Beazley PLC (LON:BEZ) (LSE:BEZ.L) has released full-year results for FY2016. Profit before tax has risen from $284 million to $293 million, while return on equity is down slightly to 18% from 19%. Gross premiums written were 6% higher at $2195 million versus $2080 million in 2015. Net premiums written were 8% higher at $1854 million against $1713 million in 2015.
The company’s performance was encouraging across the board. A higher investment return was a key cause of higher profitability, while underwriting success remains central to Beazley’s improving performance. It generated a combined ratio of 89% in 2016, even though there were highly competitive conditions in many of the company’s markets. Premium growth led to the development of a number of growth opportunities, especially in the USA, which could offset other areas where the company is being forced to make reductions in investment.
On a per share basis, earnings and net assets increased by 11% and 21% respectively. Investors have reacted positively to the update, with Beazley’s share price up 9% at 446p at the time of writing. This takes its gain to 20% in the last three months, which in my view is an excellent return even in a rising stock market.
In fact, its rise is higher than for insurance sector peers Aviva plc (LON:AV) (LSE:AV.L), Prudential plc (LON:PRU) (LSE:PRU.L), Direct Line Insurance Group PLC (LON:DLG) (LSE:DLG.L) and Admiral Group plc (LON:ADM) (LSE:ADM.L). For example, Aviva is up 12%, Prudential is 16% higher, Direct Line is 0.5% higher and Admiral is down 5%.
In my view, Beazley has investment appeal. I feel its business model and strategy are sound, which could lead to further growth over the medium term. I think Aviva may have more growth potential due to its integration of the Friends Life business. I also feel Prudential offers greater diversity and long term growth potential in Asia. However, in my view Beazley remains a sound long term investment.