Beazley Plc

Beazley Plc (LON: BEZ) is a FTSE 250 listed Specialist Insurance Company. The major operations are based in Europe, the United States and the Pacific region.

The Company will release Q1 interim statement on 13 May 2021.

Investment Highlights – Beazley Plc – Buy at GBX 341.90

• The Company has seen robust double-digit premium growth across businesses, driven by rate rises across all divisions.
• BEZ achieved strong investment income in FY20 and remained optimistic about the year ahead.
• As per valuation metrics, EV/Sales, Price/Cash Flow and Price/Book Value multiples of the Beazley Plc are currently lower as compared to the corresponding multiples of the Insurance industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is supporting an upside move (around 42 level), which means the stock price could increase in the short term.

Key Risks

• The ongoing market volatility arising from geopolitical and economic uncertainties can dampen investor sentiments.
• The falling equity markets and interests' rates could put pressure on the insurers' balance sheets in the short-term.

Financial Highlights – FY2020 (31 December 2020) (released on 5 February 2021)

(Source: Interim Report, Company Website)

• For the financial year 2020, the gross written premium increased by 19% to US$3,563.8 million, supported by rate rises across most of the divisions.
• The net investment income stood at $188.1 million in FY2020 (FY2019: US$263.7 million).
• The Company reported a loss before tax of $50.4 million in FY2020 (FY2019: Profit before tax of $267.7 million), while the return on equity was -3% against 15% in FY2019.
• The combined ratio stood at 109%, which was heavily impacted by the Covid-19 related claims.

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Book Value Approach (NTM) (Illustrative)

Conclusion

The Company has shown strong performance in the financial year 2020, with double-digit growth in gross premiums and premium rates. The Company continues to support customers and provide excellent claims service. At present, pricing conditions are positive, and the Company has capital and expertise to take advantage of market conditions. BEZ is expecting to deliver mid-teens growth in the financial year 2021 along with strong shareholder returns. Furthermore, the Company is maintaining a balanced portfolio and growing market share to grow the business further. The stock made a 52-week low and high of GBX 287.60 and GBX 459.40, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “BUY” recommendation on Beazley Plc at the current price of GBX 341.90 (as on 9 April 2021 at 10:55 AM GMT), with lower double-digit upside potential based on 1.65x Price/NTM Book Value (approx.) on FY21E book value per share (approx.). 

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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