Beazley to split specialty lines
Specialty insurer Beazley plans to split its specialty lines division into specialty (casualty) and TMB (cyber / management liability), according to Jefferies analysts who welcomed the move given the differing growth profiles and profitability.
“Now contributing 56%+ of Beazley's gross written premium, we emphatically agree with management that now is the opportune moment to split the division,” the analysts said.
The specialty lines division has always been a diverse and complex business, including a wide variety of long tail casualty lines, alongside short tail cyber liability, the analysts argued. The separation will produce “clear operational benefits,” according to Jefferies research.
Although the exact split between the two parts has yet to be specified, Jefferies expects that of the current $1.30 billion of gross written premium (FY2017), one will comprise around $700 million of casualty, while the other will have about $350 million of TMB / cyber and roughly $240 million of management liability. Given that TMB's cyber products are the most rapidly growing lines, investors will thus receive increasingly more useful disclosures - which the analysts expect will enable the business to be valued at a considerably higher valuation.
Specialty Lines International is set to drive long term growth, not just in the US but globally, with products recently launched in Australia, Canada and Spain, the analysts noted. Beazley’s management confirmed that GDPR is likely to increase awareness of cyber products internationally, although Beazley expects most GDPR-driven demand to take time to develop.
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