 7.4 percent to 2.9 pence a share in line with its strategy of increasing the payment by 5 percent to 10 percent.
Competitors Catlin Group Ltd. and Amlin Plc paced today’s selloff, dropping 3.9 percent to 494.5 pence and 2.9 percent to 398.8 pence respectively in London.
Beazley has still climbed 33 percent this year, making it the best-performing member on the FTSE 350 Nonlife Insurance Index and giving the company a market value of 1.18 billion pounds ($1.8 billion).