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					      Annual statement
                                                                     Competitive markets are not new to
                                                                     Beazley. In 2010 we delivered an
                                                                     improved underwriting performance
                                                                     against a backdrop of deteriorating
                                                                     market conditions.
      Jonathan Agnew                  Andrew Horton
      Chairman                        Chief	executive




      2010	saw	an	exceptional	performance	from	the	company	          Growth	opportunities	for	the	insurance	industry	as	a	whole	
      that	Andrew	Beazley	and	Nick	Furlonge	founded	twenty	          proved	limited	in	2010.	At	Beazley	we	identified	and	
      five	years	ago,	maintaining	our	track	record	of	unbroken	      capitalised	on	three,	two	organic	and	one	the	result	of	a	
      profitability	with	a	pre-tax	profit	of	$250.8m	(2009:	         prior	acquisition.	Organically,	our	reinsurance	business	
      $158.1m)	on	gross	premiums	that	fell	1%	from	2009	to	          grew	by	23%	to	$174.4m,	supported	by	our	new	special	
      $1,741.6m.	Excluding	a	one-off	foreign	exchange	gain	of	       purpose	syndicate	(6107),	backed	by	third	party	capital.	
      $33.7m,	the	pre-tax	profit	was	$217.1m	and	despite	            By	the	end	of	December	our	reinsurance	team	had	written	
      competition	increasing	across	most	of	our	lines	of	            $16.4m	for	the	account	of	this	syndicate.
      business,	we	achieved	an	improved	combined	ratio	of	
                                                                     We	also	continued	to	see	strong	growth	in	demand	for	
      88%	(2009:	90%).
                                                                     data	breach	insurance	in	the	US.	Publicity	surrounding	
      The	board	is	pleased	to	announce	a	second	interim	             corporate	data	breaches	involving	the	loss	of	personal	
      dividend	of	5.1	pence	per	ordinary	share	(2009:                customer	information	continues	at	a	high	level.	Beazley	
      4.7	pence	per	ordinary	share)	and	a	special	dividend	of	       Breach	Response	has	been	successfully	introduced	in	
      2.5	pence	per	ordinary	share.	Together	with	the	first	         the	US	market	as	a	comprehensive	solution	to	this	
      interim	dividend	of	2.4	pence	per	ordinary	share	these	        growing	risk.	
      dividends	give	a	total	of	10.0	pence.
                                                                     Our	third	area	of	growth	was	in	our	life,	accident	&	health	
      Premium	rates	on	renewal	business	fell	by	2%	(2009:	3%	        business,	following	our	acquisition	in	2008	of	Momentum	
      increase),	placing	increased	emphasis	on	the	skill	of	our	     Underwriting	Management	Limited	(MUM).	Premiums	
      underwriters	in	identifying	profitable	underwriting	           underwritten	by	this	division	grew	by	15%	to	$78.1m	and	
      opportunities.	Competitive	markets	are	not	new	to	             the	business	performed	better	than	we	had	expected,	
      Beazley:	through	our	history	we	have	experienced	multiple	     contributing	$4.7m	to	profits.	As	we	had	hoped,	the	
      market	cycles.	The	peaks	and	troughs	vary	by	line	of	          conjunction	of	the	skills	of	the	team,	most	of	whom	have	
      business,	geography	and	size	of	risk,	so	the	task	for	a	       worked	together	for	more	than	a	decade,	and	the	Beazley	
      diversified	business	such	as	ours	is	to	optimise	the	          name	has	proved	very	attractive	to	brokers.
      portfolio	mix	to	achieve	healthy	returns	across	the	cycle.	
                                                                     A	further	recent	acquisition,	that	of	the	First	State	
      Our	combined	ratio	of	88%	and	our	return	on	equity	of	
                                                                     underwriting	agency	in	the	US,	is	now	fully	integrated	
      21.4%	in	2010	(2009:	16.0%)	reflects	our	success	in	
                                                                     into	Beazley.	The	highly	experienced	team	led	by	Judy	
      achieving	this.
                                                                     Patterson	focuses	on	surplus	lines	commercial	property	
      Our	investments	returned	$37.5m	or	1.0%	(2009:	                risks	and	forms	the	core	of	our	excess	and	surplus	(E&S)	
      $88.1m,	2.7%)	in	an	environment	characterised	by	              commercial	property	business	in	the	US,	which	
      continuing	macro-economic	uncertainty,	weak	global	            underwrote	premiums	of	$110.0m	last	year	
      demand	and	very	low	interest	rates.	Our	investment	            (2009:$102.8m).	
      returns	increased	in	the	course	of	the	year,	but	our	focus	
                                                                     Demand	was	also	strong	for	energy	insurance	in	2010,	
      remains	on	capital	preservation	given	the	continuing	risk	
                                                                     following	the	Deepwater	Horizon	disaster	in	the	Gulf	of	
      of	severe	market	downturns.	Accordingly,	the	majority	of	
                                                                     Mexico.	We	expect	demand	for	our	products	to	remain	
      our	invested	assets	(63.8%	at	year	end)	are	cash,	cash	
                                                                     strong	in	2011	as	a	result	of	rising	commodity	prices,	
      equivalents	and	sovereign	or	supranational	bonds	and	the	
                                                                     customer	awareness	of	risk	and,	in	some	cases,	
      duration	of	our	overall	fixed	income	portfolio	is	just	over	
                                                                     regulators	requiring	additional	financial	security	from	oil	
      one	year.	We	seek	some	return	above	risk	free	rates	via	a	
                                                                     and	gas	companies.	Paul	Dawson	and	his	team	are	
      portfolio	of	capital	growth	assets.	
                                                                     respected	heads	of	this	class	and	will	look	to	increase	
                                                                     their	share	of	the	market	if	conditions	remain	attractive.




12   www.beazley.com
Quick read           Annual statement      Performance by division    Financial review      Corporate governance      Financial statements




             Change in functional currency                                    The	number	of	claims	in	our	political	risks	book,	which	
             In	April	2010,	we	announced	a	change	in	our	functional	          had	risen	in	2009	due	to	the	impact	of	the	global	
             currency	for	Beazley	plc	and	its	principal	operating	            economic	crisis	on	trade	credit	business,	returned	to	
             entities	from	sterling	to	the	US	dollar,	reflecting	the	         long-term	average	levels	in	2010.
             growth	of	our	dollar	denominated	premiums	and	the	fact	          Specialty	lines,	our	largest	single	division,	also	saw	a	
             that	the	regulatory	capital	supporting	the	business	is	          reduction	in	frequency	of	claims	for	directors’	and	
             largely	held	in	dollars.	We	believe	that	this	change	will	       officers’	(D&O)	and	employment	practices	liability	(EPL)	
             give	investors	a	clearer	understanding	of	the	group’s	           business,	two	of	our	more	recession-exposed	lines.	Our	
             performance	over	time.	Accounting	in	dollars	will	               approach	to	recession	planning	and	cycle	management	
             significantly	reduce	the	future	volatility	of	Beazley’s	         in	specialty	lines	has	been	rigorous,	reducing	our	
             reported	earnings	due	to	foreign	exchange	movements	             exposures	in	areas	such	as	EPL,	D&O	and	mid	market	
             –	and	in	particular	due	to	foreign	exchange	on	non-              architects	and	engineers	(A&E)	professional	liability	while	
             monetary	items.	                                                 increasing	our	underwriting	in	areas	such	as	data	breach	
             Irish domicile                                                   insurance	and	parts	of	our	healthcare	account.	
             In	June	2009	we	redomiciled	our	holding	company	to	              The	end	of	2010	and	the	start	of	2011	have	been	
             Ireland.	The	move	has	achieved	all	the	objectives	we	            marked	by	heavy	rains	and	flooding	in	Queensland,	
             described	in	last	year’s	annual	report,	affording	us	a	          Australia	as	well	as	a	significant	tropical	storm,	Yasi.	
             strong	regulatory	environment,	and	a	competitive	tax	            We	do	not	expect	the	cost	to	Beazley	of	the	insured	
             regime.	Our	effective	tax	rate	in	2010	was	13%.	                 losses	occuring	in	2010	from	these	events	to	be	
             We	take	comfort	in	the	Irish	government’s	strong	                material.	Whilst	it	is	too	early	to	be	able	to	make	any	
             commitment	to	the	existing	corporate	tax	rate,	which	            definitive	statement	concerning	the	events	that	have	
             has	proved	an	incentive	to	investment	by	many	                   occurred	so	far	during	2011	due	to	the	uncertainty,	we	
             companies	in	the	insurance	industry,	among	others.	              believe	they	will	be	contained	within	our	first	half	2011	
                                                                              catastrophe	budgets.
             Claims experience                                                Delivery against strategic priorities
             Our	claims	experience	was	positive	in	2010,	with	a	              Our	strategy	focuses	on	three	areas:	prudent	capital	
             claims	ratio	of	52%	that	was	an	improvement	on	55%	              allocation	to	achieve	sustainable	profitability	across	the	
             in	2009,	despite	the	impact	of	two	major	earthquakes.	           group;	nurturing	and	enhancing	our	skills	base;	and	
             Our	balanced	underwriting	portfolio	gives	us	the	ability	to	     scaling	our	operations	so	that,	as	growth	opportunities	
             offset	the	impact	of	catastrophe	losses	with	profits	from	       arise,	we	can	continue	to	provide	the	high	level	of	service	
             other	lines	of	business.	This	also	improves	the	capital	         that	our	clients	and	brokers	have	the	right	to	expect.
             efficiency	of	our	business.	
                                                                              In	the	second	half	of	2010	we	made	an	approach	to	
             In	2010	the	US	hurricane	season	passed	without	                  acquire	Hardy	Underwriting	Bermuda	Limited	(Hardy),	a	
             incident	but	there	were	two	significant	earthquakes	along	       small	complementary	and	high	quality	specialty	insurer.	
             the	Pacific	‘ring	of	fire’,	the	first	in	Chile	and	the	second	   Whilst	our	indicative	offer	represented	a	significant	
             in	New	Zealand.	Our	estimate	of	the	claims	cost	from	            premium	to	Hardy’s	net	tangible	assets,	we	would	have	
             the	Chilean	earthquake	remains	in	the	range	of	$55m	to	          been	able	to	achieve	our	target	of	return.	However,	
             $75m.	In	the	case	of	New	Zealand	we	initially	estimated	         Hardy’s	board	were	of	the	view	that	our	proposals	did	
             a	group	loss	of	$15m-$30m	based	on	a	market	loss	of	             not	fully	value	the	company	and	so	we	withdrew.	
             $2bn-$4bn.	We	have	subsequently	increased	this	to	a	             Seeking	to	acquire	teams	of	underwriters,	underwriting	
             group	loss	of	$35m,	based	on	the	updated	market	view	            agents	or	small	or	medium	sized	insurance	companies	
             of	losses	to	$3bn-$5bn.	




                                                                                                                   Beazley Annual Report 2010   13
      Annual statement continued




      In 2010 we planted the seeds for a number
      of growth opportunities that we expect to
      bear fruit in 2011 and future years.




      in	our	target	markets	and	product	sets	remains	one	of	         delighted	to	welcome	Paul	Gulstrand,	who	joined	us	from	
      our	key	priorities.                                            UnitedHealth	Group	to	develop	our	accident	and	health	
      We	have	never	been	reluctant	to	return	capital	to	             insurance	business	in	the	US.	We	have	to	date	been	
      shareholders	in	circumstances	where	we	are	not	                underwriting	accident	and	health	risks	on	a	reinsurance	
      confident	that	we	can	allocate	it	to	meet	or	exceed	our	       basis	locally	in	the	US.	In	the	course	of	2011,	Paul	and	
      pretax	cross-cycle	return	on	equity	target	rate	of	18%.	       his	team	will	begin	to	offer	a	range	of	simple	and	
      During	the	course	of	2010	Beazley	plc	acquired	16.8m	          streamlined	insurance	products	to	US	employers	that	
      of	its	own	shares	to	be	held	in	treasury	at	an	average	        wish	to	offer	“gap	protection”	to	their	employees	in	an	
      price	of	112.1p.	                                              affordable	manner,	providing	cover	not	normally	afforded	
                                                                     under	company	health	care	plans.
      Our	markets	are	becoming	more	competitive	but	in	
      2010	we	planted	the	seeds	for	a	number	of	growth	              All	of	our	product	lines,	old	and	new,	rely	on	the	skills	of	
      opportunities	that	we	expect	to	bear	fruit	in	2011	and	        seasoned	underwriting	and	claims	professionals,	working	
      future	years.	John	McNally,	one	of	the	most	experienced	       closely	together,	to	deliver	profitable	growth	over	time.	
      underwriters	of	M&A-related	transaction	liability	             Beazley	is	not	a	hierarchical	or	bureaucratic	company:	
      insurance	in	London,	joined	our	management	liability	          over	our	25	years	we	have	found	that	the	greatest	
      team	at	Lloyd’s.	The	team	has	since	encountered	a	             success	comes	from	taking	highly	motivated	and	
      strong	appetite	from	private	equity	investors	looking	to	      experienced	individuals	and	giving	them	the	
      reduce	some	of	the	risks	to	which	merger	and	                  entrepreneurial	freedom	to	develop	their	business.	
      acquisitions	(M&A)	transactions	are	exposed.	We	are	fast	      This	is	the	approach	that	has	governed	the	growth	of	
      becoming	a	leading	market	in	London	for	these	specialist	      our	Lloyd’s	business	and	we	have	found	it	holds	
      types	of	insurance,	which	are	increasingly	appealing	to	       particular	appeal	in	the	US	where	our	marketing	tag	
      clients	in	Europe	and	Asia,	as	well	as	to	the	traditional	     line	is	”straight	answers”.	
      buyers	in	the	US.                                              A	consequence	of	this	approach	is	that	we	make	hiring	
      In	the	US,	our	newly	formed	environmental	liability	team	      decisions	very	carefully.	Entrepreneurial	freedom	is	not	
      led	by	John	Beauchamp	unveiled	three	new	products	in	          to	everyone’s	taste	and	some	underwriters	lack	the	
      the	course	of	the	year.	Environmental	risks	threaten	a	        experience	to	exercise	it	with	confidence	and	success.	
      wide	variety	of	commercial	organisations,	including	owners	    But	the	payback	for	investing	time	in	identifying	these	
      of	property;	industrial	and	commercial	operations;	general	    individuals	is	high:	good	people	tend	to	stay	with	Beazley	
      and	specialty	contractors;	and	the	environmental	services	     for	many	years.	
      industry.	The	claims	can	be	complex	and	benefit	from	          Growth of locally underwritten US business
      strong	risk	management	and	claims	support.	They	play	to	       In	March,	we	celebrated	our	fifth	anniversary	as	a	local	
      the	strengths	of	Beazley	and	of	Lloyd’s	–	and	we	will	begin	   US	insurer.	In	our	first	year,	2005,	we	underwrote	$15m	
      underwriting	environmental	risks	from	the	Beazley	box	at	      through	our	US	operations;	last	year	we	underwrote	
      Lloyd’s	in	2011.                                               $393.6m,	23%	of	total	group	premiums,	up	from	
      A	third	area	in	which	we	see	considerable	growth	              $370.7m	in	2009.
      potential	for	Beazley	is	the	specialist	accident	and	health	
      market	in	the	United	States.	In	January	2010,	we	were	




14   www.beazley.com
Quick read                   Annual statement           Performance by division   Financial review     Corporate governance      Financial statements




                 Locally underwritten US premiums

                 400
                 350
                 300
                 250
             US $m


                 200
                 150
                 100
                     50
                     0
                             2005 2006 2007 2008 2009 2010

                          Surplus business      Admitted business




             Our	local	US	business	focuses	on	smaller	scale	risks	                       Andrew Beazley
             in	lines	of	business	with	which	we	were	already	very	                       Andrew	Beazley,	who	co-founded	the	company	with	
             familiar	through	our	Lloyd’s	syndicates.	Our	position	                      Nick	Furlonge	and	led	it	successfully	for	22	years,	
             at	Lloyd’s	in	large	risk	business	has	proved	a	powerful	                    died	on	13	October.	Andrew	was	a	powerful	source	of	
             source	of	credibility	for	our	US	underwriters	in	targeting	                 inspiration	to	us	and,	through	his	career,	to	hundreds	of	
             smaller	clients.                                                            people	at	Beazley	and	in	the	broader	insurance	market.	
                                                                                         We	will	miss	him	deeply	as	a	colleague	and	as	a	friend.	
             Board and executive changes
             We	made	a	series	of	additions	to	the	Beazley	board	in	                      Andrew	co-founded	and	led	a	company	that	has	
             2010.	In	November	Ken	Sroka	joined	the	board	as	a	                          achieved	a	25-year	record	of	unbroken	profitability	and	
             non-executive	director.	He	was	formerly	head	of	product	                    steady	growth	through	often	turbulent	market	conditions,	
             development	at	Zurich	Financial	Services,	where	he	                         built	on	mutual	trust,	openness,	respect	and	a	strong	
             created	and	directed	Zurich’s	financial	lines	business	in	                  sense	of	fun.	It	is	a	legacy	we	cherish.	
             North	America	and	more	recently	focused	on	the	
             development	of	specialist	products.
             Rolf	Tolle	and	Adrian	Cox	were	appointed	to	the	board	in	                   Jonathan Agnew            Andrew Horton
             December.	Rolf	had	joined	the	board	of	Beazley	Furlonge	                    Chairman	                 Chief	executive
             Ltd,	the	Lloyd’s	managing	agency	which	forms	part	of	the	                   8	February	2011
             Beazley	group,	in	June.	He	retired	as	franchise	
             performance	director	at	Lloyd’s	in	December	2009	after	
             seven	years	in	the	role.	Adrian	has	headed	our	largest	
             division,	Specialty	Lines,	since	2008.
             We	also	made	two	appointments	to	the	Beazley	executive	
             committee	in	2010.	Strong	broker	relationships	are	the	
             lifeblood	of	Beazley	and	we	were	delighted	to	welcome	
             Dan	Jones	as	a	member	of	the	senior	management	team	
             in	June.	In	his	new	role,	Dan	–	who	stood	down	as	a	
             non-executive	director	on	the	Beazley	plc	board	–	is	
             focusing	on	deepening	relationships	with	key	business	
             producers	around	the	world.	Dan	brings	extensive	
             knowledge	of	the	insurance	broking	sector	on	both	sides	
             of	the	Atlantic.	Between	1997	and	2005,	he	served	as	a	
             senior	executive	at	Marsh,	Inc.	
             Andrew	Pryde	has	also	joined	the	executive	committee	
             as	chief	risk	officer.	As	group	actuary,	Andrew	has	been	
             leading	our	efforts	to	ensure	compliance	with	Solvency	II,	
             which	are	well	advanced.




                                                                                                                              Beazley Annual Report 2010   15
      Q&A
          Andrew Horton describes the trends, risks
          and opportunities that he foresees in 2011.




          Q: Many of the lines of business                 Q: In a market such as this, how               individually	or	in	teams	–	in	lines	of	
                                                                                                          business	that	are	complementary	to	
          Beazley specialises in are seeing                do you keep faith with your clients            business	we	currently	write.	But	our	
          intense competition. How soft will               while maintaining profitability?               business	plan	for	2011	does	not	
          the soft market get?                                                                            envisage	strong	organic	growth	because	

                                                           A:     In	a	nutshell,	by	focusing	on	the	
                                                                                                          in	markets	that	are	not	themselves	

          A: I	see	the	overall	profitability	of	           reason	people	buy	insurance	in	the	first	
                                                           place.	You’re	buying	a	promise	to	pay	
                                                                                                          growing	we	would	need	to	underprice	
                                                                                                          the	competition	to	achieve	that.	
          the	insurance	sector	as	being	on	a	
                                                           –	you’re	buying	claims	service.	And	it	
                                                                                                          Q:
          downward	trend	at	present	–	and	that’s	
          before	considering	the	potential	impact	         continues	to	amaze	me	how	little	senior	              In the current market is
          of	catastrophe	losses.	We	have	seen	a	           executives	in	our	industry	talk	about	that.	   profitable growth best achieved
          significant	influx	of	new	competitors	into	                                                     organically or through M&A?
                                                           When	you’re	in	a	tough	market	like	
          some	of	our	core	lines	of	business,	
                                                           today’s,	claims	service	is	really	your	
          including	lines	that	are	known	to	be	
          challenging	to	underwrite,	like	
                                                           main	bulwark	against	price-driven	
                                                           competition.	We	say	to	our	clients	and	
                                                                                                          A: Both	are	challenging,	frankly.	
          professional	liability	for	lawyers	or	for	                                                      We	were	described	in	some	sections	
                                                           to	our	brokers:	yes,	we	may	be	a	little	       of	the	press	as	being	‘opportunistic’	in	
          architects	and	engineers.	We	would	
                                                           more	expensive	but	remember	what	              making	an	offer	for	another	Lloyd’s	
          expect	a	number	of	these	companies	
                                                           you’re	buying.	We	have	made	and	               business	last	year.	My	response	was,	
          to	withdraw	in	due	course	but	the	
                                                           continue	to	make	major	investments	            show	me	an	offer	that	does	not	have	
          challenge	with	writing	some	of	the	
                                                           in	highly	skilled	claims	people	who	can	       some	element	of	opportunism	in	it.	
          longer	tail	business	in	a	soft	market	is	
                                                           provide	prompt	and	supportive	service	         So	I	hope	we	will	continue	to	be	
          that	it’s	a	little	like	frostbite	–	you	don’t	
                                                           in	the	event	of	a	claim.	                      opportunistic	in	that	sense.	But	if	one	
          know	anything’s	wrong	until	it’s	too	late.	
          So	they	may	think	they’re	currently	             And	the	good	news	about	this	from	an	          thinks	of	opportunism	as	off-the-cuff	
          writing	at	a	profit	and	not	discover	            investor’s	perspective	is	that	the	best	       decision	making,	then	our	approach	is	
          otherwise	for	a	few	years.                       clients	are	generally	the	ones	who	care	       the	reverse	of	opportunistic.	For	us,	
                                                           most	about	claims	service.	And	they	           potential	acquisitions	have	to	meet	
          That	said,	there	is	a	very	obvious	                                                             some	tough	criteria.	They	have	to	be	in	
                                                           also	care	most	about	prudent	risk	
          constraint	on	the	ability	of	the	market	to	                                                     specialist	lines	of	business	that	we	really	
                                                           management,	which	is	another	service	
          continue	to	chase	rates	downward,	and	                                                          like.	They	have	to	have	a	stellar	track	
                                                           we	focus	on.	So	the	clients	that	are	less	
          that	is	the	meagre	investment	return	                                                           record	in	underwriting.	And	we	have	to	
                                                           price	sensitive	and	do	not	see	what	we	
          they	are	currently	earning.	The	biggest	                                                        be	confident	about	the	culture	of	the	
                                                           offer	as	a	commodity	often	represent	
          enemy	of	prudent	underwriting	has	                                                              organisation	and	the	prospective	fit	with	
                                                           the	best	risks.
          historically	been	a	buoyant	investment	                                                         our	culture.	We	look	at	dozens	of	
          market;	we	must	hope	that	the	opposite	
          statement	also	holds	true.	If	it	does,	we	       Q:    Do you see growth
                                                                                                          potential	acquisitions	annually	that	do	
                                                                                                          not	meet	one	or	other	of	these	criteria.
          would	expect	reductions	in	rates	to	             opportunities in the year ahead?
          bottom	out	some	time	next	year.	                                                                And	finally	of	course	the	price	must	be	
                                                                                                          right.	Our	investors	have	the	right	to	
                                                           A: Beazley	has	grown	significantly	in	         expect	that	we	will	keep	our	feet	on	
                                                           recent	years	and	we	will	grow	in	future,	      the	ground	and	not	get	carried	away	
                                                           but	we’re	going	to	be	very	careful	about	      by	bid	fever.	
                                                           sizing	up	growth	opportunities	in	the	
                                                           current	environment.	We’re	going	to	
                                                           continue	to	look	out	for	them.	There	
                                                           may	be	good	people	we	can	hire	–	either	




16   www.beazley.com
       Quick read           Annual statement     Performance by division       Financial review      Corporate governance      Financial statements




Q: Should insurers be returning                Q:     What opportunities do you                   Q:      Beazley celebrates its 25th
capital to investors at this point in          see to develop business in                         anniversary this year. What
the cycle?                                     continental Europe in 2011?                        reflections does that prompt in you?

A: There	is	of	course	not	just	one	            A: Europe,	including	the	UK,	is	                   A: The	main	reflection	it	prompts	in	
insurance	cycle	and	in	fact	it	is	unusual	     currently	the	source	of	15%	of	our	                me	is	a	sense	of	pride	that	the	spirit	
for	the	property	cycle	and	the	casualty	       premiums.	In	the	past	five	years	we	have	          that	animated	the	company	from	the	
cycle	and	the	marine	cycle,	for	example,	      opened	offices	in	Paris,	Munich	and	               beginning	is	still	alive	and	strong.	
to	be	fully	in	synch	with	one	another.	So	     Oslo,	focusing	on	the	local	development	           The	company	that	Andrew	Beazley	and	
there	may	be	growth	opportunities	in	          of	our	professional	liability,	reinsurance	        Nick	Furlonge	founded	25	years	ago	
one	area	while	there	is	a	dearth	of	           and	energy	insurance	business	                     is	recognisably	the	same	company.	
opportunities	in	another.	That	said,	the	      respectively.	Going	forward,	we	plan	to	           We’re	writing	many	of	the	same	lines	of	
group	actively	manages	the	capital	it	         use	these	local	offices	–	supported	by	            business,	such	as	professional	liability	
holds	and	in	the	absence	of	favourable	        the	marketing	and	business	development	            and	catastrophe.	The	only	difference	
underwriting	conditions	will	release	it	to	    efforts	of	our	London-based	underwriters	          now	is	that	we’re	leaders	in	those	
investors	if	the	time	is	right.	We	are	        –	to	grow	our	business	across	a	broader	           markets	rather	than	new	entrants.
determined	to	give	our	investors	a	            spectrum.	The	experience	of	insurers	
                                                                                                  But	the	way	we’ve	grown	and	diversified	
healthy	return	on	capital.                     from	London	seeking	to	build	large-scale	
                                                                                                  is	consistent	too.	Like	all	businesses	we	
                                               businesses	in	Europe	has	not	been	
                                                                                                  can	often	find	ourselves	talking	in	quite	
Q:    What is your perspective on
                                               uniformly	positive	so	we	are	proceeding	
                                               cautiously,	but	we	have	been	encouraged	
                                                                                                  abstract	terms	about	things	like	
                                                                                                  scalability	or	capital	allocation.	But	the	
the admission of new capital to the            by	the	support	we	have	received	from	
Lloyd’s market?                                                                                   real	key	to	Beazley’s	success	has	been	
                                               local	brokers	in	many	countries	for	a	
                                                                                                  hiring	good	and	knowledgeable	people	
                                               stronger	Beazley	presence.		
A: The	Lloyd’s	market	is	constantly	                                                              and	giving	them	the	entrepreneurial	
                                                                                                  freedom	to	build	a	team	and	build	a	
renewed	and	reinvigorated	by	the	arrival	
of	new	capital	providers	and	the	creation	
                                               Q:    Beazley’s investment returns                 business	within	the	broader	company.	
                                               were lower than many peers in                      I’ve	seen	that	happen	countless	times	
of	new	syndicates.		We	welcome	that	           2010. Why was this?                                since	I	joined	Beazley	in	2003.	It’s	a	
and	believe	that	the	franchise	board	                                                             winning	formula.	

                                               A:
monitors	prospective	new	entrants	
effectively.	The	question	really	is:	what	            Beazley	has	a	very	capital	efficient	
are	the	new	entrants	bringing?		If	they	       business	model.	The	balance	of	our	                Andrew Horton
are	looking	to	build	a	new	market	that	        underwriting	portfolio	means	we	                   Chief	executive
isn’t	there	already	at	Lloyd’s	or	is	          underwrite	$2	of	premiums	for	each	$1	of	
relatively	small	and	inactive,	that’s	         capital	and,	as	a	result	of	our	portfolio	mix,	    8	February	2011
great.		That’s	what	we	did	in	2008	when	       generate	$4	of	invested	assets	for	each	
we	established	the	first	life	syndicate	at	    $1	of	capital	(our	peers	are	more	like	
Lloyd’s	in	twenty	years	–	and	five	more	       3:1).	Beazley	follows	a	relatively	cautious	
life	syndicates	have	since	been	formed.		      investment	strategy	which	will	result	in	
But	if	you’re	just	setting	up	a	me-too	        lower	than	average	investment	returns	in	
syndicate	to	write	exactly	the	same	           some	market	conditions.	However,	this	
business	as	everyone	else,	we’re	less	         strategy	still	translates	into	a	good	return	
keen.	I	hope	and	believe	that’s	               for	shareholders	due	to	gearing.	
something	that	Tom	Bolt,	the	
                                               2010	was	a	year	where	we	saw	
performance	director	and	the	franchise	
                                               significant	risks	in	asset	markets.	As	a	
board	at	Lloyd’s	are	alert	to.
                                               result	we	positioned	our	portfolio	very	
                                               conservatively.	

                                                                                                                            Beazley Annual Report 2010   17

				
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