| | | | |
| | | | |
| | | |
Ordinary shares of 5p each | | | | |
| | | | |
| | | | |
Issue of shares to satisfy employee share schemes | | | | |
| | | | |
| | | | |
issued at a price of 575 pence per share, representing a discount of 8.0% to the closing share price of 625 pence on 15
November 2022. In aggregate, the equity raise represented gross proceeds of \u00a3350.5m ($415.8m) and net proceeds of
\u00a3340.8m ($404.4m). The company incurred other transaction costs of $0.7m which were recognised in the consolidated
statement of profit or loss.
21 Share capital continued
The 60,403,895 Placing Shares were issued for non-cash consideration by way of a 'cash box' structure structure. involving a
newly incorporated subsidiary of the company (\u2018Cash Box\u2019). This structure involved the issue of ordinary and preference shares
by Cash Box to one of the investment banks advising the company in respect of the equity raise. These preference and ordinary
shares were subsequently acquired by the company and the preference shares were redeemed by Cash Box. The acquisition by
the company of the ordinary shares in Cash Box held by the investment bank resulted in the company securing over 90% of the
equity share capital of Cash Box. The company was therefore able to rely on Section 612 of the Companies Act 2006, which
provides relief from the requirements under Section 610 of the Companies Act 2006 to create a share premium account.
Therefore, no share premium was recorded in relation to the Placing shares.
The premium over the nominal value of the Placing shares was credited to a merger reserve and subsequently recognised in
retained earnings. The merger reserve created was determined to be distributable for the purposes of the Companies Act 2006.
Certain Directors of the company participated in the equity raise via the Placing Shares and the 26,086 Subscription Shares.
Retail investors were able to participate in the equity raise on the same terms as institutional investors via the retail offer,
which was hosted on the PrimaryBid platform. A total of 529,036 Retail Offer Shares were issued, and Share Premium of
$3.6m was recognised.
22 Other reserves
| | | |
| Employee share options reserve | Employee share trust reserve | |
| | | |
| | | |
Balance at 1\u00a0January 2021 | | | |
| | | |
Tax on share option vestings | | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2021 | | | |
| | | |
Tax on share option vestings | | | |
Acquisition of own shares held in trust | | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2022 | | | |
| | | |
| Employee share options reserve | Employee share trust reserve | |
| | | |
| | | |
Balance at 1\u00a0January 2021 | | | |
| | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2021 | | | |
| | | |
Acquisition of own shares held in trust | | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2022 | | | |
The merger reserve is shown within the statement of changes in equity as a separate category and as such has been excluded
from the other reserves note.
The employee share options reserve is held in accordance with IFRS 2: Share-based payment. For more information refer to
note 23.2.
More information on the employee share trust reserve is included in note 23.
23 Equity compensation plans
23.1 Employee share trust
| | | | |
| | | | |
| | | | |
Movements in employee share trust reserve | | | | |
| | | | |
| | | | |
Transfer of shares to employees | | | | |
| | | | |
The shares are owned by the employee share trust to satisfy awards under the Group\u2019s deferred share plan, retention plan, one-
off share incentive plan and long term incentive plan (LTIP). These shares are purchased on the market and carried at cost.
On the third anniversary of an award the shares under the deferred share plan are transferred from the trust to the employee.
Under the retention plan, on the third anniversary, and each year after that up to the sixth anniversary, 25.0% of the shares
awarded are transferred to the employee.
The deferred share plan is recognised in the statement of profit or loss on a straight-line basis over a period of three years,
while the retention share plan is recognised in the statement of profit or loss on a straight-line basis over a period of six years.
23.2 Employee share option plans
The Group has a long term incentive plan (LTIP), one-off share incentive plan, deferred share plan, retention plan and save-as-
you-earn (SAYE) plan that entitle employees to purchase shares in the Group.
The terms and conditions of the grants are as follows:
| | | | |
| | | | Contractual life of options |
| | | Five year\u2019s service + NAV + minimum shareholding requirement | |
| | |
| | |
| | |
| | |
| | |
| | | Three year\u2019s service + NAV + minimum shareholding requirement | |
| | |
| | |
| | |
| | | Three years\u2019 service | |
| | |
| | |
| | | | |
| | |
| | | | |
Total share options outstanding | | | | |
Vesting conditions
In summary the vesting conditions are defined as:
\u2022two years\u2019 service \u2013 an employee has to remain in employment until the second anniversary from the grant date;
\u2022three years\u2019 service \u2013 an employee has to remain in employment until the third anniversary from the grant date; and
\u2022NAV \u2013 the NAV growth, after adjusting for the effect of dividends, is greater than the risk-free rate of return plus a premium
per year.
23 Equity compensation plans continued
Further details of equity compensation plans can be found in the Directors\u2019 remuneration report on pages 112 to 139. The total
gain on Directors\u2019 exercises of share option plans during the period was \u00a30.2m (2021: \u00a3nil).
The number and weighted average exercise prices of share options are as follows:
| | | | |
| | |
| Weighted average exercise price (pence per share) | | Weighted average exercise price (pence per share) | |
| | | | |
Forfeited during the year | | | | |
Exercised during the year | | | | |
| | | | |
Outstanding at 31 December | | | | |
Exercisable at 31 December | | | | |
1The weighted average share price at the point of exercise of these options was 498.7p.
2The weighted average share price at the point of exercise of these options was 366.2p.
The range of exercise prices for options outstanding at the end of the year was \u00a30 to \u00a34.56 (2021: \u00a30 to \u00a34.56). The weighted
average remaining contractual life for the outstanding options at end of the year was 1.89 years (2021: 1.87 years).
The share option programmes allow Group employees to acquire shares of the company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in the employee share options reserve. The fair value of the
options granted is measured at grant date and spread over the period in which the employees become unconditionally entitled
to the options. The fair value of the options granted is measured using the Black Scholes model, taking into account the terms
and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest.
The following is a summary of the assumptions used to calculate the fair value of share options awarded during the period:
| | |
| | |
| | |
Share options charge to employee share options reserve | | |
| | |
Weighted average share price (pence per option) | | |
Weighted average fair value (pence per option) | | |
Weighted average exercise price (pence per option) | | |
Average expected life of options | | |
| | |
| | |
Average risk-free interest rate | | |
| | |
Weighted average share price (pence per option) | | |
Weighted average fair value (pence per option) | | |
Weighted average exercise price (pence per option) | | |
Average expected life of options | | |
| | |
| | |
Average risk-free interest rate | | |
The expected volatility is based on historic volatility over a period of at least two years.
24 Insurance liabilities and reinsurance assets
| | |
| | |
| | |
| | |
Claims reported and loss adjustment expenses | | |
Claims incurred but not reported | | |
| | |
| | |
Total insurance liabilities, gross | | |
| | |
Recoverable from reinsurers | | |
Claims reported and loss adjustment expenses | | |
Claims incurred but not reported | | |
Reinsurers' share of claims liabilities | | |
| | |
Total reinsurers' share of insurance liabilities | | |
The gross claims reported, the loss adjustment liabilities and the liabilities for claims incurred but not reported are net of
recoveries from salvage and subrogation.
24 Insurance liabilities and reinsurance assets continued
24.1 Movements in insurance liabilities and reinsurance assets
a)Claims and loss adjustment expenses`
| | | | | | |
| | | | | | |
| | | | | |
Claims reported and loss adjustment expenses | | | | | | |
Claims incurred but not reported | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Arising from current year claims | | | | | | |
Arising from prior year claims | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Claims reported and loss adjustment expenses | | | | | | |
Claims incurred but not reported | | | | | | |
| | | | | | |
| | | | | | |
24 Insurance liabilities and reinsurance assets continued
b)Unearned premiums reserve
24 Insurance liabilities and reinsurance assets continued
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| | | | | | | | | | | | |
| | | | | | | | | | | | |
Estimated total ultimate losses ($m) | | | | | | | | | | | | |
| | | | | | | | | | | | |
Less unearned portion of ultimate losses ($m) | | | | | | | | | | | | |
Net claims liabilities ($m) | | | | | | | | | | | | |
Analysis of movements in loss development tables
We have updated our loss development tables to show the ultimate loss ratios as at 31 December 2022 for each underwriting
year. The impact of amounts reported in respect of the unexpired risk reserve are embedded within the loss ratios presented.
Cyber Risks
The 2021 underwriting year has released following favourable experience. The 2019 and 2020 underwriting years have
strengthened in response to adverse claims development on existing claims. However, as these years are recovering under
aggregate excess of loss reinsurance programmes, the impact is reduced net of reinsurance.
Digital
The deterioration on the 2018 underwriting year arises from adverse claims experience on the tech & media private enterprise
class. The recent underwriting years have released following the expiry of risk.
MAP Risks
The 2019 to 2021 underwriting years have been impacted by the Russian invasion of Ukraine. The impact is lower net of
reinsurance as a result of the excess of loss reinsurance programmes in place.
24 Insurance liabilities and reinsurance assets continued
Property Risks
Favourable developments on attritional claims and established catastrophe events have led to releases on the 2019 and 2020
underwriting years. The 2021 underwriting year has been impacted by weather related events in the US during 2022. The
impact is less gross of reinsurance due to favourable developments on established catastrophe events.
Specialty Risks
The 2017 and 2018 underwriting years have seen adverse claims development gross of reinsurance predominantly driven by
the healthcare book. Both these years are recovering under aggregate excess of loss reinsurance programmes, so the impact is
lower net of reinsurance. Recent underwriting years continue to improve as the risk expires.
Claim releases
The below table analyses our net claims between current year claims and adjustments to prior year net claims reserves. These
have been broken down by segment and underwriting year. Beazley\u2019s reserving policy is to maintain catastrophe reserve
margins either until the end of the exposure period or until catastrophe events occur. Therefore margins have been released
from prior year reserves where risks have expired during 2022.
The below table has been prepared on an underwriting year of account basis, whereas the net loss development tables on
pages 219 to 220 have been prepared on an accident year basis in relation to our US admitted business. However, in
aggregate the net release or strengthening is consistent.
Reserve releases during the year totalled $132.6m (2021: $209.8m). The net of reinsurance estimates of ultimate claims
costs have improved on the 2021, 2020 and 2019 and earlier underwriting years, with releases of $13.3m, $96.6m and
$22.7m respectively. Our MAP Risks division saw strong releases across all years of account, while the other four divisions
each saw a strengthening on one of the years of account. Our Cyber Risks division saw a large strengthening on the 2020 year
of account, while Specialty Risks saw a strengthening on 2019 year and earlier.
The movements shown on 2019 and earlier are absolute claim movements and are not impacted by any current year
movements in premium on those underwriting years.
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
\u2013 2019 underwriting year and earlier | | | | | | |
\u2013 2020 underwriting year | | | | | | |
\u2013 2021 underwriting year | | | | | | |
| | | | | | |
| | | | | | |
Beazley Furlonge Limited operates a defined benefit pension scheme (\u2018the Beazley Furlonge Limited Pension Scheme\u2019), which
closed to new entrants in 2002. The scheme provides the following benefits:
\u2022an annual pension payable to the member from his or her normal pension age (60th birthday) of generally 1/60th of final
pensionable salary for each year of pensionable service up to 31 March 2006;
\u2022a spouse\u2019s pension of 2/3rds of the member\u2019s pension payable on the member\u2019s death after retirement;
\u2022a lump sum of four times current pensionable salary for death in service at the date of death; and
\u2022a pension of 2/3rds of the member\u2019s prospective pension at the date of death, payable to the spouse until their death. This
pension is related to salary at the date of death.
The scheme is administered by a trust that is legally separated from the Group. The trustees consist of both employee and
employer representatives and an independent chair, all of whom are governed by the scheme rules.
During 2022, the pension scheme trustees completed a transaction that insures all of the scheme's liabilities to a third party
via a bulk annuity buy-in with an external insurance company. The buy-in covers all members of the scheme and preserves their
existing pension entitlements. The annuity contracts meet the criteria to be classified as qualifying insurance policies as
defined in IAS 19 as the cash flows match the timing and value of the benefits payable to members that they cover. These
annuities are thus valued at the present value of the obligations insured.
The pension scheme trustees and the company will consider in due course whether to move to a full buy-out of the plan,
whereby the buy-in policies held by the plan will be converted to individual annuity policies which will be issued to scheme
members. This is a separate decision for the trustees and the company and whilst the buy-in policy allows for such a buy-out to
happen, this is not a requirement. At the reporting date, the trustees and the company retain all obligations to ensure benefits
due to scheme members are paid.
The purchase of these annuities has not been treated as a settlement, and the difference between the purchase price of the
annuities and their carrying value has been recognised in Other comprehensive income on the revaluation of plan assets, which
also includes any valuation movements during the year before the buy-in transaction completed.
Historically the scheme exposed the Group to additional actuarial, interest rate and market risk. However as a result of the buy-
in transaction in December these risks are now born by the insurance company to which liabilities have been insured. The buy-in
transaction does expose the Group to additional credit risk with regard to the insurance company from whom the annuities were
purchased.
Contributions to the scheme are determined by a qualified actuary using the projected unit credit method as set out in the
scheme rules and the most recent valuation was at 31 December 2022. Following the buy-in transaction the Group expects to
make no further contributions to the scheme.
27 Retirement benefit obligations continued
Trustees obligations
Under section 222 of the Pension Act 2004, every scheme is subject to the Statutory Funding Objective (SFO), which is to have
sufficient and appropriate assets to cover its technical provisions, which represent the present value of benefits to which
members are entitled based on pensionable service to the valuation date. This is assessed at least every three years using
assumptions agreed between the Trustees and the employer as set out in the Statement of Funding Principles produced in
accordance with the Occupational Pensions (Scheme Funding) Regulations 2005 (OP(SF)R 2005) Regulation 6.
The Trustees written Statement of Funding Principles is dated 29 January 2021 and it sets out their policy for securing that the
SFO is met (that the scheme will have sufficient assets to cover its technical provisions). In accordance with the OP(SF)R 2005
Regulation 5(2) trustees have chosen the Defined Accrued Benefit Method, a variant of the projected unit credit method where
accrual has ceased.
The most recently completed Actuarial Valuation of the Scheme was carried out at 1 January 2020 including a valuation carried
out in accordance with the Pensions Protection Fund (Valuation) Regulations 2005 and with appropriate section 179 guidance
and assumptions issued by The Board of the Pension Protection Fund.
During 2021 a decision was made to move the plan assets out of equities and to reinvest in quoted corporate bonds and index
linked securities. The rationale for this was to protect the scheme\u2019s funding position and provide protection against movements
in interest rates and expected inflation. Following the buy-in transaction, the main class of plan assets is the purchased annuity
contracts. During the year, the scheme had no exposure to liability driven investment products (2021: nil).
The Trust Deed provides Beazley with an unconditional right to a refund of surplus assets assuming the full settlement of plan
liabilities in the event of a plan wind-up. Furthermore, in the ordinary course of business the Trustee has no rights to unilaterally
wind up, or otherwise augment the benefits due to members of, the scheme. Based on these rights, any net surplus in the UK
scheme is recognised in full.
| | |
| | |
| | |
Movement in present value of funded obligations recognised in the statement of financial position | | |
| | |
| | |
Actuarial (gain) due to changes in financial assumptions | | |
| | |
| | |
| | |
| | |
| | |
| | |
Movement in fair value of plan assets recognised in the statement of financial position | | |
| | |
Expected return on plan assets | | |
(Loss)/gain on asset return | | |
| | |
| | |
| | |
| | |
| | |
Plan assets are comprised as follows: | | |
| | |
| | |
| | |
| | |
| | |
27 Retirement benefit obligations continued
The actual gain on plan assets was $33.3m (2021: gain of $9.0m).
| | |
| | |
| | |
Principal actuarial assumptions | | |
| | |
| | |
Expected return on plan assets | | |
| | |
| | |
Life expectancy for members aged 60 at 31 December | | |
Life expectancy for members aged 40 at 31 December | | |
At 31\u00a0December 2022, the weighted-average duration of the defined benefit obligation was 23.7 years (2021: 22.6 years).
Sensitivity analysis
Changes in the relevant actuarial assumptions would result in a change in the value of the funded obligation as shown below.
For 2022 any change in the obligation would be matched by a change in the carrying value of the annuity contracts purchased in
the period.
| | |
| | |
| | |
Discount rate (0.5% decrease) | | |
| | |
Future salary changes (0.5% decrease) | | |
Life expectancy (1 year increase) | | |
| | |
| | |
| | |
Discount rate (0.5% decrease) | | |
| | |
Future salary changes (0.5% decrease) | | |
Life expectancy (1 year increase) | | |
Deferred tax assets and deferred tax liabilities relating to the same tax authority are presented net in the Group\u2019s balance
sheet.
| | | | | |
| | | | FX translation differences | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Deferred acquisition costs | | | | | |
Tax losses carried forward | | | | | |
| | | | | |
Unrealised gains on investments | | | | | |
| | | | | |
Net deferred income tax account | | | | | |
| | | | | |
| Balance 1\u00a0Jan 21\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 | | | FX translation differences | Balance 31\u00a0Dec 21\u00a0 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Deferred acquisition costs | | | | | |
Tax losses carried forward | | | | | |
| | | | | |
| | | | | |
Net deferred income tax account | | | | | |
Deferred tax assets of $4.0m (2021: $9.6m) relating to tax losses, which depend on the availability of future taxable profits,
have been recognised. The Group has concluded that, it is probable that the deferred tax assets will be recovered using the
estimated future taxable profits based on the approved business plans. The losses can be carried forward indefinitely.
The Group has unrecognised realised and unrealised capital losses of $2.2m (2021: nil) that will expire in five years.
29 Leases
Leases as lessee (IFRS 16)
The Group leases offices, IT equipment and motor vehicles. The leased offices are in several locations and the leases of large
offices such as London and New York typically run for a period of 10 years with an option to renew the lease after that date or
continue on a rolling month by month basis. Lease payments are renegotiated as agreed in the lease contracts.
Information about leases for which the Group is a lessee is presented below.
Right of use assets
Right of use assets related to leased properties that do not meet the definition of investment property are presented as
property, plant and equipment.
| | | | |
| | | | |
| | | | |
Balance at 1\u00a0January 2022 | | | | |
Depreciation charge for the year | | | | |
Additions of right of use assets | | | | |
Foreign exchange translation differences | | | | |
Balance at 31\u00a0December 2022 | | | | |
Lease liabilities
| | | | |
| | | | |
| | | | |
Balance at 1\u00a0January 2022 | | | | |
| | | | |
Interest on lease liabilities and dilapidation provision | | | | |
Additions to lease portfolio | | | | |
Foreign exchange translation differences | | | | |
Balance at 31\u00a0December 2022 | | | | |
Right of use assets
| | | | |
| | | | |
| | | | |
Balance at 1\u00a0January 2021 | | | | |
Depreciation charge for the year | | | | |
Additions of right of use assets | | | | |
Disposals of right of use assets | | | | |
Foreign exchange translation differences | | | | |
Balance at 31\u00a0December 2021 | | | | |
29 Leases continued
Lease liabilities
| | | | |
| | | | |
| | | | |
Balance at 1\u00a0January 2021 | | | | |
| | | | |
Interest on lease liabilities | | | | |
Additions to lease portfolio | | | | |
Foreign exchange translation differences | | | | |
Balance at 31\u00a0December 2021 | | | | |
Amounts recognised in profit or loss
| | |
| | |
| | |
| | |
Interest on lease liabilities | | |
| | |
Income from sub-leasing right of use assets | | |
Expenses relating to low value leases | | |
Expenses relating to short-term leases | | |
Total recognised in profit or loss | | |
Extension options
Some property leases contain extension options exercisable by the Group before the end of the non-cancellable contract period
or the option to continue with the lease on a monthly rolling basis. The Group reassess whether it is reasonably certain to
exercise the options if there is a significant event or changes in circumstances within its control.
30 Related party transactions
The Group and company have related party relationships with syndicates 623, 4321, 5623, 6107, its subsidiaries, associates
and its Directors.
30.1 Syndicates 623, 4321, 5623 and 6107
The Group received management fees and profit commissions for providing a range of management services to syndicates 623
and 6107 which are all managed by the Group. In addition, the Group ceded portions or all of a group of insurance policies to
syndicates 6107 and 5623. The participants on syndicates 623, 6107 and 5623 are solely third party capital while the Group
provides 10% of the capital for syndicate 4321.
Details of transactions entered into and the balances with these syndicates are as follows:
| | |
| | |
| | |
Written premium ceded to syndicates | | |
Other income received from syndicates | | |
| | |
| | |
Due (to) / from syndicate 623 | | |
| | |
| | |
30.2 Key management compensation
| | |
| | |
| | |
Salaries and other short term benefits | | |
| | |
| | |
| | |
30 Related party transactions continued
The key management of Beazley plc as a standalone entity is deemed to be the same as that of the wider Beazley Group. The
majority of costs are incurred by other Group companies and are not recharged to the Company. Amounts paid to key
management by Beazley plc were $1.1m (2021: $1.1m).
31 Parent company and subsidiary undertakings
Beazley plc, a company incorporated in England and Wales and resident for tax purposes in the United Kingdom, is the ultimate
parent and the ultimate controlling party within the Group.
The following is a list of all the subsidiaries in the Group as at 31\u00a0December 2022:
| | | |
| Country/region of incorporation | | Beazley plc direct investment in subsidiary ($m) |
Beazley Ireland Holdings plc | | | |
Beazley Underwriting Pty Ltd | | | |
| | | |
Beazley Corporate Member (No.2) Limited | | | |
Beazley Corporate Member (No.3) Limited | | | |
Beazley Corporate Member (No.6) Limited | | | |
Beazley Furlonge Holdings Limited | | | |
| | | |
| | | |
Beazley Investments Limited | | | |
Beazley Leviathan Limited ~ | | | |
Beazley Management Limited | | | |
Beazley Staff Underwriting Limited | | | |
Beazley Solutions Limited | | | |
Beazley Underwriting Limited | | | |
Beazley Underwriting Services Limited | | | |
Lodestone Security Limited | | | |
| | | |
Beazley Solutions International Limited | | | |
| | | |
Beazley America Insurance Company, Inc.*** | | | |
Beazley Group (USA) General Partnership** | | | |
| | | |
Beazley Holdings, Inc. Digital LLC* | | | |
Beazley Insurance Company, Inc.*** | | | |
Beazley Newco Captive Company, Inc.*** | | | |
Beazley USA Services, Inc.* | | | |
Lodestone Securities LLC**** | | | |
| | | |
| | | |
Please see page 232 for registered addresses.
31 Parent company and subsidiary undertakings continued
The following is a list of Group registered office locations:
| | | |
| | | |
United Kingdom and Continental Europe | | | |
| | | |
C/O RSM UK Restructuring Advisory LLP, 25 Farringdon Street ~ | | | |
| | | |
| | | |
| | | |
| | | |
2711 Centerville Road Suite 400** | | | |
30 Batterson Park Road*** | | | |
160 Greentree Drive, Suite 101**** | | | |
55 University Avenue, Suite 550 | | | |
| | | |
138 Market Street, 03-04 Capita Green | | | |
Kensington Gardens, No. I1317, Lot 7616, Jalan Jumidar Buyong | | | |
| | | |
Level 15, 1 O\u2019Connell Street | | | |
32 Contingencies
Funds at Lloyd\u2019s
The following amounts are held in trust by Lloyd\u2019s to secure underwriting commitments:
| | |
| | |
| | |
| | |
| | |
Financial assets at fair value and cash | | |
Letters of credit (\u2018LOC\u2019) | | |
Total Funds at Lloyd\u2019s | | |
The funds are held in trust and can be used to meet claims liabilities should syndicates fail to meet their claim liabilities. The
funds can be only used to meet claim liabilities of the relevant member.
Since 2020, $225m under the Group\u2019s syndicated short term banking facility has been utilised as letters of credit placed as
Funds at Lloyd\u2019s (FAL) to provide capital support for the Group\u2019s underwriting at Lloyd\u2019s. Letters of credit issued under the
facility are uncollateralised. No liability was recognised for these letters of credit in the current or prior period, amounts would
only become due if the letters of credit were called upon to fund liabilities.
Other than the letters of credit these balances are included within financial assets at fair value and cash and cash equivalents
on the statement of financial position.
33 Foreign exchange rates
The Group used the following exchange rates to translate foreign currency assets, liabilities, income and expenses into US
dollars, being the Group\u2019s presentational currency:
Estimated impact of the adoption of IFRS 9
The Group expects the impact of IFRS 9 on the valuation of financial assets to be immaterial at transition as these assets are
already held at fair value through profit or loss in accordance with IAS 39. This practice will continue under IFRS 9 as the Group
does not manage its investments using a \u2018hold to collect\u2019 or \u2018hold to collect and sell\u2019 business model and therefore is required
to measure its investments at fair value through profit or loss. Certain receivable balances will continue to be measured at
amortised cost and will have an expected credit loss applied on adoption of IFRS 9. The Group will continue to measure
borrowings at amortised cost. The Group does not expect the adoption of IFRS 9 to have a material impact on the Group's
earnings or the timing of when profits are recognised.
IFRS 9 is not required to be applied retrospectively, as such the new standard will be applied prospectively from 1 January
2023. At this point an expected credit loss provision will be recognised with the resulting difference recognised as an
adjustment in retained earnings. The Group expects this resulting difference to be insignificant on the date of transition.
Beazley plc as a standalone entity adopted IFRS 9 from 1 January 2018, which had an immaterial impact on its financial
statements.
1.4 Significant Accounting Policies
Consolidation
a)Subsidiary undertakings
Subsidiary undertakings are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. Subsidiary companies where the Group has control are consolidated within these financial statements.
Equity financial investments made by the parent company in subsidiary undertakings and associates are stated at cost in its
separate financial statements and are reviewed for impairment when events or changes in circumstances indicate the carrying
value may be impaired.
Certain Group subsidiaries underwrite as corporate members of Lloyd\u2019s on syndicates managed by Beazley Furlonge Limited. In
view of the several and direct liability of underwriting members at Lloyd\u2019s for the transactions of syndicates in which they
participate, only attributable shares of transactions, assets and liabilities of those syndicates are included in the Group
financial statements. The Group continues to conclude that it remains appropriate to consolidate its share of the result of these
syndicates and accordingly, as the Group is the sole provider of capacity on syndicates 2623, 3622 and 3623, these financial
statements include 100% of the economic interest in these syndicates. The Group provides 10% of the capacity on Syndicate
4321 and these financial statements include 10% of the economic interest in this syndicate.
For the following syndicates to which Beazley is appointed managing agent, being syndicates 623, 6107, and 5623, for which
the capacity is provided entirely by third parties to the Group, these financial statements reflect Beazley\u2019s economic interest in
the form of agency fees and profit commission to which it is entitled.
1 Statement of accounting policies continued
b)Associates
Associates are those entities over which the Group has power to exert significant influence but which it does not control.
Significant influence is generally presumed if the Group has between 20% and 50% of voting rights. Other factors may be taken
into consideration when determining the existence of significant influence. Investments in associates are accounted for using
the equity method of accounting.
c)Intercompany balances and transactions
All intercompany transactions, balances and unrealised gains or losses on transactions between Group companies are
eliminated in the Group financial statements. Transactions and balances between the Group and associates are not eliminated.
Foreign currency translation
a)Functional and presentational currency
Items included in the financial statements of the parent and the subsidiaries are measured using the currency of the primary
economic environment in which the relevant entity operates (the functional currency). The Group financial statements are
presented in US dollars, being the functional and presentational currency of the parent and its main trading subsidiaries, as the
majority of trading assets and insurance premiums are denominated in US dollars.
b)Transactions and balances
Foreign currency transactions are translated into the functional currency using average exchange rates applicable to the period
in which the transactions take place. Foreign exchange gains and losses resulting from the settlement of such transactions and
from translation at the period end of monetary assets and liabilities denominated in foreign currencies are recognised in the
statement of profit or loss. Non-monetary items recorded at historical cost in foreign currencies are translated using the
exchange rate on the date of the initial transaction.
c)Foreign operations
The results and financial position of the Group companies that have a functional currency different from the Group
presentational currency are translated into the presentational currency as follows:
\u2022assets and liabilities are translated at the closing rate as at the statement of financial position date;
\u2022income and expenses for each statement of profit or loss are translated at average exchange rates for the reporting period
where this is determined to be a reasonable approximation of the actual transaction rates; and
\u2022all resulting exchange differences are recognised in other comprehensive income and as a separate component of equity.
Insurance contracts
Insurance contracts (including inwards reinsurance contracts) are defined as those containing significant insurance risk.
Insurance risk is considered significant if, and only if, an insured event could cause Beazley to pay significant additional
benefits in any scenario, excluding scenarios that lack commercial substance. Such contracts remain insurance contracts until
all rights and obligations are extinguished or expire.
Net earned premiums
a)Premiums
Gross premiums written represent premiums on business commencing in the financial year together with adjustments to
premiums written in previous accounting periods and estimates for premiums from contracts entered into during the course of
the year. Gross premiums written are stated before deduction of brokerage, taxes, duties levied on premiums and other
deductions.
b)Unearned premiums
A provision for unearned premiums (gross of reinsurance) represents that part of the gross premiums written that it is
estimated will be earned in the following financial periods. It is calculated using the daily pro-rata method, under which the
premium is apportioned over the period of risk.
1 Statement of accounting policies continued
Deferred acquisition costs (DAC)
Acquisition costs comprise brokerage, premium levy and staff-related costs (excluding performance related pay) of the
underwriters acquiring new business and renewing existing contracts. The proportion of acquisition costs in respect of unearned
premiums is deferred at the reporting date and recognised in later periods when the related premiums are earned.
Claims
These include the cost of claims and claims handling expenses paid during the period, together with the movements in
provisions for outstanding claims, claims incurred but not reported (IBNR) and claims handling provisions. The provision for
claims comprises amounts set aside for claims advised and IBNR, including claims handling expenses.
The IBNR amount is based on estimates calculated using widely accepted actuarial techniques which are reviewed quarterly by
the Group actuary and annually by Beazley\u2019s independent syndicate reporting actuary. The techniques generally use projections,
based on past experience of the development of claims over time, to form a view on the likely ultimate claims to be
experienced.
For more recent underwriting years, attention is paid to the variations in the business portfolio accepted and the underlying
terms and conditions. Thus, the critical assumptions used when estimating provisions are that past experience is a reasonable
predictor of likely future claims development and that the rating and business portfolio assumptions are a fair reflection of the
likely level of ultimate claims to be incurred for the more recent years.
Liability adequacy testing
At each reporting date, liability adequacy tests are performed to ensure the adequacy of the claims liabilities net of DAC and
unearned premium reserves. In performing these tests, current best estimates of future contractual cash flows, claims handling
and administration expenses, and investment income from the assets backing such liabilities are used.
Any deficiency is immediately charged to the statement of profit or loss and subsequently by establishing a URR provision for
losses arising from liability adequacy tests.
Ceded reinsurance
Any benefits to which the Group is entitled under its outwards reinsurance contracts held are recognised as reinsurance assets.
These assets consist of balances due from reinsurers and include reinsurers\u2019 share of provisions for claims. These balances
are based on calculated amounts of outstanding claims and projections for IBNR and URR, net of estimated irrecoverable
amounts, having regard to the reinsurance programme in place for the class of business, the claims experience for the period
and the current security rating of the reinsurer involved. Reinsurance liabilities are primarily premiums payable for reinsurance
contracts and are recognised as an expense when a contract incepts.
The Group assesses its reinsurance assets for impairment. If there is objective evidence of impairment, then the carrying
amount is reduced to its recoverable amount and the impairment loss is recognised in the statement of profit or loss.
Other income
Other income is made up of commissions received from Beazley service companies, profit commissions, managing agent\u2019s fees
and service fees. Profit commissions are recognised and earned as the performance obligations of the related contracts are
met. Commissions received from service companies and managing agent\u2019s fees are recognised as the services are provided,
and therefore the performance obligations of the contracts are met.
Dividends paid
Dividend distributions to the shareholders of the Group are recognised in the period in which the dividends are paid.
Plant and equipment
All plant and equipment is recorded at cost less accumulated depreciation and any impairment losses. Depreciation is
calculated using the straight-line method to allocate the cost of the assets to their residual values over their estimated useful
lives, which vary from three to ten years.
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that
the carrying value may be impaired. If any such condition exists, the recoverable amount of the asset is estimated in order to
determine the extent of impairment and the difference is charged to the statement of profit or loss.
1 Statement of accounting policies continued
Intangible assets
a)Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group\u2019s share of the fair value of the
identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill is carried
at cost less accumulated impairment losses.
Goodwill has an indefinite life and is annually tested for impairment. Goodwill is allocated to each cash-generating unit (\u2018CGU\u2019)
for the purpose of impairment testing. Goodwill is impaired when the net carrying amount of the relevant CGU exceeds its
recoverable amount, being its value in use. Value in use is defined as the present value of the future cash flows expected to be
derived from the CGU.
b)Syndicate capacity
The syndicate capacity represents the cost of purchasing the Group\u2019s participation in the combined syndicates. The capacity is
capitalised at cost in the statement of financial position. It has an indefinite useful life and is carried at cost less accumulated
impairment. It is annually tested for impairment by reference to the latest auction prices provided by Lloyd\u2019s.
c)Licences
Licences have an indefinite useful life and are initially recorded at fair value. Licenses are allocated to each CGU for the
purpose of impairment testing. Licences are annually tested for impairment and provision is made for any impairment when the
recoverable amount, being the higher of its value in use and fair value, is less than the carrying value.
d)IT development costs
Costs that are directly associated with the development of identifiable and unique software products and that are anticipated to
generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include external
consultants\u2019 fees, certain qualifying internal staff costs and other costs incurred to develop software programs. The Group does
not routinely capitalise costs relating to software products hosted in the cloud. Costs are amortised over their estimated useful
life, three years, on a straight-line basis and subject to impairment testing annually. Amortisation commences when the asset
becomes operational. Other non-qualifying costs are expensed as incurred.
e)Renewal rights
Renewal rights comprise future profits relating to insurance contracts acquired and the expected renewal of those contracts.
The costs directly attributable to acquire the renewal rights are recognised as intangible assets where they can be measured
reliably and it is probable that they will be recovered by directly related future profits. These costs are subject to an impairment
review annually and are amortised on a straight-line basis, based on the estimated useful life of the assets, which is estimated
to be between five and 10 years.
Financial instruments
Financial instruments are recognised in the statement of financial position at such time as the Group becomes a party to the
contractual provisions of the financial instrument. Purchases and sales of financial assets are recognised on the trade date,
which is the date the Group commits to purchase or sell the asset. A financial asset is derecognised when the contractual
rights to receive cash flows from the financial assets expire, or where the financial assets have been transferred, together with
substantially all the risks and rewards of ownership. Financial liabilities are derecognised if the Group\u2019s obligations specified in
the contract expire, are discharged or are cancelled.
a)Financial Assets
On acquisition of a financial asset, the Group is required to classify the asset into one of the following categories: financial
assets at fair value through the statement of profit or loss, loans and receivables, assets held to maturity and assets available
for sale. The Group does not make use of the held to maturity and available for sale categories.
Except for derivative financial instruments and other financial assets listed in policies (c), (e) and (f) below, all financial assets
are designated as fair value through the statement of profit or loss upon initial recognition because they are managed and their
performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair value
basis to the Group\u2019s key management. The Group\u2019s investment strategy is to invest and evaluate their performance with
reference to their fair values.
1 Statement of accounting policies continued
b)Fair value measurement
Fair value is the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market
participants at the measurement date. Fair value is a market-based measure and in the absence of observable market prices in
an active market, it is measured using the assumptions that market participants would use when pricing the asset or liability.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of
the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique
whose variables include only data from observable markets.
When the transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially
measured at the transaction price and any difference between this price and the value initially obtained from a valuation model
is subsequently recognised in profit or loss depending on the individual facts and circumstances of the transaction but before
the valuation is supported wholly by observable market data or the transaction is closed out.
Upon initial recognition, attributable transaction costs relating to financial instruments at fair value through profit or loss are
recognised in the statement of profit or loss when incurred. Financial assets at fair value through profit or loss are continuously
measured at fair value, and changes therein are recognised in the statement of profit or loss. Net changes in the fair value of
financial assets at fair value through profit or loss exclude interest and dividend income, as these items are accounted for
separately.
c)Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Loans and receivables are carried at amortised cost less any impairment losses.
d)Hedge funds, equity funds and illiquid credit assets
The Group invests in a number of hedge funds, equity funds and illiquid credit assets for which there are no available quoted
market prices. The valuation of these assets is based on fair value techniques as described in note 16. The fair value of our
hedge fund and illiquid asset portfolio is calculated by reference to the underlying net asset values (NAVs) of each of the
individual funds. Consideration is also given to adjusting such NAV valuations for any restriction applied to distributions, the
existence of side pocket provisions and the timing of the latest available valuations. At certain times, we will have uncalled
unfunded commitments in relation to our illiquid credit assets. These uncalled unfunded commitments are actively monitored by
the Group and are disclosed in the notes 2 and 16 to the financial statements. The additional investment into our illiquid credit
asset portfolio is recognised on the date that this funding is provided by the Group.
e) Insurance receivables and payables
Insurance receivables and payables are recognised when due. These include amounts due to and from agents, brokers and
insurance contract holders. Insurance receivables are classified as \u2018loans and receivables\u2019 as they are non-derivative financial
assets with fixed or determinable payments that are not quoted on an active market. Insurance receivables are measured at
amortised cost less any impairment losses. Insurance payables are stated at amortised cost.
f)Other receivables
Other receivables categorised as loans and receivables are carried at amortised cost less any impairment losses.
g)Investment income
Investment income consists of dividends, interest, realised and unrealised gains and losses and foreign exchange gains and
losses on financial assets and liabilities at fair value through the statement of profit or loss. Dividends on equity securities are
recorded as revenue on the ex-dividend date. Interest is recognised on an effective rate basis for financial assets at fair value
through the statement of profit or loss. The realised gains or losses on disposal of an investment are the difference between
the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between
the carrying value at the reporting date, and the carrying value at the previous period end or purchase value during the period.
1 Statement of accounting policies continued
h)Borrowings
Borrowings are initially recorded at their issue proceeds less transaction costs incurred. Subsequently borrowings are stated at
amortised cost and interest is recognised in the statement of profit or loss over the period of the borrowings using the effective
interest method.
Finance costs comprise interest, fees paid for the arrangement of debt and letter of credit facilities, and commissions charged
for the utilisation of letters of credit. These costs are recognised in the statement of profit or loss using the effective interest
method.
In addition, finance costs include gains on the early redemption of the Group\u2019s borrowings. These gains are recognised in the
statement of profit or loss, being the difference between proceeds paid plus related costs and the carrying value of the
borrowings redeemed.
i)Other payables
Other payables are stated at amortised cost determined according to the effective interest rate method.
j)Hedge accounting and derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. The best evidence of fair value of a derivative at initial recognition is the transaction price. The
method of recognising the resulting fair value gains or losses depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. Fair values are obtained from quoted market prices in active
markets, recent market transactions, and valuation techniques which include discounted cash flow models. All derivatives are
carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivative assets and liabilities are offset and the net amount reported in the statement of financial position when there is a
legally enforceable right to set off the recognised amounts and the parties intend to settle on a net basis, or realise the assets
and settle the liability simultaneously.
The Group has not designated any derivatives as fair value hedges, cash flow hedges or net investment hedges and therefore
all fair value movements are recorded through profit or loss.
k)Impairment of financial assets
The Group considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and a
collective level. The Group assesses at each reporting date whether there is objective evidence that a specific financial asset
measured at amortised cost is impaired. A financial asset is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the assets
and that event has an impact on the estimated cash flows of the financial asset that can be reliably estimated. Assets that are
not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.
If there is objective evidence that impairment exists, the amount of the loss is measured as the difference between the asset\u2019s
carrying amount and the value of the estimated future cash flows discounted at the financial asset\u2019s original effective interest
rate. The amount of the loss is recognised in the statement of profit or loss.
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and
the amount of loss incurred, adjusted for management\u2019s judgement as to whether current economic and credit conditions are
such that the actual losses are likely to be greater or lesser than those suggested by historical trends.
l)Cash and cash equivalents
Cash and cash equivalents consist of cash held at bank, cash in hand, deposits held at call with banks, cash held in Lloyd\u2019s
trust accounts and other short term highly liquid investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. These investments have less than three months maturity from the date
of acquisition. Cash and cash equivalents are measured at fair value through the profit and loss account.
m)Unfunded commitment capital
Unfunded committed capital arising in relation to certain financial asset investments is not shown on the statement of financial
position as unfunded committed capital represents a loan commitment that is scoped out of IAS 39.
1 Statement of accounting policies continued
Leases
Where the Group is the lessee, a lease liability equal to the present value of outstanding lease payments and a corresponding
right-of use asset equal to cost are initially recognised at the commencement of the lease. The right-of-use asset is
subsequently measured at amortised cost and depreciated on a straight-line basis over the length of the lease term. The cost
of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, an estimate of any costs
to be incurred at expiration of the lease agreements and lease payments made at or before the commencement date less any
lease incentives received. Recognised right of use assets are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right of use assets are subject to impairment.
The lease term is determined as the non-cancellable term of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised. The Group applies judgement in evaluating whether it is reasonably certain to exercise
the option to renew. After the commencement date, the Group reassesses the lease term if there is a significant event or
change in circumstances that is within its control and affect its ability to exercise (or not to exercise) the option to renew (e.g., a
change in business strategy).
The Group applies the IFRS 16 election not to recognise any amounts on the balance sheet associated with leases that are
either deemed to be short-term, or where the underlying asset is of low-value. Lease payments on short-term leases and leases
of low-value assets are recognised as an expense in the profit or loss on a straight-line basis over the lease term.
Employee benefits
a)Pension obligations
The Group operates a defined benefit pension plan that is closed to new entrants and future service accruals. All employees
may now participate in defined contribution pension arrangements, to which the Group contributes.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation. The pension costs are assessed
using the projected unit credit method. Under this method the costs of providing pensions are charged to the statement of profit
or loss so as to spread the regular costs over the service lives of employees in accordance with the advice of the qualified
actuary, who values the plans annually. The net pension obligation is measured at the present value of the estimated future net
cash flows and is stated net of plan assets.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other
comprehensive income.
The Group also determines the net interest income/expense for the period on the net defined benefit asset/liability by applying
the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit
asset/liability at the beginning of the annual period, taking into account any changes in the net defined benefit asset/liability
during the period as a result of contributions and benefit payments. Consequently, the net interest on the defined benefit
asset/ liability comprises:
\u2022interest cost on the defined benefit obligation;
\u2022interest income on plan assets; and
\u2022interest on the effect of the asset ceiling.
Net interest income/expense is recognised in the statement of profit or loss.
Past service costs are recognised as an expense at the earlier of the date when a plan amendment or curtailment occurs and
the date when an entity recognises any termination benefits.
For the defined contribution plan, the Group pays contributions to a privately administered pension plan. Once the contributions
have been paid, the Group has no further obligations. The Group\u2019s contributions are charged to the statement of profit or loss in
the period to which they relate.
1 Statement of accounting policies continued
b)Share based compensation
The grant date fair value of share based payment awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market performance conditions at the vesting date. For share based
payment awards with non-vesting conditions, the grant date fair value of the share based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.
When options are exercised and new shares are issued, the proceeds received, net of any transaction costs, are credited to
share capital (nominal value) with the excess amount going to share premium. For other plans, when no proceeds are received,
the nominal value of shares issued is to share capital and debited to retained earnings. When the options are exercised and
the shares are granted from the employee share trust, the proceeds received, net of any transaction costs, and the value of
shares held within the trust, are credited to retained earnings.
Income taxes
Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised in the statement of
profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in
which case it is recognised respectively in other comprehensive income or directly in equity.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at
the year end reporting date and any adjustments to tax payable in respect of prior periods.
Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets are recognised in the statement of financial position to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.
Earnings per share
Basic earnings per share are calculated by dividing profit or loss after tax available to shareholders by the weighted average
number of ordinary shares in issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares such as share options granted to employees. Share options with performance conditions
attaching to them have been excluded from the weighted average number of shares to the extent that these conditions have not
been met at the reporting date.
The shares held in the employee share options plan (ESOP) and treasury shares are excluded from both the calculations, until
such time as they vest unconditionally with the employees.
Provisions and contingencies
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources or economic benefits will be required to settle the obligation, and a reliable estimate of
the obligation can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a
separate asset but only when the reimbursement is most probable.
Contingent liabilities are present obligations that are not recognised because it is not probable that an outflow of resources will
be required to meet the liabilities or because the amount of the obligation cannot be measured with sufficient reliability.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-300": {
"value": "
Significant changes in accounting policy not yet effective
International Financial Reporting Standard 17, Insurance Contracts (\u2018IFRS 17\u2019)
IFRS 17, Insurance Contracts, was issued by the International Accounting Standards Board (IASB) in May 2017 and was
approved for adoption in the United Kingdom by the UK endorsement Board on 16 May 2022. UK-adopted IFRS 17 is effective
for accounting periods beginning on or after 1 January 2023. IFRS 17 will materially change the way the Group accounts for,
and reports, (re)insurance contracts issued and reinsurance contracts entered into in its consolidated financial statements.
Changes to accounting policies
The IFRS 17 general measurement model requires that the following balances are recognised on initial recognition of an
insurance contract:
\u2022a discounted probability-weighted best estimate of future cash flows relating to the insurance contract;
\u2022a risk adjustment for non-financial risk; and
\u2022a contractual service margin (\u2018CSM\u2019) representing the unearned profit that will be recognised over the coverage period of the
contract. The CSM is measured such that no profit arises on initial recognition.
The Group intends to measure all contracts consistently using the general measurement model set out above and does not
expect to use the simplified premium allocation approach for any portfolios or groups of insurance contracts currently issued. A
discount rate to discount future cash flows will be derived using the \u2018bottom-up\u2019 approach, based on a risk-free discount rate
that is then adjusted with an illiquidity premium. Subsequent changes in discount rates on remeasurement will be accounted for
through the statement of profit or loss.
IFRS 17 requires that insurance contracts where the underlying risks are of a similar nature and where they are managed
together be aggregated into groups of insurance contracts. These will then be subdivided based on the year coverage begins
and whether it is onerous on initial recognition. The Group intends to align its IFRS 17 groupings with the way it currently
manages and reports its business. Where a contract is onerous on initial recognition, the Group will be required to recognise
any losses up-front. The Group is currently assessing the extent to which contracts currently in issue may be onerous.
Reinsurance contracts which the Group takes out (reinsurance contracts held) will be measured similarly to (re)insurance
contracts issued. However the concept of onerosity does not exist in IFRS 17 for reinsurance and therefore the reinsurance
CSM is measured such that no income or expense is recognised on initial recognition.
Changes to presentation of financial statements on adoption of IFRS 17
The adoption of IFRS 17 will result in significant changes to the consolidated statement of profit or loss, the consolidated
statement of financial position and related notes. These include:
\u2022An insurance service result comprised of insurance revenue, insurance service expense and insurance finance income or
expense will replace the current premium and claims lines in the statement of profit or loss.
\u2022Reinsurance will be presented separately to insurance contracts issued.
\u2022The statement of financial position will contain less detail, with all balances in the scope of IFRS 17 being included in
insurance assets/liabilities or reinsurance assets/liabilities.
\u2022More extensive analysis of the IFRS 17 balances will be found in the notes to the financial statements.
Estimated impact of the adoption of IFRS 17
IFRS 17 requires that on transition comparative information is restated in accordance with the new accounting policies in force.
The Group expects to apply the fully retrospective transition approach. Contracts in the scope of IFRS 17 will be recognised and
measured as if IFRS 17 had always applied, and previously reported balances which would not have existed if IFRS 17 had
always been applied (such as certain insurance receivables and some deferred acquisition costs) will be derecognised. Any
resulting net difference will be included as a transition adjustment to retained earnings.
The Group has assessed the initial impact of IFRS 17 will have on its statement of financial position as at 1 January 2022.
Based on assessments undertaken to date, the total adjustment (after tax) to the balance of the Group\u2019s consolidated retained
earnings is expected to be an increase of at least 2% of equity.
1 Statement of accounting policies continued
This increase is due to a number of valuation differences between IFRS 4 and IFRS 17:
\u2022IFRS 17 technical provisions are discounted to reflect the time value of money. Under IFRS 4 the Group does not discount
technical provisions, and thus under IFRS 17 net technical provisions will be less than when measured under IFRS 4.
\u2022In order to cover claims expected to be paid, the Group has historically held reserves within a range of 5-10% over an
actuarial estimate. This actuarial estimate itself has a level of prudence within it. Under IFRS 17, reserves will be held at a
best estimate (with no prudence), with an added risk adjustment calculated to a specified confidence level. This will show a
percentile giving an indication about where reserves sit compared to the best estimate and the capital requirement. The
reserve margin at date of transition had a confidence level at the upper end of a 80th to 90th percentile range under IFRS 4.
Under IFRS 17 we expect the confidence level on transition to be nearer the middle of this range. Accordingly, the Group
expects the provision for claims recognised on adoption of IFRS 17 to be lower than current IFRS 4 technical provisions.
\u2022Under IFRS 4 unearned premium reserves and deferred acquisition costs are treated as non-monetary and are translated to
the Group\u2019s functional currency using historic exchange rates. These balances are eliminated upon adoption of IFRS 17 and
all insurance contract balances are considered to be monetary and are revalued using spot rates at each reporting date.
The assessment above is preliminary as we work to finalise the transition to IFRS 17. The actual impact of the adoption of IFRS
17 may change as the Group refines the accounting processes and internal controls required for applying IFRS 17 whilst
carrying out parallel runs alongside IFRS 4 reporting. Additionally, the new accounting policies, judgements and estimation
techniques which will be adopted are subject to change until the Group finalises its first set of IFRS 17 compliant financial
reporting in 2023.
As at the date of approval of these financial statements, the Group is conducting parallel runs of the IFRS 17 model which will
produce an IFRS 17 compliant result for the year ended 31 December 2022. The output of these parallel runs is currently being
reviewed by management and will be subject to external audit. As the quantification of the impact of IFRS 17 on these financial
statements for the year ended 31 December 2022 is not fully audited, the Group has not disclosed this impact.
International Financial Reporting Standard 9, Financial Instruments (\u2018IFRS 9\u2019)
IFRS 9 was issued by the IASB in July 2014 and became effective for accounting periods beginning on or after 1 January 2018.
The IASB issued amendment to IFRS 4, Insurance Contracts in September 2016 and June 2020 which exempts eligible entities
from applying IFRS 9 for accounting periods beginning before 1 January 2023. The Group remains eligible to apply the
temporary exemption in IFRS 4 and thus will begin to apply IFRS 9 for accounting periods beginning on 1 January 2023.
The Group qualifies for this exemption because, as at 31 December 2015, $5,040.7m or 95% of its total liabilities were
connected with insurance. There has been no material change in the Group\u2019s activities since 31 December 2015, therefore the
Group is still eligible to use the exemption. The Group has also disclosed information in relation to specific types of financial
instruments to ensure the comparability with the entities applying IFRS 9. As such, fair values are disclosed separately for the
Group\u2019s financial assets which are managed and evaluated on a fair value basis and those which meet the solely payments of
principal and interest (SPPI) test under IFRS 9.
The below table sets out the disclosures required by the amendments to IFRS 4 for the deferral of IFRS 9 and sets out the fair
value of assets which are managed and evaluated on a fair value basis and those which meet the SPPI test under IFRS 9.
Information on credit exposures can be found in note 2 on page 183.
1 Statement of accounting policies continued
| | |
| | |
Financial assets managed and evaluated on a fair value basis | | |
Fixed and floating rate debt securities: | | |
| | |
| | |
\u00a0 \u00a0 \u2013 Investment grade | | |
\u00a0 \u00a0 \u2013 High yield | | |
| | |
| | |
| | |
| | |
Derivative financial assets | | |
Total financial assets managed and evaluated on a fair value basis | | |
Financial assets meeting the SPPI test | | |
Cash and cash equivalents | | |
| | |
Total financial assets meeting the SPPI test | | |
Estimated impact of the adoption of IFRS 9
The Group expects the impact of IFRS 9 on the valuation of financial assets to be immaterial at transition as these assets are
already held at fair value through profit or loss in accordance with IAS 39. This practice will continue under IFRS 9 as the Group
does not manage its investments using a \u2018hold to collect\u2019 or \u2018hold to collect and sell\u2019 business model and therefore is required
to measure its investments at fair value through profit or loss. Certain receivable balances will continue to be measured at
amortised cost and will have an expected credit loss applied on adoption of IFRS 9. The Group will continue to measure
borrowings at amortised cost. The Group does not expect the adoption of IFRS 9 to have a material impact on the Group's
earnings or the timing of when profits are recognised.
IFRS 9 is not required to be applied retrospectively, as such the new standard will be applied prospectively from 1 January
2023. At this point an expected credit loss provision will be recognised with the resulting difference recognised as an
adjustment in retained earnings. The Group expects this resulting difference to be insignificant on the date of transition.
Beazley plc as a standalone entity adopted IFRS 9 from 1 January 2018, which had an immaterial impact on its financial
statements.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-301": {
"value": "
1.1 Basis of presentation
The Group financial statements are prepared on the historical cost basis, with the exception of financial assets and derivative
financial instruments which are stated at their fair value, and the defined benefit pension asset which is measured as the fair
value of plan assets less the present value of the defined benefit pension obligation. All amounts presented are in US dollars
and millions, unless stated otherwise.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-302": {
"value": "
1.2 Going concern
The consolidated financial statements of Beazley plc and the standalone financial statements of the company have been
prepared on a going concern basis. In adopting the going concern basis, The Board has reviewed the Group\u2019s current and
forecast solvency and liquidity positions for the next 12 months from the date that the financial statements are authorised for
issue. The Group\u2019s business activities, together with the factors likely to affect its future development, performance, and
position, are set out in the strategic report contained in the Group\u2019s Annual Report & Accounts. In addition, the risk report and
financial review includes the Group\u2019s risk management objectives and the Group\u2019s objectives, policies and processes for
managing its capital.
In assessing the Group\u2019s going concern position as at 31 December 2022, the Directors have considered a number of factors,
including:
\u2022the current statement of financial position and in particular the adequacy of technical provisions;
\u2022the Group\u2019s strategic and financial plan for the next 12 months, taking account of possible changes in trading performance
and funding retention;
\u2022the Group's capital forecast, which takes into account the capital requirements of major subsidiaries and their current
external credit rating and outlook;
\u2022the Group's liquidity at both a group and material subsidiary level;
\u2022stress testing and scenario analysis which, among others, assess the impact of natural and cyber catastrophe events on the
Group's capital and liquidity positions and reverse stress test scenarios designed to render the business model unviable; and
\u2022other qualitative factors, such as the market environment and the Group's ability to raise additional capital and/or liquidity.
As a result of the assessment, no material uncertainty in relation to going concern has been identified. As at its most recent
regulatory submission, the Group\u2019s capital ratios and its total capital resources are comfortably in excess of regulatory solvency
requirements, and internal stress testing indicates the Group can withstand severe economic and competitive stresses.
Based on the going concern assessment performed, the directors have a reasonable expectation that the company and the
Group have adequate resources to continue in operational existence over a period of at least 12 months from the date of this
report and therefore believe that the Group is well placed to manage its business risks successfully. Accordingly, they continue
to adopt the going concern basis in preparing the consolidated financial statements.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoingConcernExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-303": {
"value": "
1.3 Use of estimates and judgements
The preparation of financial statements requires the use of certain critical accounting estimates and judgements that affect the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from those on which management\u2019s
estimates are based. Estimates and assumptions are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable. Estimates which are sensitive to economic,
regulatory and geopolitical conditions could be impacted by significant changes in the external environment such as rising
inflation, rising interest rates, climate change, the Russia-Ukraine conflict, and US legislation.
Specific to climate change, since responses to it are still developing, it is not possible to consider all possible future outcomes
when determining asset and liability valuations, and timing of future cash flows, as these are not yet known. Nevertheless, the
current management view is that reasonably possible changes arising from climate risks would not have a material impact on
asset and liability valuations at the year-end date.
Estimates are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
1 Statement of accounting policies continued
a)Valuation of insurance contract liabilities
The most critical estimate included within the Group\u2019s financial position is the estimate for insurance losses incurred but not
reported (IBNR), which is included within total insurance liabilities and reinsurance assets in the statement of financial position
and in note 24. This estimate is critical as it outlines the current liability for future expenses expected to be incurred in relation
to claims. If this estimation was to prove inadequate then an exposure would arise in future years where a liability has not been
provided for.
The best estimate of the most likely ultimate outcome is used when calculating notified claims. This estimate is based upon
the facts available at the time, in conjunction with the claims manager\u2019s view of likely future developments. Further detail on
how the Group determines its technical provisions is included in note 24.
b)Valuation of unquoted and illiquid financial assets
Determination of fair value of unquoted and illiquid assets involves judgement in model valuations, through the incorporation of
both observable and unobservable market inputs. These inputs include assumptions that lead to the existence of a range of
plausible valuations. Further detail on the methodologies and inputs used by the Group is included in note 16.
c)Premium estimates
A portion of gross written premiums is based on the estimated premium income (EPI) of each contract, which is an
underwriters\u2019 estimate of the ultimate premium expected to be paid over the life of the contract. Where premium is written
through delegated authority agreements, the EPI is pro-rated across the agreement period. Judgement is involved in determining
the ultimate estimates in order to establish the appropriate premium value and, ultimately, the cash to be received. EPI
estimates are updated to reflect changes in an underwriters expectation through consultation with brokers and third-party
coverholders, changes in market conditions, historic experience and to reflect actual cash received for a contract.
Due to the nature of the Lloyd\u2019s business and the settlement patterns of the underlying business it is also not uncommon for
some contracts to take a number of years to finalise and settle, and a receivable on the balance sheet remains. The amount of
estimated future premium that remains in insurance receivables relating to years of account that are more than three years
developed at 31\u00a0December 2022 is $29.8m (2021: $15.4m).
d)Assessing indicators of impairment of Goodwill
A number of estimates are used in determining the key assumptions underlying the recoverable amounts used in assessing the
impairment of goodwill. The key assumptions used in the preparation of future cash flows are: premium growth rates, claims
experience, discount rates, retention rates and expected future market conditions. Further detail is provided in note 12.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-304": {
"value": "Valuation of insurance contract liabilities
The most critical estimate included within the Group\u2019s financial position is the estimate for insurance losses incurred but not
reported (IBNR), which is included within total insurance liabilities and reinsurance assets in the statement of financial position
and in note 24. This estimate is critical as it outlines the current liability for future expenses expected to be incurred in relation
to claims. If this estimation was to prove inadequate then an exposure would arise in future years where a liability has not been
provided for.
The best estimate of the most likely ultimate outcome is used when calculating notified claims. This estimate is based upon
the facts available at the time, in conjunction with the claims manager\u2019s view of likely future developments. Further detail on
how the Group determines its technical provisions is included in note 24.
Premium estimates
A portion of gross written premiums is based on the estimated premium income (EPI) of each contract, which is an
underwriters\u2019 estimate of the ultimate premium expected to be paid over the life of the contract. Where premium is written
through delegated authority agreements, the EPI is pro-rated across the agreement period. Judgement is involved in determining
the ultimate estimates in order to establish the appropriate premium value and, ultimately, the cash to be received. EPI
estimates are updated to reflect changes in an underwriters expectation through consultation with brokers and third-party
coverholders, changes in market conditions, historic experience and to reflect actual cash received for a contract.
Due to the nature of the Lloyd\u2019s business and the settlement patterns of the underlying business it is also not uncommon for
some contracts to take a number of years to finalise and settle, and a receivable on the balance sheet remains. The amount of
estimated future premium that remains in insurance receivables relating to years of account that are more than three years
developed at 31\u00a0December 2022 is $29.8m (2021: $15.4m).
Insurance contracts
Insurance contracts (including inwards reinsurance contracts) are defined as those containing significant insurance risk.
Insurance risk is considered significant if, and only if, an insured event could cause Beazley to pay significant additional
benefits in any scenario, excluding scenarios that lack commercial substance. Such contracts remain insurance contracts until
all rights and obligations are extinguished or expire.
Net earned premiums
a)Premiums
Gross premiums written represent premiums on business commencing in the financial year together with adjustments to
premiums written in previous accounting periods and estimates for premiums from contracts entered into during the course of
the year. Gross premiums written are stated before deduction of brokerage, taxes, duties levied on premiums and other
deductions.
b)Unearned premiums
A provision for unearned premiums (gross of reinsurance) represents that part of the gross premiums written that it is
estimated will be earned in the following financial periods. It is calculated using the daily pro-rata method, under which the
premium is apportioned over the period of risk.
1 Statement of accounting policies continued
Deferred acquisition costs (DAC)
Acquisition costs comprise brokerage, premium levy and staff-related costs (excluding performance related pay) of the
underwriters acquiring new business and renewing existing contracts. The proportion of acquisition costs in respect of unearned
premiums is deferred at the reporting date and recognised in later periods when the related premiums are earned.
Claims
These include the cost of claims and claims handling expenses paid during the period, together with the movements in
provisions for outstanding claims, claims incurred but not reported (IBNR) and claims handling provisions. The provision for
claims comprises amounts set aside for claims advised and IBNR, including claims handling expenses.
The IBNR amount is based on estimates calculated using widely accepted actuarial techniques which are reviewed quarterly by
the Group actuary and annually by Beazley\u2019s independent syndicate reporting actuary. The techniques generally use projections,
based on past experience of the development of claims over time, to form a view on the likely ultimate claims to be
experienced.
For more recent underwriting years, attention is paid to the variations in the business portfolio accepted and the underlying
terms and conditions. Thus, the critical assumptions used when estimating provisions are that past experience is a reasonable
predictor of likely future claims development and that the rating and business portfolio assumptions are a fair reflection of the
likely level of ultimate claims to be incurred for the more recent years.
Liability adequacy testing
At each reporting date, liability adequacy tests are performed to ensure the adequacy of the claims liabilities net of DAC and
unearned premium reserves. In performing these tests, current best estimates of future contractual cash flows, claims handling
and administration expenses, and investment income from the assets backing such liabilities are used.
Any deficiency is immediately charged to the statement of profit or loss and subsequently by establishing a URR provision for
losses arising from liability adequacy tests.
Ceded reinsurance
Any benefits to which the Group is entitled under its outwards reinsurance contracts held are recognised as reinsurance assets.
These assets consist of balances due from reinsurers and include reinsurers\u2019 share of provisions for claims. These balances
are based on calculated amounts of outstanding claims and projections for IBNR and URR, net of estimated irrecoverable
amounts, having regard to the reinsurance programme in place for the class of business, the claims experience for the period
and the current security rating of the reinsurer involved. Reinsurance liabilities are primarily premiums payable for reinsurance
contracts and are recognised as an expense when a contract incepts.
The Group assesses its reinsurance assets for impairment. If there is objective evidence of impairment, then the carrying
amount is reduced to its recoverable amount and the impairment loss is recognised in the statement of profit or loss.
Insurance receivables and payables
Insurance receivables and payables are recognised when due. These include amounts due to and from agents, brokers and
insurance contract holders. Insurance receivables are classified as \u2018loans and receivables\u2019 as they are non-derivative financial
assets with fixed or determinable payments that are not quoted on an active market. Insurance receivables are measured at
amortised cost less any impairment losses. Insurance payables are stated at amortised cost.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInsuranceContracts",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-305": {
"value": "Valuation of unquoted and illiquid financial assets
Determination of fair value of unquoted and illiquid assets involves judgement in model valuations, through the incorporation of
both observable and unobservable market inputs. These inputs include assumptions that lead to the existence of a range of
plausible valuations. Further detail on the methodologies and inputs used by the Group is included in note 16.
Financial Assets
On acquisition of a financial asset, the Group is required to classify the asset into one of the following categories: financial
assets at fair value through the statement of profit or loss, loans and receivables, assets held to maturity and assets available
for sale. The Group does not make use of the held to maturity and available for sale categories.
Except for derivative financial instruments and other financial assets listed in policies (c), (e) and (f) below, all financial assets
are designated as fair value through the statement of profit or loss upon initial recognition because they are managed and their
performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair value
basis to the Group\u2019s key management. The Group\u2019s investment strategy is to invest and evaluate their performance with
reference to their fair values.
1 Statement of accounting policies continued",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-306": {
"value": "Assessing indicators of impairment of Goodwill
A number of estimates are used in determining the key assumptions underlying the recoverable amounts used in assessing the
impairment of goodwill. The key assumptions used in the preparation of future cash flows are: premium growth rates, claims
experience, discount rates, retention rates and expected future market conditions. Further detail is provided in note 12.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group\u2019s share of the fair value of the
identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill is carried
at cost less accumulated impairment losses.
Goodwill has an indefinite life and is annually tested for impairment. Goodwill is allocated to each cash-generating unit (\u2018CGU\u2019)
for the purpose of impairment testing. Goodwill is impaired when the net carrying amount of the relevant CGU exceeds its
recoverable amount, being its value in use. Value in use is defined as the present value of the future cash flows expected to be
derived from the CGU.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-307": {
"value": "Assessing indicators of impairment of Goodwill
A number of estimates are used in determining the key assumptions underlying the recoverable amounts used in assessing the
impairment of goodwill. The key assumptions used in the preparation of future cash flows are: premium growth rates, claims
experience, discount rates, retention rates and expected future market conditions. Further detail is provided in note 12.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-308": {
"value": "
Consolidation
a)Subsidiary undertakings
Subsidiary undertakings are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. Subsidiary companies where the Group has control are consolidated within these financial statements.
Equity financial investments made by the parent company in subsidiary undertakings and associates are stated at cost in its
separate financial statements and are reviewed for impairment when events or changes in circumstances indicate the carrying
value may be impaired.
Certain Group subsidiaries underwrite as corporate members of Lloyd\u2019s on syndicates managed by Beazley Furlonge Limited. In
view of the several and direct liability of underwriting members at Lloyd\u2019s for the transactions of syndicates in which they
participate, only attributable shares of transactions, assets and liabilities of those syndicates are included in the Group
financial statements. The Group continues to conclude that it remains appropriate to consolidate its share of the result of these
syndicates and accordingly, as the Group is the sole provider of capacity on syndicates 2623, 3622 and 3623, these financial
statements include 100% of the economic interest in these syndicates. The Group provides 10% of the capacity on Syndicate
4321 and these financial statements include 10% of the economic interest in this syndicate.
For the following syndicates to which Beazley is appointed managing agent, being syndicates 623, 6107, and 5623, for which
the capacity is provided entirely by third parties to the Group, these financial statements reflect Beazley\u2019s economic interest in
the form of agency fees and profit commission to which it is entitled.
1 Statement of accounting policies continued
b)Associates
Associates are those entities over which the Group has power to exert significant influence but which it does not control.
Significant influence is generally presumed if the Group has between 20% and 50% of voting rights. Other factors may be taken
into consideration when determining the existence of significant influence. Investments in associates are accounted for using
the equity method of accounting.
c)Intercompany balances and transactions
All intercompany transactions, balances and unrealised gains or losses on transactions between Group companies are
eliminated in the Group financial statements. Transactions and balances between the Group and associates are not eliminated.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-309": {
"value": "Subsidiary undertakings
Subsidiary undertakings are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. Subsidiary companies where the Group has control are consolidated within these financial statements.
Equity financial investments made by the parent company in subsidiary undertakings and associates are stated at cost in its
separate financial statements and are reviewed for impairment when events or changes in circumstances indicate the carrying
value may be impaired.
Certain Group subsidiaries underwrite as corporate members of Lloyd\u2019s on syndicates managed by Beazley Furlonge Limited. In
view of the several and direct liability of underwriting members at Lloyd\u2019s for the transactions of syndicates in which they
participate, only attributable shares of transactions, assets and liabilities of those syndicates are included in the Group
financial statements. The Group continues to conclude that it remains appropriate to consolidate its share of the result of these
syndicates and accordingly, as the Group is the sole provider of capacity on syndicates 2623, 3622 and 3623, these financial
statements include 100% of the economic interest in these syndicates. The Group provides 10% of the capacity on Syndicate
4321 and these financial statements include 10% of the economic interest in this syndicate.
For the following syndicates to which Beazley is appointed managing agent, being syndicates 623, 6107, and 5623, for which
the capacity is provided entirely by third parties to the Group, these financial statements reflect Beazley\u2019s economic interest in
the form of agency fees and profit commission to which it is entitled.
1 Statement of accounting policies continued",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-310": {
"value": "Associates
Associates are those entities over which the Group has power to exert significant influence but which it does not control.
Significant influence is generally presumed if the Group has between 20% and 50% of voting rights. Other factors may be taken
into consideration when determining the existence of significant influence. Investments in associates are accounted for using
the equity method of accounting.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-311": {
"value": "
Foreign currency translation
a)Functional and presentational currency
Items included in the financial statements of the parent and the subsidiaries are measured using the currency of the primary
economic environment in which the relevant entity operates (the functional currency). The Group financial statements are
presented in US dollars, being the functional and presentational currency of the parent and its main trading subsidiaries, as the
majority of trading assets and insurance premiums are denominated in US dollars.
b)Transactions and balances
Foreign currency transactions are translated into the functional currency using average exchange rates applicable to the period
in which the transactions take place. Foreign exchange gains and losses resulting from the settlement of such transactions and
from translation at the period end of monetary assets and liabilities denominated in foreign currencies are recognised in the
statement of profit or loss. Non-monetary items recorded at historical cost in foreign currencies are translated using the
exchange rate on the date of the initial transaction.
c)Foreign operations
The results and financial position of the Group companies that have a functional currency different from the Group
presentational currency are translated into the presentational currency as follows:
\u2022assets and liabilities are translated at the closing rate as at the statement of financial position date;
\u2022income and expenses for each statement of profit or loss are translated at average exchange rates for the reporting period
where this is determined to be a reasonable approximation of the actual transaction rates; and
\u2022all resulting exchange differences are recognised in other comprehensive income and as a separate component of equity.
Investment income
Investment income consists of dividends, interest, realised and unrealised gains and losses and foreign exchange gains and
losses on financial assets and liabilities at fair value through the statement of profit or loss. Dividends on equity securities are
recorded as revenue on the ex-dividend date. Interest is recognised on an effective rate basis for financial assets at fair value
through the statement of profit or loss. The realised gains or losses on disposal of an investment are the difference between
the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between
the carrying value at the reporting date, and the carrying value at the previous period end or purchase value during the period.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-312": {
"value": "Functional and presentational currency
Items included in the financial statements of the parent and the subsidiaries are measured using the currency of the primary
economic environment in which the relevant entity operates (the functional currency). The Group financial statements are
presented in US dollars, being the functional and presentational currency of the parent and its main trading subsidiaries, as the
majority of trading assets and insurance premiums are denominated in US dollars.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-313": {
"value": "
Insurance contracts
Insurance contracts (including inwards reinsurance contracts) are defined as those containing significant insurance risk.
Insurance risk is considered significant if, and only if, an insured event could cause Beazley to pay significant additional
benefits in any scenario, excluding scenarios that lack commercial substance. Such contracts remain insurance contracts until
all rights and obligations are extinguished or expire.
Net earned premiums
a)Premiums
Gross premiums written represent premiums on business commencing in the financial year together with adjustments to
premiums written in previous accounting periods and estimates for premiums from contracts entered into during the course of
the year. Gross premiums written are stated before deduction of brokerage, taxes, duties levied on premiums and other
deductions.
b)Unearned premiums
A provision for unearned premiums (gross of reinsurance) represents that part of the gross premiums written that it is
estimated will be earned in the following financial periods. It is calculated using the daily pro-rata method, under which the
premium is apportioned over the period of risk.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-314": {
"value": "
Deferred acquisition costs (DAC)
Acquisition costs comprise brokerage, premium levy and staff-related costs (excluding performance related pay) of the
underwriters acquiring new business and renewing existing contracts. The proportion of acquisition costs in respect of unearned
premiums is deferred at the reporting date and recognised in later periods when the related premiums are earned.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredAcquisitionCostsArisingFromInsuranceContractsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-315": {
"value": "
Claims
These include the cost of claims and claims handling expenses paid during the period, together with the movements in
provisions for outstanding claims, claims incurred but not reported (IBNR) and claims handling provisions. The provision for
claims comprises amounts set aside for claims advised and IBNR, including claims handling expenses.
The IBNR amount is based on estimates calculated using widely accepted actuarial techniques which are reviewed quarterly by
the Group actuary and annually by Beazley\u2019s independent syndicate reporting actuary. The techniques generally use projections,
based on past experience of the development of claims over time, to form a view on the likely ultimate claims to be
experienced.
For more recent underwriting years, attention is paid to the variations in the business portfolio accepted and the underlying
terms and conditions. Thus, the critical assumptions used when estimating provisions are that past experience is a reasonable
predictor of likely future claims development and that the rating and business portfolio assumptions are a fair reflection of the
likely level of ultimate claims to be incurred for the more recent years.
Liability adequacy testing
At each reporting date, liability adequacy tests are performed to ensure the adequacy of the claims liabilities net of DAC and
unearned premium reserves. In performing these tests, current best estimates of future contractual cash flows, claims handling
and administration expenses, and investment income from the assets backing such liabilities are used.
Any deficiency is immediately charged to the statement of profit or loss and subsequently by establishing a URR provision for
losses arising from liability adequacy tests.
Ceded reinsurance
Any benefits to which the Group is entitled under its outwards reinsurance contracts held are recognised as reinsurance assets.
These assets consist of balances due from reinsurers and include reinsurers\u2019 share of provisions for claims. These balances
are based on calculated amounts of outstanding claims and projections for IBNR and URR, net of estimated irrecoverable
amounts, having regard to the reinsurance programme in place for the class of business, the claims experience for the period
and the current security rating of the reinsurer involved. Reinsurance liabilities are primarily premiums payable for reinsurance
contracts and are recognised as an expense when a contract incepts.
The Group assesses its reinsurance assets for impairment. If there is objective evidence of impairment, then the carrying
amount is reduced to its recoverable amount and the impairment loss is recognised in the statement of profit or loss.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForExpensesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-316": {
"value": "
Ceded reinsurance
Any benefits to which the Group is entitled under its outwards reinsurance contracts held are recognised as reinsurance assets.
These assets consist of balances due from reinsurers and include reinsurers\u2019 share of provisions for claims. These balances
are based on calculated amounts of outstanding claims and projections for IBNR and URR, net of estimated irrecoverable
amounts, having regard to the reinsurance programme in place for the class of business, the claims experience for the period
and the current security rating of the reinsurer involved. Reinsurance liabilities are primarily premiums payable for reinsurance
contracts and are recognised as an expense when a contract incepts.
The Group assesses its reinsurance assets for impairment. If there is objective evidence of impairment, then the carrying
amount is reduced to its recoverable amount and the impairment loss is recognised in the statement of profit or loss.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForReinsuranceExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-317": {
"value": "
Dividends paid
Dividend distributions to the shareholders of the Group are recognised in the period in which the dividends are paid.
Investment income
Investment income consists of dividends, interest, realised and unrealised gains and losses and foreign exchange gains and
losses on financial assets and liabilities at fair value through the statement of profit or loss. Dividends on equity securities are
recorded as revenue on the ex-dividend date. Interest is recognised on an effective rate basis for financial assets at fair value
through the statement of profit or loss. The realised gains or losses on disposal of an investment are the difference between
the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between
the carrying value at the reporting date, and the carrying value at the previous period end or purchase value during the period.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-318": {
"value": "
Plant and equipment
All plant and equipment is recorded at cost less accumulated depreciation and any impairment losses. Depreciation is
calculated using the straight-line method to allocate the cost of the assets to their residual values over their estimated useful
lives, which vary from three to ten years.
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that
the carrying value may be impaired. If any such condition exists, the recoverable amount of the asset is estimated in order to
determine the extent of impairment and the difference is charged to the statement of profit or loss.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-319": {
"value": "
Intangible assets
a)Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group\u2019s share of the fair value of the
identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill is carried
at cost less accumulated impairment losses.
Goodwill has an indefinite life and is annually tested for impairment. Goodwill is allocated to each cash-generating unit (\u2018CGU\u2019)
for the purpose of impairment testing. Goodwill is impaired when the net carrying amount of the relevant CGU exceeds its
recoverable amount, being its value in use. Value in use is defined as the present value of the future cash flows expected to be
derived from the CGU.
b)Syndicate capacity
The syndicate capacity represents the cost of purchasing the Group\u2019s participation in the combined syndicates. The capacity is
capitalised at cost in the statement of financial position. It has an indefinite useful life and is carried at cost less accumulated
impairment. It is annually tested for impairment by reference to the latest auction prices provided by Lloyd\u2019s.
c)Licences
Licences have an indefinite useful life and are initially recorded at fair value. Licenses are allocated to each CGU for the
purpose of impairment testing. Licences are annually tested for impairment and provision is made for any impairment when the
recoverable amount, being the higher of its value in use and fair value, is less than the carrying value.
d)IT development costs
Costs that are directly associated with the development of identifiable and unique software products and that are anticipated to
generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include external
consultants\u2019 fees, certain qualifying internal staff costs and other costs incurred to develop software programs. The Group does
not routinely capitalise costs relating to software products hosted in the cloud. Costs are amortised over their estimated useful
life, three years, on a straight-line basis and subject to impairment testing annually. Amortisation commences when the asset
becomes operational. Other non-qualifying costs are expensed as incurred.
e)Renewal rights
Renewal rights comprise future profits relating to insurance contracts acquired and the expected renewal of those contracts.
The costs directly attributable to acquire the renewal rights are recognised as intangible assets where they can be measured
reliably and it is probable that they will be recovered by directly related future profits. These costs are subject to an impairment
review annually and are amortised on a straight-line basis, based on the estimated useful life of the assets, which is estimated
to be between five and 10 years.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-320": {
"value": "
Financial instruments
Financial instruments are recognised in the statement of financial position at such time as the Group becomes a party to the
contractual provisions of the financial instrument. Purchases and sales of financial assets are recognised on the trade date,
which is the date the Group commits to purchase or sell the asset. A financial asset is derecognised when the contractual
rights to receive cash flows from the financial assets expire, or where the financial assets have been transferred, together with
substantially all the risks and rewards of ownership. Financial liabilities are derecognised if the Group\u2019s obligations specified in
the contract expire, are discharged or are cancelled.
a)Financial Assets
On acquisition of a financial asset, the Group is required to classify the asset into one of the following categories: financial
assets at fair value through the statement of profit or loss, loans and receivables, assets held to maturity and assets available
for sale. The Group does not make use of the held to maturity and available for sale categories.
Except for derivative financial instruments and other financial assets listed in policies (c), (e) and (f) below, all financial assets
are designated as fair value through the statement of profit or loss upon initial recognition because they are managed and their
performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair value
basis to the Group\u2019s key management. The Group\u2019s investment strategy is to invest and evaluate their performance with
reference to their fair values.
1 Statement of accounting policies continued
b)Fair value measurement
Fair value is the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market
participants at the measurement date. Fair value is a market-based measure and in the absence of observable market prices in
an active market, it is measured using the assumptions that market participants would use when pricing the asset or liability.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of
the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique
whose variables include only data from observable markets.
When the transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially
measured at the transaction price and any difference between this price and the value initially obtained from a valuation model
is subsequently recognised in profit or loss depending on the individual facts and circumstances of the transaction but before
the valuation is supported wholly by observable market data or the transaction is closed out.
Upon initial recognition, attributable transaction costs relating to financial instruments at fair value through profit or loss are
recognised in the statement of profit or loss when incurred. Financial assets at fair value through profit or loss are continuously
measured at fair value, and changes therein are recognised in the statement of profit or loss. Net changes in the fair value of
financial assets at fair value through profit or loss exclude interest and dividend income, as these items are accounted for
separately.
c)Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Loans and receivables are carried at amortised cost less any impairment losses.
d)Hedge funds, equity funds and illiquid credit assets
The Group invests in a number of hedge funds, equity funds and illiquid credit assets for which there are no available quoted
market prices. The valuation of these assets is based on fair value techniques as described in note 16. The fair value of our
hedge fund and illiquid asset portfolio is calculated by reference to the underlying net asset values (NAVs) of each of the
individual funds. Consideration is also given to adjusting such NAV valuations for any restriction applied to distributions, the
existence of side pocket provisions and the timing of the latest available valuations. At certain times, we will have uncalled
unfunded commitments in relation to our illiquid credit assets. These uncalled unfunded commitments are actively monitored by
the Group and are disclosed in the notes 2 and 16 to the financial statements. The additional investment into our illiquid credit
asset portfolio is recognised on the date that this funding is provided by the Group.
e) Insurance receivables and payables
Insurance receivables and payables are recognised when due. These include amounts due to and from agents, brokers and
insurance contract holders. Insurance receivables are classified as \u2018loans and receivables\u2019 as they are non-derivative financial
assets with fixed or determinable payments that are not quoted on an active market. Insurance receivables are measured at
amortised cost less any impairment losses. Insurance payables are stated at amortised cost.
f)Other receivables
Other receivables categorised as loans and receivables are carried at amortised cost less any impairment losses.
g)Investment income
Investment income consists of dividends, interest, realised and unrealised gains and losses and foreign exchange gains and
losses on financial assets and liabilities at fair value through the statement of profit or loss. Dividends on equity securities are
recorded as revenue on the ex-dividend date. Interest is recognised on an effective rate basis for financial assets at fair value
through the statement of profit or loss. The realised gains or losses on disposal of an investment are the difference between
the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between
the carrying value at the reporting date, and the carrying value at the previous period end or purchase value during the period.
1 Statement of accounting policies continued
h)Borrowings
Borrowings are initially recorded at their issue proceeds less transaction costs incurred. Subsequently borrowings are stated at
amortised cost and interest is recognised in the statement of profit or loss over the period of the borrowings using the effective
interest method.
Finance costs comprise interest, fees paid for the arrangement of debt and letter of credit facilities, and commissions charged
for the utilisation of letters of credit. These costs are recognised in the statement of profit or loss using the effective interest
method.
In addition, finance costs include gains on the early redemption of the Group\u2019s borrowings. These gains are recognised in the
statement of profit or loss, being the difference between proceeds paid plus related costs and the carrying value of the
borrowings redeemed.
i)Other payables
Other payables are stated at amortised cost determined according to the effective interest rate method.
j)Hedge accounting and derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. The best evidence of fair value of a derivative at initial recognition is the transaction price. The
method of recognising the resulting fair value gains or losses depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. Fair values are obtained from quoted market prices in active
markets, recent market transactions, and valuation techniques which include discounted cash flow models. All derivatives are
carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivative assets and liabilities are offset and the net amount reported in the statement of financial position when there is a
legally enforceable right to set off the recognised amounts and the parties intend to settle on a net basis, or realise the assets
and settle the liability simultaneously.
The Group has not designated any derivatives as fair value hedges, cash flow hedges or net investment hedges and therefore
all fair value movements are recorded through profit or loss.
k)Impairment of financial assets
The Group considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and a
collective level. The Group assesses at each reporting date whether there is objective evidence that a specific financial asset
measured at amortised cost is impaired. A financial asset is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the assets
and that event has an impact on the estimated cash flows of the financial asset that can be reliably estimated. Assets that are
not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.
If there is objective evidence that impairment exists, the amount of the loss is measured as the difference between the asset\u2019s
carrying amount and the value of the estimated future cash flows discounted at the financial asset\u2019s original effective interest
rate. The amount of the loss is recognised in the statement of profit or loss.
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and
the amount of loss incurred, adjusted for management\u2019s judgement as to whether current economic and credit conditions are
such that the actual losses are likely to be greater or lesser than those suggested by historical trends.
l)Cash and cash equivalents
Cash and cash equivalents consist of cash held at bank, cash in hand, deposits held at call with banks, cash held in Lloyd\u2019s
trust accounts and other short term highly liquid investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. These investments have less than three months maturity from the date
of acquisition. Cash and cash equivalents are measured at fair value through the profit and loss account.
m)Unfunded commitment capital
Unfunded committed capital arising in relation to certain financial asset investments is not shown on the statement of financial
position as unfunded committed capital represents a loan commitment that is scoped out of IAS 39.
1 Statement of accounting policies continued",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-321": {
"value": "Fair value measurement
Fair value is the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market
participants at the measurement date. Fair value is a market-based measure and in the absence of observable market prices in
an active market, it is measured using the assumptions that market participants would use when pricing the asset or liability.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of
the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique
whose variables include only data from observable markets.
When the transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially
measured at the transaction price and any difference between this price and the value initially obtained from a valuation model
is subsequently recognised in profit or loss depending on the individual facts and circumstances of the transaction but before
the valuation is supported wholly by observable market data or the transaction is closed out.
Upon initial recognition, attributable transaction costs relating to financial instruments at fair value through profit or loss are
recognised in the statement of profit or loss when incurred. Financial assets at fair value through profit or loss are continuously
measured at fair value, and changes therein are recognised in the statement of profit or loss. Net changes in the fair value of
financial assets at fair value through profit or loss exclude interest and dividend income, as these items are accounted for
separately.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-322": {
"value": "Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are carried at amortised cost less any impairment losses.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-323": {
"value": "Hedge funds, equity funds and illiquid credit assets
The Group invests in a number of hedge funds, equity funds and illiquid credit assets for which there are no available quoted
market prices. The valuation of these assets is based on fair value techniques as described in note 16. The fair value of our
hedge fund and illiquid asset portfolio is calculated by reference to the underlying net asset values (NAVs) of each of the
individual funds. Consideration is also given to adjusting such NAV valuations for any restriction applied to distributions, the
existence of side pocket provisions and the timing of the latest available valuations. At certain times, we will have uncalled
unfunded commitments in relation to our illiquid credit assets. These uncalled unfunded commitments are actively monitored by
the Group and are disclosed in the notes 2 and 16 to the financial statements. The additional investment into our illiquid credit
asset portfolio is recognised on the date that this funding is provided by the Group.
Hedge accounting and derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. The best evidence of fair value of a derivative at initial recognition is the transaction price. The
method of recognising the resulting fair value gains or losses depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. Fair values are obtained from quoted market prices in active
markets, recent market transactions, and valuation techniques which include discounted cash flow models. All derivatives are
carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivative assets and liabilities are offset and the net amount reported in the statement of financial position when there is a
legally enforceable right to set off the recognised amounts and the parties intend to settle on a net basis, or realise the assets
and settle the liability simultaneously.
The Group has not designated any derivatives as fair value hedges, cash flow hedges or net investment hedges and therefore
all fair value movements are recorded through profit or loss.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-324": {
"value": "Investment income
Investment income consists of dividends, interest, realised and unrealised gains and losses and foreign exchange gains and
losses on financial assets and liabilities at fair value through the statement of profit or loss. Dividends on equity securities are
recorded as revenue on the ex-dividend date. Interest is recognised on an effective rate basis for financial assets at fair value
through the statement of profit or loss. The realised gains or losses on disposal of an investment are the difference between
the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between
the carrying value at the reporting date, and the carrying value at the previous period end or purchase value during the period.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-325": {
"value": "Borrowings
Borrowings are initially recorded at their issue proceeds less transaction costs incurred. Subsequently borrowings are stated at
amortised cost and interest is recognised in the statement of profit or loss over the period of the borrowings using the effective
interest method.
Finance costs comprise interest, fees paid for the arrangement of debt and letter of credit facilities, and commissions charged
for the utilisation of letters of credit. These costs are recognised in the statement of profit or loss using the effective interest
method.
In addition, finance costs include gains on the early redemption of the Group\u2019s borrowings. These gains are recognised in the
statement of profit or loss, being the difference between proceeds paid plus related costs and the carrying value of the
borrowings redeemed.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-326": {
"value": "Borrowings
Borrowings are initially recorded at their issue proceeds less transaction costs incurred. Subsequently borrowings are stated at
amortised cost and interest is recognised in the statement of profit or loss over the period of the borrowings using the effective
interest method.
Finance costs comprise interest, fees paid for the arrangement of debt and letter of credit facilities, and commissions charged
for the utilisation of letters of credit. These costs are recognised in the statement of profit or loss using the effective interest
method.
In addition, finance costs include gains on the early redemption of the Group\u2019s borrowings. These gains are recognised in the
statement of profit or loss, being the difference between proceeds paid plus related costs and the carrying value of the
borrowings redeemed.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-327": {
"value": "Hedge accounting and derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. The best evidence of fair value of a derivative at initial recognition is the transaction price. The
method of recognising the resulting fair value gains or losses depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. Fair values are obtained from quoted market prices in active
markets, recent market transactions, and valuation techniques which include discounted cash flow models. All derivatives are
carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivative assets and liabilities are offset and the net amount reported in the statement of financial position when there is a
legally enforceable right to set off the recognised amounts and the parties intend to settle on a net basis, or realise the assets
and settle the liability simultaneously.
The Group has not designated any derivatives as fair value hedges, cash flow hedges or net investment hedges and therefore
all fair value movements are recorded through profit or loss.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-328": {
"value": "Hedge accounting and derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. The best evidence of fair value of a derivative at initial recognition is the transaction price. The
method of recognising the resulting fair value gains or losses depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. Fair values are obtained from quoted market prices in active
markets, recent market transactions, and valuation techniques which include discounted cash flow models. All derivatives are
carried as assets when fair value is positive and as liabilities when fair value is negative.
Derivative assets and liabilities are offset and the net amount reported in the statement of financial position when there is a
legally enforceable right to set off the recognised amounts and the parties intend to settle on a net basis, or realise the assets
and settle the liability simultaneously.
The Group has not designated any derivatives as fair value hedges, cash flow hedges or net investment hedges and therefore
all fair value movements are recorded through profit or loss.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-329": {
"value": "Impairment of financial assets
The Group considers evidence of impairment for financial assets measured at amortised cost at both a specific asset and a
collective level. The Group assesses at each reporting date whether there is objective evidence that a specific financial asset
measured at amortised cost is impaired. A financial asset is impaired and impairment losses are incurred only if there is
objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the assets
and that event has an impact on the estimated cash flows of the financial asset that can be reliably estimated. Assets that are
not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.
If there is objective evidence that impairment exists, the amount of the loss is measured as the difference between the asset\u2019s
carrying amount and the value of the estimated future cash flows discounted at the financial asset\u2019s original effective interest
rate. The amount of the loss is recognised in the statement of profit or loss.
In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and
the amount of loss incurred, adjusted for management\u2019s judgement as to whether current economic and credit conditions are
such that the actual losses are likely to be greater or lesser than those suggested by historical trends.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-330": {
"value": "Cash and cash equivalents
Cash and cash equivalents consist of cash held at bank, cash in hand, deposits held at call with banks, cash held in Lloyd\u2019s
trust accounts and other short term highly liquid investments that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. These investments have less than three months maturity from the date
of acquisition. Cash and cash equivalents are measured at fair value through the profit and loss account.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-331": {
"value": "
Leases
Where the Group is the lessee, a lease liability equal to the present value of outstanding lease payments and a corresponding
right-of use asset equal to cost are initially recognised at the commencement of the lease. The right-of-use asset is
subsequently measured at amortised cost and depreciated on a straight-line basis over the length of the lease term. The cost
of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, an estimate of any costs
to be incurred at expiration of the lease agreements and lease payments made at or before the commencement date less any
lease incentives received. Recognised right of use assets are depreciated on a straight-line basis over the shorter of its
estimated useful life and the lease term. Right of use assets are subject to impairment.
The lease term is determined as the non-cancellable term of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised. The Group applies judgement in evaluating whether it is reasonably certain to exercise
the option to renew. After the commencement date, the Group reassesses the lease term if there is a significant event or
change in circumstances that is within its control and affect its ability to exercise (or not to exercise) the option to renew (e.g., a
change in business strategy).
The Group applies the IFRS 16 election not to recognise any amounts on the balance sheet associated with leases that are
either deemed to be short-term, or where the underlying asset is of low-value. Lease payments on short-term leases and leases
of low-value assets are recognised as an expense in the profit or loss on a straight-line basis over the lease term.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-332": {
"value": "
Employee benefits
a)Pension obligations
The Group operates a defined benefit pension plan that is closed to new entrants and future service accruals. All employees
may now participate in defined contribution pension arrangements, to which the Group contributes.
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age, years of service and compensation. The pension costs are assessed
using the projected unit credit method. Under this method the costs of providing pensions are charged to the statement of profit
or loss so as to spread the regular costs over the service lives of employees in accordance with the advice of the qualified
actuary, who values the plans annually. The net pension obligation is measured at the present value of the estimated future net
cash flows and is stated net of plan assets.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other
comprehensive income.
The Group also determines the net interest income/expense for the period on the net defined benefit asset/liability by applying
the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit
asset/liability at the beginning of the annual period, taking into account any changes in the net defined benefit asset/liability
during the period as a result of contributions and benefit payments. Consequently, the net interest on the defined benefit
asset/ liability comprises:
\u2022interest cost on the defined benefit obligation;
\u2022interest income on plan assets; and
\u2022interest on the effect of the asset ceiling.
Net interest income/expense is recognised in the statement of profit or loss.
Past service costs are recognised as an expense at the earlier of the date when a plan amendment or curtailment occurs and
the date when an entity recognises any termination benefits.
For the defined contribution plan, the Group pays contributions to a privately administered pension plan. Once the contributions
have been paid, the Group has no further obligations. The Group\u2019s contributions are charged to the statement of profit or loss in
the period to which they relate.
1 Statement of accounting policies continued
b)Share based compensation
The grant date fair value of share based payment awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market performance conditions at the vesting date. For share based
payment awards with non-vesting conditions, the grant date fair value of the share based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.
When options are exercised and new shares are issued, the proceeds received, net of any transaction costs, are credited to
share capital (nominal value) with the excess amount going to share premium. For other plans, when no proceeds are received,
the nominal value of shares issued is to share capital and debited to retained earnings. When the options are exercised and
the shares are granted from the employee share trust, the proceeds received, net of any transaction costs, and the value of
shares held within the trust, are credited to retained earnings.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-333": {
"value": "Share based compensation
The grant date fair value of share based payment awards granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market performance conditions at the vesting date. For share based
payment awards with non-vesting conditions, the grant date fair value of the share based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.
When options are exercised and new shares are issued, the proceeds received, net of any transaction costs, are credited to
share capital (nominal value) with the excess amount going to share premium. For other plans, when no proceeds are received,
the nominal value of shares issued is to share capital and debited to retained earnings. When the options are exercised and
the shares are granted from the employee share trust, the proceeds received, net of any transaction costs, and the value of
shares held within the trust, are credited to retained earnings.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-334": {
"value": "
Income taxes
Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised in the statement of
profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in
which case it is recognised respectively in other comprehensive income or directly in equity.
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at
the year end reporting date and any adjustments to tax payable in respect of prior periods.
Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets are recognised in the statement of financial position to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-335": {
"value": "Income taxes
Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively
enacted at the reporting date.
Deferred tax assets are recognised in the statement of financial position to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-336": {
"value": "
Earnings per share
Basic earnings per share are calculated by dividing profit or loss after tax available to shareholders by the weighted average
number of ordinary shares in issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares such as share options granted to employees. Share options with performance conditions
attaching to them have been excluded from the weighted average number of shares to the extent that these conditions have not
been met at the reporting date.
The shares held in the employee share options plan (ESOP) and treasury shares are excluded from both the calculations, until
such time as they vest unconditionally with the employees.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-337": {
"value": "
Provisions and contingencies
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources or economic benefits will be required to settle the obligation, and a reliable estimate of
the obligation can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a
separate asset but only when the reimbursement is most probable.
Contingent liabilities are present obligations that are not recognised because it is not probable that an outflow of resources will
be required to meet the liabilities or because the amount of the obligation cannot be measured with sufficient reliability.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-338": {
"value": "
Provisions and contingencies
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources or economic benefits will be required to settle the obligation, and a reliable estimate of
the obligation can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a
separate asset but only when the reimbursement is most probable.
Contingent liabilities are present obligations that are not recognised because it is not probable that an outflow of resources will
be required to meet the liabilities or because the amount of the obligation cannot be measured with sufficient reliability.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-339": {
"value": "
The symbol \u2020 by a table or numerical information means it has not been audited.2.1 Insurance Risk
Insurance risk arises from this risk transfer due to inherent uncertainties about the occurrence, amount and timing of insurance
premium and claim liabilities. The Group seeks insurance risks as its core business. The four key components of insurance risk
are underwriting, reinsurance, claims management and reserving. Each element is considered below.
a) Underwriting risk
Underwriting risk comprises four elements that apply to all insurance products offered by the Group:
\u2022cycle risk \u2013 the risk that business is written without full knowledge as to the (in)adequacy of rates, terms and conditions;
\u2022event risk \u2013 the risk that individual risk losses or catastrophes lead to claims that are higher than anticipated in plans and
pricing;
\u2022pricing risk \u2013 the risk that the level of expected loss is understated in the pricing process; and
\u2022expense risk \u2013 the risk that the allowance for expenses and inflation in pricing is inadequate.
The Group\u2019s underwriting strategy is to seek a diverse and balanced portfolio of risks in order to limit the variability of
outcomes. This is achieved by accepting a spread of business over time, segmented between different products, geographies
and sizes. The annual business plans for each underwriting team reflect the Group\u2019s underwriting strategy, and set out the
classes of business, the territories and the industry sectors in which business is to be written which are approved by the
appropriate Boards.
Our underwriters determine premiums for risks written based on a range of criteria tailored specifically to each individual risk.
These factors include but are not limited to financial exposure, loss history, risk characteristics, limits, deductibles, terms and
conditions and acquisition expenses depending on the type of risk. A proportion of the Group\u2019s insurance risks are transacted
by third parties under delegated underwriting and claims authorities. Each third party is thoroughly vetted by our coverholder
approval group before it can bind risks, and is subject to monitoring to maintain underwriting quality and confirm ongoing
compliance with contractual guidelines. All underwriters also have a right to refuse renewal or change the terms and conditions
of insurance contracts upon renewal. Rate monitoring details, including limits, deductibles, exposures, terms and conditions
and risk characteristics are also captured and the results are combined to monitor the rating environment for each class of
business.
The Group also recognises that insurance events are, by their nature, random, and the actual number and size of events during
any one year may vary from those estimated using established statistical techniques. To address this, the Group sets out the
exposure that it is prepared to accept in certain territories to a range of events such as natural catastrophes and specific
scenarios which may result in large industry losses. This is monitored through regular calculation of realistic disaster scenarios
(RDSs). The aggregate position is monitored at the time of underwriting a risk, and reports are regularly produced to highlight
the key aggregations to which the Group is exposed.
The Group uses a number of modelling tools to monitor its exposures against the agreed risk appetite set and to simulate
catastrophe losses in order to measure the effectiveness of its reinsurance programmes. Stress and scenario tests are also
run using these models. The range of scenarios considered includes natural catastrophe, cyber, marine, liability, political,
terrorism and war events.
One of the largest types of event exposure relates to natural catastrophe events such as windstorm or earthquake. With the
increasing risk from climate change impacts the frequency and severity of natural catastrophes, the Group continues to monitor
its exposure. Where possible the Group measures geographic accumulations and uses its knowledge of the business, historical
loss behaviour and commercial catastrophe modelling software to assess the expected range of losses at different return
periods. Upon application of the reinsurance coverage purchased, the key gross and net exposures are calculated on the basis
of extreme events at a range of return periods.
2 Risk management continued
The Group\u2019s catastrophe risk appetite is set by the risk management function and approved by The Board and the business
plans of each team are determined within these parameters. The Board may adjust these limits over time as conditions change.
In 2022 the Group operated to a catastrophe risk appetite for a probabilistic 1-in-250 years US event of \u2020 $438.0m (2021:
$520.0m) net of reinsurance. This represents a reduction of 16% in 2022.
Lloyd\u2019s has also defined its own specific set of RDS events for which all syndicates with relevant exposures must report. Of
these the three largest, net of reinsurance, events which could have impacted Beazley in 2021 and 2022 are:
| | |
| |
| Modelled PML1(before reinsurance) | Modelled PML1(after reinsurance) |
Lloyd\u2019s prescribed natural catastrophe event (total incurred losses) | | |
Los Angeles quake (2022: $78bn) | | |
US Northeast windstorm (2022: $81bn) | | |
Gulf of Mexico windstorm (2022: $118bn) | | |
| | |
| |
| Modelled PML1(before reinsurance) | Modelled PML1(after reinsurance) |
Lloyd\u2019s prescribed natural catastrophe event (total incurred losses) | | |
Los Angeles quake (2021: $78bn) | | |
San Francisco quake (2021: $78bn) | | |
US Northeast windstorm (2021: $112bn) | | |
1Probable market loss.
The tables above show each event independent of each other and considered on their own. Net of reinsurance exposures for
the Los Angeles quake scenario have increased by less than 1% in 2022, whereas gross exposures have reduced by 6%. The
reduction in gross exposures is being driven by less exposure being written in the Property Risks division, which has had
minimal impact on the net, as the loss is contained within the Reinsurance protections. The US Northeast windstorm scenario
has increased by 3% gross and 11% net, with the increase in gross being driven by an increase in exposure in Contingency, and
the net increasing across both Contingency & Property Risks. Windstorm exposures have increased in the Gulf of Mexico during
2022, which has resulted in the Gulf of Mexico scenario replacing the San Francisco quake scenario as one of the three largest
net scenarios for 2022. The net natural catastrophe risk appetite reduced by 16% in 2022 to $438.0m from $520.0m in 2021,
with the reduction in appetite coming from the Property Risks division.
The net exposure of the Group to each of these modelled events at a given point in time is a function of assumptions made
about how and where the event occurs, its magnitude, the amount of business written that is exposed to each event and the
reinsurance arrangements in place.
The Group also has exposure to man-made claim aggregations, such as those arising from terrorism, liability, and cyber events.
Beazley chooses to underwrite cyber insurance within the Cyber Risks and Specialty Risks divisions using our team of specialist
underwriters, claims managers and data breach services managers. Other than for affirmative cyber coverage, Beazley\u2019s
preference is to exclude cyber exposure where possible.
To manage the potential exposure, The Board has approved a risk budget for the aggregation of cyber related claims which is
monitored by reference to the largest of seventeen realistic disaster scenarios that have been developed internally. These
scenarios include the failure of a data aggregator, the failure of a shared hardware or software platform, the failure of a cloud
provider & physical damage scenarios. Whilst it is not possible to be precise, as there is sparse data on actual aggregated
events, these severe scenarios are expected to be very infrequent. To manage underwriting exposures, the Group has
developed limits of authority and business plans which are binding upon all staff authorised to underwrite and are specific to
underwriters, classes of business and industry. In 2022, the maximum line that any one underwriter could commit the managed
syndicates to was $150m. In most cases, maximum lines for classes of business were much lower than this.
2 Risk management continued
The largest net realistic disaster scenario is currently just under $140m for the Group as at 31 December 2022. The
reinsurance programmes that protect the Cyber and Specialty Risks divisions would partially mitigate the cost of most, but not
all, Cyber catastrophes.
Beazley also reports on Cyber exposure to Lloyd\u2019s using the three largest internal realistic disaster scenarios and three new
prescribed scenarios which include a cloud provider scenario & a ransomware scenario.
Operating divisions
In 2022, the Group\u2019s business consisted of five operating divisions. The following table provides a breakdown of gross
premiums written by division, and also provides a geographical split based on placement of risk.
b)Reinsurance risk
Reinsurance risk to the Group arises where reinsurance contracts put in place to reduce gross insurance risk do not perform as
anticipated, result in coverage disputes or prove inadequate in terms of the vertical or horizontal limits purchased. Failure of a
reinsurer to pay a valid claim is considered a credit risk which is detailed in the credit risk section on page 183. In some cases
the Group deems it more economic to hold capital than purchase reinsurance. These decisions are regularly reviewed.
The reinsurance security committee examines and approves all reinsurers to ensure that they possess suitable security.
The Group\u2019s ceded reinsurance team ensures that these guidelines are followed, undertakes the administration of reinsurance
contracts and monitors and instigates our responses to any erosion of the reinsurance programmes.
c)Claims management risk
Claims management risk may arise within the Group in the event of inaccurate or incomplete case reserves and claims
settlements, poor service quality or excessive claims handling costs. These risks may damage the Group brand and undermine
its ability to win and retain business, or incur punitive damages. These risks can occur at any stage of the claims life cycle. The
Group\u2019s claims teams are focused on delivering quality, reliability and speed of service to both internal and external clients.
Their aim is to adjust and process claims in a fair, efficient and timely manner, in accordance with the policy\u2019s terms and
conditions, the regulatory environment, and the business\u2019s broader interests. Case reserves are set for all known claims
liabilities, including provisions for expenses, as soon as a reliable estimate can be made of the claims liability.
d)Reserving and ultimate reserves risk
Reserving and ultimate reserves risk occurs within the Group where established insurance liabilities are insufficient through
inaccurate forecasting, or where there is inadequate allowance for expenses and reinsurance bad debts in provisions.
2 Risk management continued
To manage reserving and ultimate reserves risk, our actuarial team uses a range of recognised techniques to project gross
premiums written, monitor claims development patterns and stress-test ultimate insurance liability balances. The Group aims to
hold reserves within a range of 5-10% above the actuarial estimates, which themselves include some margin for uncertainty.
The objective of the Group\u2019s reserving policy is to produce accurate and reliable estimates that are consistent over time and
across classes of business. The estimates of gross premiums written and claims prepared by the actuarial department are
used through a formal quarterly peer review process to independently test the integrity of the estimates produced by the
underwriting teams for each class of business. These meetings are attended by senior management, senior underwriters, and
actuarial, claims, and finance representatives.
2.2 Market risk
Market risk (known as asset risk in the Group\u2019s risk management framework) arises from adverse financial market movements
of values of investments, interest rates, exchange rates, or external market forces. Efficient management of market risk is key
to the investment of Group assets for matching to future liabilities. Appropriate levels of investment risk are determined by
limiting the proportion of forecast Group earnings which could be at risk from lower than expected investment returns, using a 1
in 10 confidence level as a practical measure of such risk. In 2022, this permitted variance from the forecast investment return
was set at \u2020 $200m. For 2023, the permitted variance is likely to be modestly increased due to the higher level of investment
assets. Investment strategy is developed to be consistent with this limit and investment risk is monitored on an ongoing basis,
using outputs from our internal model.
Changes in interest rates also impact the present values of estimated Group liabilities, which are used for solvency and capital
calculations. The four key components of asset risk are foreign exchange, interest rate, prices of assets and derivatives and
investment. Each element is in more detail considered below.
a) Foreign exchange risk
The functional currency of Beazley plc and its main trading entities is US dollars and the presentational currency in which the
Group reports its consolidated results is US dollars. The effect of this on foreign exchange risk is that the Group is mainly
exposed to fluctuations in exchange rates for non-dollar denominated transactions and to net asset translation risk on non-
dollar functional currency entities.
The Group operates in four main currencies: US dollars, sterling, Canadian dollars and euros. Transactions in all currencies are
converted to US dollars on initial recognition with any resulting monetary items being translated to the US dollar spot rate at the
reporting date. If any foreign exchange risk arises it is actively managed as described below.
In 2022, the Group managed its foreign exchange risk by periodically assessing its non-dollar exposures and hedging these to a
tolerable level while targeting to have net assets that are predominantly denominated in US dollar. As part of this hedging
strategy, exchange rate derivatives were used to rebalance currency exposure across the Group. Details of foreign currency
derivative contracts entered into with external parties are disclosed in note 17. On a forward looking basis an assessment is
made of expected future exposure development and appropriate currency trades put in place to reduce risk.
The Group\u2019s underwriting capital is matched by currency to the principal underlying currencies of its written premiums. This
helps to mitigate the risk that the Group\u2019s capital required to underwrite business is materially affected by any future
movements in exchange rates.
The Group also has foreign operations with functional currencies that are different from the Group\u2019s presentational currency.
The effect of this on foreign exchange risk is that the Group is exposed to fluctuations in exchange rates for US dollar
denominated transactions and net assets arising in those foreign currency operations. It also gives rise to a currency
translation exposure for the Group to sterling, euro, Canadian dollars, Singapore dollars and Australian dollars on translation to
the Group\u2019s presentational currency. These exposures are minimal and are not hedged.
2 Risk management continued
The following table summarises the carrying value of total assets and total liabilities categorised by the Group\u2019s main
currencies:
b) Interest rate risk
Some of the Group\u2019s financial instruments, including cash and cash equivalents, certain financial assets at fair value and
borrowings, are exposed to movements in market interest rates.
The Group manages interest rate risk by primarily investing in short duration financial assets along with cash and cash
equivalents. The investment committee monitors the duration of these assets on a regular basis.
The Group also entered into bond futures contracts to manage the interest rate risk on bond portfolios.
The following table shows the modified duration at the reporting date of the financial instruments that are exposed to
movements in market interest rates. Modified duration is a commonly used measure of volatility which represents the
percentage change of the price of a security to yield. The Group believes gives a better indication than maturity of the likely
sensitivity of the portfolio to changes in interest rates.
2 Risk management continued
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fixed and floating rate debt securities | | | | | | | |
| | | | | | | |
Cash and cash equivalents | | | | | | | |
Derivative financial instruments | | | | | | | |
| | | | | | | |
| | | | | | | |
2 Risk management continued
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fixed and floating rate debt securities | | | | | | | |
| | | | | | | |
Cash and cash equivalents | | | | | | | |
Derivative financial instruments | | | | | | | |
| | | | | | | |
| | | | | | | |
Borrowings consist of two items. The first is $250m of subordinated tier 2 debt raised in November 2016. This debt is due in
2026 and has annual interest of 5.875% payable in May and November of each year. The second comprises $300m of
subordinated tier 2 debt raised in September 2019. This debt is due in 2029 and has annual interest of 5.5% payable in March
and September each year.
Sensitivity analysis of yields
Changes in yields, with all other variables constant, would result in changes in the capital value of debt securities and syndicate
loans as well as subsequent interest receipts and payments. This would affect reported profits and net assets as indicated in
the table below:
| | | | |
| Impact on profit after income tax for the year | |
| | | |
| | | | |
Shift in yield (basis points) | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
c)Price risk of assets and derivatives
Financial assets and derivatives that are recognised in the statement of financial position at their fair value are susceptible to
losses due to adverse changes in prices. This is referred to as price risk.
Financial assets include fixed and floating rate debt securities, syndicate loans, hedge funds, illiquid credit assets, equity
investments and derivative financial assets. The price of debt securities is affected by interest rate risk, as described above,
and also by issuer\u2019s credit risk. The sensitivity to price risk that relates to the Group\u2019s hedge fund, syndicate loans, illiquid
credit and equity investments is presented below.
Listed investments that are quoted in an active market are recognised in the statement of financial position at quoted bid price,
which is deemed to be approximate exit price. If the market for the investment is not considered to be active, then the Group
establishes fair value using valuation techniques (refer to note 16). This includes comparison of orderly transactions between
market participants, reference to the current fair value of other investments that are substantially the same, discounted cash
flow models and other valuation techniques that are commonly used by market participants.
2 Risk management continued
| | | | |
| Impact on profit after income tax for the year | |
| | | |
| | | | |
Change in fair value of hedge funds, equity funds and illiquid credit assets | | | | |
30% increase in fair value | | | | |
20% increase in fair value | | | | |
10% increase in fair value | | | | |
10% decrease in fair value | | | | |
20% decrease in fair value | | | | |
30% decrease in fair value | | | | |
d) Investment risk
The value of the Group\u2019s investment portfolio is impacted by interest rate and market price risks, as described above. Managing
the Group\u2019s exposures to these risks is an intrinsic part of the investment strategy. Beazley uses an Economic Scenario
Generator to simulate multiple simulations of financial conditions, to support stochastic analysis of asset risk. Beazley uses
these outputs to assess the value at risk (VAR) of its investments, at different confidence levels, including \u20181 in 200\u2019, which
reflects Solvency II modelling requirements, and \u20181 in 10\u2019, reflecting scenarios which are more likely to occur in practice. It is
assessed for investments in isolation and also in conjunction with the present value of our liabilities, to help us monitor and
manage asset risk for solvency and capital purposes. By its nature, stochastic modelling does not provide a precise measure of
risk, and Economic Scenario Generator outputs are regularly validated against actual market conditions, and Beazley also uses
a number of other, qualitative measures to support the monitoring and management of investment risk. These include stress
testing and scenario analysis.
Beazley\u2019s investment strategy is developed by reference to an investment risk budget, approved annually by The Board. The
Solvency II internal model is used to monitor compliance with the budget, which limits the amount by which our reported annual
investment return may deviate from a predetermined target, at the 1 in 10 confidence level. In 2022, this permitted deviation
was set at \u2020 $200m. Additionally, a limit is specified for the net interest rate sensitivity of assets and liabilities combined and
investments are managed to ensure that this limit is not exceeded.
2.3 Credit risk
The risk arises when failure of another party to perform its financial or contractual obligations to the Group in a timely manner.
The Group accepts credit risk overall and recognizes credit risk is aligned to its appetite for insurance risk. The primary sources
of credit risk for the Group are:
\u2022reinsurers \u2013 reinsurers may fail to pay valid claims against a reinsurance contract held by the Group;
\u2022brokers and coverholders \u2013 counterparties fail to pass on premiums or claims collected or paid on behalf of the Group;
\u2022investments \u2013 issuer default results in the Group losing all or part of the value of a financial instrument or a derivative
financial instrument; and
\u2022cash and cash equivalents.
An approval system also exists for brokers with their credit and performance monitored. The investment committee has
established parameters for investment managers regarding the type, duration and quality of investments including credit ratings
acceptable to the Group. The performance of investment managers is regularly reviewed to confirm adherence to these
guidelines. The Group has developed processes to examine all reinsurers before entering into new business arrangements and
they receive periodic review of their continued relationship with Beazley. Reinsurance recoverables are reviewed regularly to
assess their collectability.
To assist in the understanding of credit risks, A.M. Best, Moody\u2019s and Standard & Poor\u2019s (S&P) ratings are used. These ratings
have been categorised below as used for Lloyd\u2019s reporting:
2 Risk management continued
The following tables summarise the Group\u2019s concentrations of credit risk:
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
\u2013 fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
\u2013 illiquid credit assets | | | | | | |
\u2013 derivative financial instruments | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Cash and cash equivalents | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
\u2013 fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
\u2013 illiquid credit assets | | | | | | |
\u2013 derivative financial instruments | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Cash and cash equivalents | | | | | | |
| | | | | | |
The largest counterparty exposure within tier 1 is $3,715.8m of US treasuries (2021: $2,956.3m).
Financial investments falling within the unrated category comprise hedge funds and illiquid credit assets for which there is no
readily available market data to allow classification within the respective tiers. Additionally, insurance receivables are classified
as unrated, due to premium debtors not being credit rated with the exception of the CRI accrual element. At 31\u00a0December
2022, no cash and cash equivalents fell within the unrated category (2021: $1.8m). This was due to the Group transacting with
a bank in the US that did not have an external credit rating. Additionally the reinsurance share of unearned premium provision is
classified as unrated.
Insurance receivables and other receivables balances held by the Group have not been impaired, based on all evidence
available, and no impairment provision has been recognised in respect of these assets. Insurance receivables in respect of
coverholder business are credit controlled by third-party managers. We monitor third party coverholders\u2019 performance and their
financial processes. These assets are individually impaired after considering information such as the occurrence of significant
changes in the counterparties\u2019 financial position, patterns of historical payment information and disputes with counterparties.
An analysis of the overall credit risk exposure indicates that the Group has reinsurance assets that are impaired at the
reporting date.
2 Risk management continued
The total impairment in respect of the reinsurance assets, including reinsurers\u2019 share of outstanding claims, at 31\u00a0December
2022 was as follows:
| |
| |
| |
Balance at 1\u00a0January 2021 | |
Impairment loss written back | |
Balance at 31\u00a0December 2021 | |
Impairment loss recognised | |
Balance at 31\u00a0December 2022 | |
The Group has insurance receivables and reinsurance assets that are past due at the reporting date. An aged analysis of these
is presented below:
| | | | | |
| | | | Greater than 90 days past due | |
| | | | | |
| | | | | |
| | | | | |
The total impairment provision in the statement of financial position in respect of reinsurance assets past due (being
reinsurance recoverables due on paid claims) by more than 30 days at 31\u00a0December 2022 was $17.3m (2021: $2.1m). This
$17.3m provision in respect of overdue reinsurance recoverables is included within the total provision of $29.3m shown in the
table at the top of the page.
The Group believes that the unimpaired amounts that are past due more than 30 days are still collectable in full, based on
historic payment behaviour and analyses of credit risk.
2.4 Liquidity risk
Liquidity risk arises where cash may not be available to pay obligations. The Group is exposed to daily calls on its available
cash resources, principally from claims arising from its insurance business which is an industry norm. In the majority of the
cases, these claims are settled from the premiums received held as assets. Beazley avoids the risk of having insufficient liquid
assets to meet expected cash flow requirements.
The Group\u2019s approach is to manage its liquidity position so that it can reasonably survive a significant individual or market loss
event (details of the Group\u2019s exposure to realistic disaster scenarios are provided on pages 177 to 179. This means that the
Group maintains sufficient liquid assets, or assets that can be converted into liquid assets at short notice and without any
significant capital loss, to meet expected cash flow requirements. These liquid funds are regularly monitored using cash flow
forecasting to ensure that surplus funds are invested to achieve a higher rate of return. The Group also makes use of loan
facilities and borrowings, details of which can be found in note 25. Further information on the Group\u2019s capital resources is
contained on pages 64 to 66.
2 Risk management continued
The following is an analysis by business segment of the estimated timing of the net cash flows based on the net claims
liabilities1 balance held at 31 December:
| | | | | | |
| | | | | | Weighted average term to settlement (years) |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | Weighted average term to settlement (years) |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
1 For a breakdown of net claims liabilities refer to note 24.
The following table is an analysis of the net contractual cash flows based on all the liabilities held at 31 December:
The next two tables summarise the carrying amount at reporting date of financial instruments analysed by maturity date.
2 Risk management continued
Maturity
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fixed and floating rate debt securities | | | | | | | |
| | | | | | | |
Derivative financial instruments | | | | | | | |
Cash and cash equivalents | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Illiquid credit assets, hedge funds and equity funds are not included in the maturity profile because the maturity profiles of
these asset classes cannot be determined with any degree of certainty.
The Group makes additional interest payments for borrowings. Further details are provided in notes 8 and 25.
2.5 Capital management
The Group follows a risk-based approach to determine the amount of capital required to support its activities. Recognised
stochastic modelling techniques are used to measure risk exposures, and capital to support business activities is allocated
according to risk profile. Stress and scenario analysis is regularly performed and the results are documented and reconciled to
The Board\u2019s risk appetite where necessary.
The Group has several requirements for capital, including:
\u2022to support underwriting at Lloyd\u2019s through the syndicates in which it participates, being 2623, 3622, 3623 and 4321. This is
based on the Group\u2019s own individual capital assessment. It may be provided in the form of either the Group\u2019s cash,
investments, debt facilities, or letter of credit;
\u2022to support underwriting in Beazley Insurance Company, Inc., Beazley America Insurance Company, Inc., and Beazley NewCo
Captive Company, Inc. in the US;
\u2022to support underwriting in Beazley Insurance dac in Europe; and
\u2022to support strategic acquisitions and investments.
2 Risk management continued
All entities within the Group have been in compliance with externally imposed capital requirements during the year.
The Group uses letters of credit (LOC) available under a syndicated short term banking facility led by Lloyds Banking Group plc
to support Funds at Lloyd\u2019s (FAL) requirements. Lloyd\u2019s of London apply certain criteria to banks issuing LOCs as FAL, including
minimum credit rating requirements and counterparty limits. Should any of the banks on the existing LOC facility breach Lloyd\u2019s
of London requirements, the Group might be asked to replace the LOC provided with alternative eligible issuer(s) and/or assets
meeting Lloyd\u2019s requirements. The creditworthiness of the counterparties on the facility is monitored by the Group on an
ongoing basis.
The Group considers Shareholders' Funds, Tier 2 subordinated debt and letters of credit to be the primary sources of capital for
the Group. For more detail on the value of capital managed and how its value has changed in the year, please see pages 64 to
66.
The Internal Model Solvency Capital Requirement is a dedicated quantitative review of syndicate models and it sets outs to be a
key input to the Lloyd\u2019s Internal Model.
The Board operates a progressive dividend strategy, intending to grow the dividend each year but recognising that some
earnings fluctuations are to be expected. When determining the level of the dividend, The Board considers the Group's capital
position, future investment and growth opportunities and our ability to generate cash flows. Dividends are typically paid on an
annual basis to align with the Group's capital planning cycle. Our capital management strategy is to carry some surplus capital
to enable us to take advantage of growth opportunities which may arise. At 31\u00a0December 2022, we have surplus capital of 44%
of ECR (on a Solvency II basis), above our preferred target range of 15% to 25% of ECR. The capital base has been
strengthened following the recent equity raise to enable us to continue to pursue our sustainable long-term growth strategy,
particularly in opportunities identified in Property Risks.
The Group\u2019s parent company is exposed to the same interest rate and liquidity risk exposure experienced on its mutual
borrowings with the Group. The Group\u2019s exposure can be seen in sections 2.3b and 2.7. The company also experiences
operational, regulatory and legal risks as defined in section 2.4 and 2.6.",
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2.2 Market risk
Market risk (known as asset risk in the Group\u2019s risk management framework) arises from adverse financial market movements
of values of investments, interest rates, exchange rates, or external market forces. Efficient management of market risk is key
to the investment of Group assets for matching to future liabilities. Appropriate levels of investment risk are determined by
limiting the proportion of forecast Group earnings which could be at risk from lower than expected investment returns, using a 1
in 10 confidence level as a practical measure of such risk. In 2022, this permitted variance from the forecast investment return
was set at \u2020 $200m. For 2023, the permitted variance is likely to be modestly increased due to the higher level of investment
assets. Investment strategy is developed to be consistent with this limit and investment risk is monitored on an ongoing basis,
using outputs from our internal model.
Changes in interest rates also impact the present values of estimated Group liabilities, which are used for solvency and capital
calculations. The four key components of asset risk are foreign exchange, interest rate, prices of assets and derivatives and
investment. Each element is in more detail considered below.
a) Foreign exchange risk
The functional currency of Beazley plc and its main trading entities is US dollars and the presentational currency in which the
Group reports its consolidated results is US dollars. The effect of this on foreign exchange risk is that the Group is mainly
exposed to fluctuations in exchange rates for non-dollar denominated transactions and to net asset translation risk on non-
dollar functional currency entities.
The Group operates in four main currencies: US dollars, sterling, Canadian dollars and euros. Transactions in all currencies are
converted to US dollars on initial recognition with any resulting monetary items being translated to the US dollar spot rate at the
reporting date. If any foreign exchange risk arises it is actively managed as described below.
In 2022, the Group managed its foreign exchange risk by periodically assessing its non-dollar exposures and hedging these to a
tolerable level while targeting to have net assets that are predominantly denominated in US dollar. As part of this hedging
strategy, exchange rate derivatives were used to rebalance currency exposure across the Group. Details of foreign currency
derivative contracts entered into with external parties are disclosed in note 17. On a forward looking basis an assessment is
made of expected future exposure development and appropriate currency trades put in place to reduce risk.
The Group\u2019s underwriting capital is matched by currency to the principal underlying currencies of its written premiums. This
helps to mitigate the risk that the Group\u2019s capital required to underwrite business is materially affected by any future
movements in exchange rates.
The Group also has foreign operations with functional currencies that are different from the Group\u2019s presentational currency.
The effect of this on foreign exchange risk is that the Group is exposed to fluctuations in exchange rates for US dollar
denominated transactions and net assets arising in those foreign currency operations. It also gives rise to a currency
translation exposure for the Group to sterling, euro, Canadian dollars, Singapore dollars and Australian dollars on translation to
the Group\u2019s presentational currency. These exposures are minimal and are not hedged.
2 Risk management continued
The following table summarises the carrying value of total assets and total liabilities categorised by the Group\u2019s main
currencies:
b) Interest rate risk
Some of the Group\u2019s financial instruments, including cash and cash equivalents, certain financial assets at fair value and
borrowings, are exposed to movements in market interest rates.
The Group manages interest rate risk by primarily investing in short duration financial assets along with cash and cash
equivalents. The investment committee monitors the duration of these assets on a regular basis.
The Group also entered into bond futures contracts to manage the interest rate risk on bond portfolios.
The following table shows the modified duration at the reporting date of the financial instruments that are exposed to
movements in market interest rates. Modified duration is a commonly used measure of volatility which represents the
percentage change of the price of a security to yield. The Group believes gives a better indication than maturity of the likely
sensitivity of the portfolio to changes in interest rates.
2 Risk management continued
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fixed and floating rate debt securities | | | | | | | |
| | | | | | | |
Cash and cash equivalents | | | | | | | |
Derivative financial instruments | | | | | | | |
| | | | | | | |
| | | | | | | |
2 Risk management continued
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fixed and floating rate debt securities | | | | | | | |
| | | | | | | |
Cash and cash equivalents | | | | | | | |
Derivative financial instruments | | | | | | | |
| | | | | | | |
| | | | | | | |
Borrowings consist of two items. The first is $250m of subordinated tier 2 debt raised in November 2016. This debt is due in
2026 and has annual interest of 5.875% payable in May and November of each year. The second comprises $300m of
subordinated tier 2 debt raised in September 2019. This debt is due in 2029 and has annual interest of 5.5% payable in March
and September each year.
Sensitivity analysis of yields
Changes in yields, with all other variables constant, would result in changes in the capital value of debt securities and syndicate
loans as well as subsequent interest receipts and payments. This would affect reported profits and net assets as indicated in
the table below:
| | | | |
| Impact on profit after income tax for the year | |
| | | |
| | | | |
Shift in yield (basis points) | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
c)Price risk of assets and derivatives
Financial assets and derivatives that are recognised in the statement of financial position at their fair value are susceptible to
losses due to adverse changes in prices. This is referred to as price risk.
Financial assets include fixed and floating rate debt securities, syndicate loans, hedge funds, illiquid credit assets, equity
investments and derivative financial assets. The price of debt securities is affected by interest rate risk, as described above,
and also by issuer\u2019s credit risk. The sensitivity to price risk that relates to the Group\u2019s hedge fund, syndicate loans, illiquid
credit and equity investments is presented below.
Listed investments that are quoted in an active market are recognised in the statement of financial position at quoted bid price,
which is deemed to be approximate exit price. If the market for the investment is not considered to be active, then the Group
establishes fair value using valuation techniques (refer to note 16). This includes comparison of orderly transactions between
market participants, reference to the current fair value of other investments that are substantially the same, discounted cash
flow models and other valuation techniques that are commonly used by market participants.
2 Risk management continued
| | | | |
| Impact on profit after income tax for the year | |
| | | |
| | | | |
Change in fair value of hedge funds, equity funds and illiquid credit assets | | | | |
30% increase in fair value | | | | |
20% increase in fair value | | | | |
10% increase in fair value | | | | |
10% decrease in fair value | | | | |
20% decrease in fair value | | | | |
30% decrease in fair value | | | | |
d) Investment risk
The value of the Group\u2019s investment portfolio is impacted by interest rate and market price risks, as described above. Managing
the Group\u2019s exposures to these risks is an intrinsic part of the investment strategy. Beazley uses an Economic Scenario
Generator to simulate multiple simulations of financial conditions, to support stochastic analysis of asset risk. Beazley uses
these outputs to assess the value at risk (VAR) of its investments, at different confidence levels, including \u20181 in 200\u2019, which
reflects Solvency II modelling requirements, and \u20181 in 10\u2019, reflecting scenarios which are more likely to occur in practice. It is
assessed for investments in isolation and also in conjunction with the present value of our liabilities, to help us monitor and
manage asset risk for solvency and capital purposes. By its nature, stochastic modelling does not provide a precise measure of
risk, and Economic Scenario Generator outputs are regularly validated against actual market conditions, and Beazley also uses
a number of other, qualitative measures to support the monitoring and management of investment risk. These include stress
testing and scenario analysis.
Beazley\u2019s investment strategy is developed by reference to an investment risk budget, approved annually by The Board. The
Solvency II internal model is used to monitor compliance with the budget, which limits the amount by which our reported annual
investment return may deviate from a predetermined target, at the 1 in 10 confidence level. In 2022, this permitted deviation
was set at \u2020 $200m. Additionally, a limit is specified for the net interest rate sensitivity of assets and liabilities combined and
investments are managed to ensure that this limit is not exceeded.
",
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2.3 Credit risk
The risk arises when failure of another party to perform its financial or contractual obligations to the Group in a timely manner.
The Group accepts credit risk overall and recognizes credit risk is aligned to its appetite for insurance risk. The primary sources
of credit risk for the Group are:
\u2022reinsurers \u2013 reinsurers may fail to pay valid claims against a reinsurance contract held by the Group;
\u2022brokers and coverholders \u2013 counterparties fail to pass on premiums or claims collected or paid on behalf of the Group;
\u2022investments \u2013 issuer default results in the Group losing all or part of the value of a financial instrument or a derivative
financial instrument; and
\u2022cash and cash equivalents.
An approval system also exists for brokers with their credit and performance monitored. The investment committee has
established parameters for investment managers regarding the type, duration and quality of investments including credit ratings
acceptable to the Group. The performance of investment managers is regularly reviewed to confirm adherence to these
guidelines. The Group has developed processes to examine all reinsurers before entering into new business arrangements and
they receive periodic review of their continued relationship with Beazley. Reinsurance recoverables are reviewed regularly to
assess their collectability.
To assist in the understanding of credit risks, A.M. Best, Moody\u2019s and Standard & Poor\u2019s (S&P) ratings are used. These ratings
have been categorised below as used for Lloyd\u2019s reporting:
2 Risk management continued
The following tables summarise the Group\u2019s concentrations of credit risk:
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
\u2013 fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
\u2013 illiquid credit assets | | | | | | |
\u2013 derivative financial instruments | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Cash and cash equivalents | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
\u2013 fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
\u2013 illiquid credit assets | | | | | | |
\u2013 derivative financial instruments | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Cash and cash equivalents | | | | | | |
| | | | | | |
The largest counterparty exposure within tier 1 is $3,715.8m of US treasuries (2021: $2,956.3m).
Financial investments falling within the unrated category comprise hedge funds and illiquid credit assets for which there is no
readily available market data to allow classification within the respective tiers. Additionally, insurance receivables are classified
as unrated, due to premium debtors not being credit rated with the exception of the CRI accrual element. At 31\u00a0December
2022, no cash and cash equivalents fell within the unrated category (2021: $1.8m). This was due to the Group transacting with
a bank in the US that did not have an external credit rating. Additionally the reinsurance share of unearned premium provision is
classified as unrated.
Insurance receivables and other receivables balances held by the Group have not been impaired, based on all evidence
available, and no impairment provision has been recognised in respect of these assets. Insurance receivables in respect of
coverholder business are credit controlled by third-party managers. We monitor third party coverholders\u2019 performance and their
financial processes. These assets are individually impaired after considering information such as the occurrence of significant
changes in the counterparties\u2019 financial position, patterns of historical payment information and disputes with counterparties.
An analysis of the overall credit risk exposure indicates that the Group has reinsurance assets that are impaired at the
reporting date.
2 Risk management continued
The total impairment in respect of the reinsurance assets, including reinsurers\u2019 share of outstanding claims, at 31\u00a0December
2022 was as follows:
| |
| |
| |
Balance at 1\u00a0January 2021 | |
Impairment loss written back | |
Balance at 31\u00a0December 2021 | |
Impairment loss recognised | |
Balance at 31\u00a0December 2022 | |
The Group has insurance receivables and reinsurance assets that are past due at the reporting date. An aged analysis of these
is presented below:
| | | | | |
| | | | Greater than 90 days past due | |
| | | | | |
| | | | | |
| | | | | |
The total impairment provision in the statement of financial position in respect of reinsurance assets past due (being
reinsurance recoverables due on paid claims) by more than 30 days at 31\u00a0December 2022 was $17.3m (2021: $2.1m). This
$17.3m provision in respect of overdue reinsurance recoverables is included within the total provision of $29.3m shown in the
table at the top of the page.
The Group believes that the unimpaired amounts that are past due more than 30 days are still collectable in full, based on
historic payment behaviour and analyses of credit risk.
",
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2.4 Liquidity risk
Liquidity risk arises where cash may not be available to pay obligations. The Group is exposed to daily calls on its available
cash resources, principally from claims arising from its insurance business which is an industry norm. In the majority of the
cases, these claims are settled from the premiums received held as assets. Beazley avoids the risk of having insufficient liquid
assets to meet expected cash flow requirements.
The Group\u2019s approach is to manage its liquidity position so that it can reasonably survive a significant individual or market loss
event (details of the Group\u2019s exposure to realistic disaster scenarios are provided on pages 177 to 179. This means that the
Group maintains sufficient liquid assets, or assets that can be converted into liquid assets at short notice and without any
significant capital loss, to meet expected cash flow requirements. These liquid funds are regularly monitored using cash flow
forecasting to ensure that surplus funds are invested to achieve a higher rate of return. The Group also makes use of loan
facilities and borrowings, details of which can be found in note 25. Further information on the Group\u2019s capital resources is
contained on pages 64 to 66.
2 Risk management continued
The following is an analysis by business segment of the estimated timing of the net cash flows based on the net claims
liabilities1 balance held at 31 December:
| | | | | | |
| | | | | | Weighted average term to settlement (years) |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | Weighted average term to settlement (years) |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
1 For a breakdown of net claims liabilities refer to note 24.
The following table is an analysis of the net contractual cash flows based on all the liabilities held at 31 December:
The next two tables summarise the carrying amount at reporting date of financial instruments analysed by maturity date.
2 Risk management continued
Maturity
| | | | | | | |
| | | | | | | |
| | | | | | | |
Fixed and floating rate debt securities | | | | | | | |
| | | | | | | |
Derivative financial instruments | | | | | | | |
Cash and cash equivalents | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Illiquid credit assets, hedge funds and equity funds are not included in the maturity profile because the maturity profiles of
these asset classes cannot be determined with any degree of certainty.
The Group makes additional interest payments for borrowings. Further details are provided in notes 8 and 25.
",
"dimensions": {
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2.5 Capital management
The Group follows a risk-based approach to determine the amount of capital required to support its activities. Recognised
stochastic modelling techniques are used to measure risk exposures, and capital to support business activities is allocated
according to risk profile. Stress and scenario analysis is regularly performed and the results are documented and reconciled to
The Board\u2019s risk appetite where necessary.
The Group has several requirements for capital, including:
\u2022to support underwriting at Lloyd\u2019s through the syndicates in which it participates, being 2623, 3622, 3623 and 4321. This is
based on the Group\u2019s own individual capital assessment. It may be provided in the form of either the Group\u2019s cash,
investments, debt facilities, or letter of credit;
\u2022to support underwriting in Beazley Insurance Company, Inc., Beazley America Insurance Company, Inc., and Beazley NewCo
Captive Company, Inc. in the US;
\u2022to support underwriting in Beazley Insurance dac in Europe; and
\u2022to support strategic acquisitions and investments.
2 Risk management continued
All entities within the Group have been in compliance with externally imposed capital requirements during the year.
The Group uses letters of credit (LOC) available under a syndicated short term banking facility led by Lloyds Banking Group plc
to support Funds at Lloyd\u2019s (FAL) requirements. Lloyd\u2019s of London apply certain criteria to banks issuing LOCs as FAL, including
minimum credit rating requirements and counterparty limits. Should any of the banks on the existing LOC facility breach Lloyd\u2019s
of London requirements, the Group might be asked to replace the LOC provided with alternative eligible issuer(s) and/or assets
meeting Lloyd\u2019s requirements. The creditworthiness of the counterparties on the facility is monitored by the Group on an
ongoing basis.
The Group considers Shareholders' Funds, Tier 2 subordinated debt and letters of credit to be the primary sources of capital for
the Group. For more detail on the value of capital managed and how its value has changed in the year, please see pages 64 to
66.
The Internal Model Solvency Capital Requirement is a dedicated quantitative review of syndicate models and it sets outs to be a
key input to the Lloyd\u2019s Internal Model.
The Board operates a progressive dividend strategy, intending to grow the dividend each year but recognising that some
earnings fluctuations are to be expected. When determining the level of the dividend, The Board considers the Group's capital
position, future investment and growth opportunities and our ability to generate cash flows. Dividends are typically paid on an
annual basis to align with the Group's capital planning cycle. Our capital management strategy is to carry some surplus capital
to enable us to take advantage of growth opportunities which may arise. At 31\u00a0December 2022, we have surplus capital of 44%
of ECR (on a Solvency II basis), above our preferred target range of 15% to 25% of ECR. The capital base has been
strengthened following the recent equity raise to enable us to continue to pursue our sustainable long-term growth strategy,
particularly in opportunities identified in Property Risks.
2.6 Company risk
The Group\u2019s parent company is exposed to the same interest rate and liquidity risk exposure experienced on its mutual
borrowings with the Group. The Group\u2019s exposure can be seen in sections 2.3b and 2.7. The company also experiences
operational, regulatory and legal risks as defined in section 2.4 and 2.6.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-344": {
"value": "
3 Segmental analysis
a) Reporting Segments
Segment information is presented based on the Group\u2019s management and internal reporting structures, which represent the
level at which financial information is reported, performance is analysed and resources are allocated by the Group\u2019s Executive
Committee, being the chief operating decision maker as defined in IFRS 8.
In March 2022, the Group updated its underwriting team structure with the creation of four underwriting divisions: Cyber Risks,
Marine, Accident and Political (MAP) Risks, Property Risks and Specialty Risks.
From January 2022, the Group began separately reporting the performance of the Digital division, following the creation of that
team in 2021.
Accordingly the Group has determined that its reporting segments are now as follows:
Cyber Risks
This segment underwrites cyber and technology risks.
Digital
This segment underwrites a variety of marine, contingency and SME liability risks through digital channels such as e-trading
platforms and broker portals.
MAP Risks
This segment underwrites marine, portfolio underwriting and political and contingency business.
Property Risks
This segment underwrites first party property risks and reinsurance business.
Specialty Risks
This segment underwrites a wide range of liability classes, including employment practices risks and directors and officers, as
well as healthcare, lawyers and international financial institutions.
3 Segmental analysis continued
b) Segment information
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Those items that are allocated on a reasonable basis, including net investment income, are split based
on each segment\u2019s capital requirements which is taken from the Group\u2019s most up to date business plan.
Finance costs and taxation have not been allocated to operating segments as these items are determined at a consolidated
level and do not relate to operating performance.
As a result of the changes in reporting segments, prior period comparative information has been re-presented in accordance
with the requirements of IFRS 8.
| | | | | | |
| 12 months ended 31\u00a0December 2022 |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Expenses for the acquisition of insurance contracts | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Segment assets and liabilities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
3 Segmental analysis continued
| | | | | | |
| 12 months ended 31\u00a0December 2021 (re-presented) |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Gain from sale of business1 | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Expenses for the acquisition of insurance contracts | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Profit for the year attributable to equity shareholders | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Segment assets and liabilities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
1The gain from sale of business relates to the sale of the Beazley Benefits business in the second half of 2021. A net gain of $54.4m was recognised, following
the receipt of gross proceeds of $56.7m and recognised closing costs of $2.3m. Further details can be found in note 5b of Beazley\u2019s 2021 Annual report and
accounts.
3 Segmental analysis continued
c) Information about geographical areas
The Group\u2019s generates revenue in multiple geographies, an overview of which is set out below. UK earned premium in the
analysis below represents all risks placed at Lloyd\u2019s; US earned premium represents all risks placed at the Group\u2019s US
insurance companies, Beazley Insurance Company, Inc. and Beazley America Insurance Company, Inc; and Europe earned
premium represents all risks placed at the Group\u2019s European insurance company, Beazley Insurance dac. An analysis of gross
premiums written split geographically by placement of risk and by reportable segment is provided in note 2 on page 179.
| | |
| | |
| | |
| | |
| | |
| | |
Europe (Non-Lloyd\u2019s) | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Europe (Non-Lloyd\u2019s) | | |
| | |
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-346": {
"value": "
4 Net investment income
| | |
| | |
| | |
Interest and dividends on financial investments at fair value through profit or loss | | |
Interest on cash and cash equivalents | | |
Net realised (losses)/gains on financial investments at fair value through profit or loss | | |
Net unrealised fair value (losses) on financial investments at fair value through profit or loss | | |
Investment income from financial investments | | |
Investment management expenses | | |
| | |
33 Foreign exchange rates
The Group used the following exchange rates to translate foreign currency assets, liabilities, income and expenses into US
dollars, being the Group\u2019s presentational currency:
| | |
| | |
| | |
Operating expenses include amounts receivable by the Group\u2019s auditors in: | | |
\u2013 audit of the Group\u2019s annual report & accounts | | |
\u2013 audit of subsidiaries pursuant to legislation | | |
\u2013 audit-related assurance services | | |
\u2013 other non-audit services | | |
| | |
Other than the fees disclosed above, no other fees were paid to the company\u2019s auditor. Audit-related assurance services
primarily comprise the review and audit of regulatory reporting pursuant to legislation and review of the Group\u2019s condensed
interim financial statements.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-350": {
"value": "
7 Employee benefit expenses
| | |
| | |
| | |
| | |
Short term incentive payments | | |
| | |
| | |
| | |
| | |
Recharged to syndicate 623 | | |
| | |
Beazley Furlonge Limited operates a defined benefit pension scheme (\u2018the Beazley Furlonge Limited Pension Scheme\u2019), which
closed to new entrants in 2002. The scheme provides the following benefits:
\u2022an annual pension payable to the member from his or her normal pension age (60th birthday) of generally 1/60th of final
pensionable salary for each year of pensionable service up to 31 March 2006;
\u2022a spouse\u2019s pension of 2/3rds of the member\u2019s pension payable on the member\u2019s death after retirement;
\u2022a lump sum of four times current pensionable salary for death in service at the date of death; and
\u2022a pension of 2/3rds of the member\u2019s prospective pension at the date of death, payable to the spouse until their death. This
pension is related to salary at the date of death.
The scheme is administered by a trust that is legally separated from the Group. The trustees consist of both employee and
employer representatives and an independent chair, all of whom are governed by the scheme rules.
During 2022, the pension scheme trustees completed a transaction that insures all of the scheme's liabilities to a third party
via a bulk annuity buy-in with an external insurance company. The buy-in covers all members of the scheme and preserves their
existing pension entitlements. The annuity contracts meet the criteria to be classified as qualifying insurance policies as
defined in IAS 19 as the cash flows match the timing and value of the benefits payable to members that they cover. These
annuities are thus valued at the present value of the obligations insured.
The pension scheme trustees and the company will consider in due course whether to move to a full buy-out of the plan,
whereby the buy-in policies held by the plan will be converted to individual annuity policies which will be issued to scheme
members. This is a separate decision for the trustees and the company and whilst the buy-in policy allows for such a buy-out to
happen, this is not a requirement. At the reporting date, the trustees and the company retain all obligations to ensure benefits
due to scheme members are paid.
The purchase of these annuities has not been treated as a settlement, and the difference between the purchase price of the
annuities and their carrying value has been recognised in Other comprehensive income on the revaluation of plan assets, which
also includes any valuation movements during the year before the buy-in transaction completed.
Historically the scheme exposed the Group to additional actuarial, interest rate and market risk. However as a result of the buy-
in transaction in December these risks are now born by the insurance company to which liabilities have been insured. The buy-in
transaction does expose the Group to additional credit risk with regard to the insurance company from whom the annuities were
purchased.
Contributions to the scheme are determined by a qualified actuary using the projected unit credit method as set out in the
scheme rules and the most recent valuation was at 31 December 2022. Following the buy-in transaction the Group expects to
make no further contributions to the scheme.
27 Retirement benefit obligations continued
Trustees obligations
Under section 222 of the Pension Act 2004, every scheme is subject to the Statutory Funding Objective (SFO), which is to have
sufficient and appropriate assets to cover its technical provisions, which represent the present value of benefits to which
members are entitled based on pensionable service to the valuation date. This is assessed at least every three years using
assumptions agreed between the Trustees and the employer as set out in the Statement of Funding Principles produced in
accordance with the Occupational Pensions (Scheme Funding) Regulations 2005 (OP(SF)R 2005) Regulation 6.
The Trustees written Statement of Funding Principles is dated 29 January 2021 and it sets out their policy for securing that the
SFO is met (that the scheme will have sufficient assets to cover its technical provisions). In accordance with the OP(SF)R 2005
Regulation 5(2) trustees have chosen the Defined Accrued Benefit Method, a variant of the projected unit credit method where
accrual has ceased.
The most recently completed Actuarial Valuation of the Scheme was carried out at 1 January 2020 including a valuation carried
out in accordance with the Pensions Protection Fund (Valuation) Regulations 2005 and with appropriate section 179 guidance
and assumptions issued by The Board of the Pension Protection Fund.
During 2021 a decision was made to move the plan assets out of equities and to reinvest in quoted corporate bonds and index
linked securities. The rationale for this was to protect the scheme\u2019s funding position and provide protection against movements
in interest rates and expected inflation. Following the buy-in transaction, the main class of plan assets is the purchased annuity
contracts. During the year, the scheme had no exposure to liability driven investment products (2021: nil).
The Trust Deed provides Beazley with an unconditional right to a refund of surplus assets assuming the full settlement of plan
liabilities in the event of a plan wind-up. Furthermore, in the ordinary course of business the Trustee has no rights to unilaterally
wind up, or otherwise augment the benefits due to members of, the scheme. Based on these rights, any net surplus in the UK
scheme is recognised in full.
| | |
| | |
| | |
Movement in present value of funded obligations recognised in the statement of financial position | | |
| | |
| | |
Actuarial (gain) due to changes in financial assumptions | | |
| | |
| | |
| | |
| | |
| | |
| | |
Movement in fair value of plan assets recognised in the statement of financial position | | |
| | |
Expected return on plan assets | | |
(Loss)/gain on asset return | | |
| | |
| | |
| | |
| | |
| | |
Plan assets are comprised as follows: | | |
| | |
| | |
| | |
| | |
| | |
27 Retirement benefit obligations continued
The actual gain on plan assets was $33.3m (2021: gain of $9.0m).
| | |
| | |
| | |
Principal actuarial assumptions | | |
| | |
| | |
Expected return on plan assets | | |
| | |
| | |
Life expectancy for members aged 60 at 31 December | | |
Life expectancy for members aged 40 at 31 December | | |
At 31\u00a0December 2022, the weighted-average duration of the defined benefit obligation was 23.7 years (2021: 22.6 years).
Sensitivity analysis
Changes in the relevant actuarial assumptions would result in a change in the value of the funded obligation as shown below.
For 2022 any change in the obligation would be matched by a change in the carrying value of the annuity contracts purchased in
the period.
| | |
| | |
| | |
Discount rate (0.5% decrease) | | |
| | |
Future salary changes (0.5% decrease) | | |
Life expectancy (1 year increase) | | |
| | |
| | |
| | |
Discount rate (0.5% decrease) | | |
| | |
Future salary changes (0.5% decrease) | | |
Life expectancy (1 year increase) | | |
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinanceCostExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-353": {
"value": "
9 Income tax expense
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Origination and reversal of temporary differences | | |
Impact of change in UK/US tax rates | | |
| | |
| | |
| | |
1The Finance Act 2021, which provides for an increase in the UK corporation tax rate from 19% to 25% effective from 1 April 2023 received Royal Assent on 10
June 2021. This tax rate change to 25% will increase the Group\u2019s future current tax charge. It was reflected in the calculation of the deferred tax balances as at
31 December 2021 for relevant temporary differences expected to reverse on or after 1 April 2023.
The Tax Act (the Tax Cuts and Jobs Act) was signed into law in the US in December 2017. The Tax Act includes base erosion
anti-avoidance tax provisions (the \u2018BEAT\u2019). We have performed an assessment for our intra-group transactions potentially in
scope of BEAT. The application of this new BEAT legislation is still uncertain for some types of transaction and we are keeping
developments under review. With support from external advisors, we believe that the BEAT impact on the Group is not
significant. No amount has been provided for BEAT liabilities in these financial statements (2021: nil). The ultimate outcome
may differ and if any additional amounts did fall within the scope of the BEAT, incremental tax at 10% might arise on some or all
of those amounts.
9 Income tax expense continued
The Group is monitoring the impact of the implementation of a Global Minimum Tax Rate of 15%, expected to apply in some
countries from 2024. Our initial assessment is that the impact will not be significant as the Group mainly operates in
jurisdictions with a statutory tax rate above 15%. We anticipate some additional tax arising in Ireland if profits are taxed at 15%
rather than 12.5%.
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity:
| | |
| | |
| | |
Current tax: share based payments | | |
Deferred tax: share based payments | | |
| | |
Deferred tax assets and deferred tax liabilities relating to the same tax authority are presented net in the Group\u2019s balance
sheet.
| | | | | |
| | | | FX translation differences | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Deferred acquisition costs | | | | | |
Tax losses carried forward | | | | | |
| | | | | |
Unrealised gains on investments | | | | | |
| | | | | |
Net deferred income tax account | | | | | |
| | | | | |
| Balance 1\u00a0Jan 21\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 | | | FX translation differences | Balance 31\u00a0Dec 21\u00a0 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Deferred acquisition costs | | | | | |
Tax losses carried forward | | | | | |
| | | | | |
| | | | | |
Net deferred income tax account | | | | | |
Deferred tax assets of $4.0m (2021: $9.6m) relating to tax losses, which depend on the availability of future taxable profits,
have been recognised. The Group has concluded that, it is probable that the deferred tax assets will be recovered using the
estimated future taxable profits based on the approved business plans. The losses can be carried forward indefinitely.
The Group has unrecognised realised and unrealised capital losses of $2.2m (2021: nil) that will expire in five years.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-354": {
"value": "
9 Income tax expense
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Origination and reversal of temporary differences | | |
Impact of change in UK/US tax rates | | |
| | |
| | |
| | |
1The Finance Act 2021, which provides for an increase in the UK corporation tax rate from 19% to 25% effective from 1 April 2023 received Royal Assent on 10
June 2021. This tax rate change to 25% will increase the Group\u2019s future current tax charge. It was reflected in the calculation of the deferred tax balances as at
31 December 2021 for relevant temporary differences expected to reverse on or after 1 April 2023.
The Tax Act (the Tax Cuts and Jobs Act) was signed into law in the US in December 2017. The Tax Act includes base erosion
anti-avoidance tax provisions (the \u2018BEAT\u2019). We have performed an assessment for our intra-group transactions potentially in
scope of BEAT. The application of this new BEAT legislation is still uncertain for some types of transaction and we are keeping
developments under review. With support from external advisors, we believe that the BEAT impact on the Group is not
significant. No amount has been provided for BEAT liabilities in these financial statements (2021: nil). The ultimate outcome
may differ and if any additional amounts did fall within the scope of the BEAT, incremental tax at 10% might arise on some or all
of those amounts.
9 Income tax expense continued
The Group is monitoring the impact of the implementation of a Global Minimum Tax Rate of 15%, expected to apply in some
countries from 2024. Our initial assessment is that the impact will not be significant as the Group mainly operates in
jurisdictions with a statutory tax rate above 15%. We anticipate some additional tax arising in Ireland if profits are taxed at 15%
rather than 12.5%.
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity:
| | |
| | |
| | |
Current tax: share based payments | | |
Deferred tax: share based payments | | |
| | |
Basic
Basic earnings per share are calculated by dividing profit after tax of $160.8m (2021: $308.7m) by the weighted average
number of shares in issue during the year of 611.7m (2021: 606.0m). The shares held in the Beazley plc Employee Benefit
Trust of 5.7m (2021: 3.1m) have been excluded from the calculation, until such time as they vest unconditionally with the
employee.
Diluted
Diluted earnings per share are calculated by dividing profit after tax of $160.8m (2021: $308.7m) by the adjusted weighted
average number of shares of 619.7m (2021: 614.3m). The adjusted weighted average number of shares assumes conversion
of dilutive potential ordinary shares, being shares from the equity settled compensation schemes. The shares held in the
Employee Benefit Trust of 5.7m (2021: 3.1m) have been excluded from the calculation, until such time as they vest
unconditionally with the employees. Further details of equity compensation plans can be found in note 23 as well as in the
Directors\u2019 remuneration report on pages 112 to 139.
",
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11 Dividends per share
An interim dividend of 13.5p covering the whole of 2022 (2021: 12.9p) will be payable on 28 April 2023 to Beazley plc
shareholders registered on 10 March 2023. The company expects the total amount to be paid in respect of the interim dividend
to be approximately \u00a391m (2021: \u00a378m). These financial statements do not provide for the interim dividend as a liability.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-357": {
"value": "0.135",
"decimals": 3,
"dimensions": {
"concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00",
"unit": "iso4217:GBP/xbrli:shares"
}
},
"f-358": {
"value": "0.129",
"decimals": 3,
"dimensions": {
"concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2021-01-01T00:00:00/2022-01-01T00:00:00",
"unit": "iso4217:GBP/xbrli:shares"
}
},
"f-359": {
"value": "91000000",
"decimals": -6,
"dimensions": {
"concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00",
"unit": "iso4217:USD"
}
},
"f-360": {
"value": "78000000",
"decimals": -6,
"dimensions": {
"concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners",
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"period": "2021-01-01T00:00:00/2022-01-01T00:00:00",
"unit": "iso4217:USD"
}
},
"f-361": {
"value": "
12 Intangible assets
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Balance at 1\u00a0January 2021 | | | | | | |
| | | | | | |
| | | | | | |
Foreign exchange (loss) / gain | | | | | | |
Balance at 31\u00a0December 2021 | | | | | | |
Balance at 1\u00a0January 2022 | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Balance at 31\u00a0December 2022 | | | | | | |
Amortisation and impairment | | | | | | |
Balance at 1\u00a0January 2021 | | | | | | |
| | | | | | |
Amortisation for the year | | | | | | |
Foreign exchange gain / (loss) | | | | | | |
Balance at 31\u00a0December 2021 | | | | | | |
Balance at 1\u00a0January 2022 | | | | | | |
| | | | | | |
Amortisation for the year | | | | | | |
| | | | | | |
Balance at 31\u00a0December 2022 | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
12 Intangible assets continued
Impairment tests
Goodwill, syndicate capacity and US insurance authorisation licences are deemed to have indefinite life as they are expected to
have value in use that does not erode or become obsolete over the course of time. Consequently, they are not amortised but
annually tested for impairment. For the purpose of impairment testing, they are allocated to the Group\u2019s cash-generating units
(CGUs) as follows:
Value in use is defined as the present value of the future cash flows expected to be derived from the CGU and represents
recoverable amount for goodwill. It is estimated by discounting future cash flows sourced from financial budgets approved by
management which cover specific estimates for a five year period. The key assumptions used in the preparation of future cash
flows are: premium growth rates,combined ratios, retention rates and expected future market conditions.
A discount rate, based on weighted average cost of capital (WACC) of 10.9% (2021: 9%) has been applied to projected future
cash flows. This has been calculated using independent measures of the risk-free rate of return and is indicative of the Group\u2019s
risk profile relative to the market. The impairment test for goodwill confirms that no impairment is required.
The Group has taken the following measures to ensure that the key assumptions used in deriving value in use for each CGU
considers the potential adverse effects of these potential changes in economic and regulatory environments:
\u2022Projected combined ratio \u2013 The Group has used projected combined ratios consistent with its five year financial budgets.
Sensitivity testing (a 5% increase in combined ratio for all classes and all years) has been performed to model the impact of
reasonably possible changes in combined ratio to our base case impairment analysis and headroom. Within these ranges,
the recoverable amounts remain supportable.
\u2022Future market conditions \u2013 to test the segment\u2019s sensitivity to variances (including those caused by the factors listed above)
from forecast profits, the discount rate has been flexed to 5% above and 5% below the central assumption. Within this range,
the recovery of goodwill was stress tested and remains supportable across all CGUs. Headroom was calculated in respect of
the value in use of all the Group\u2019s other intangible assets.
\u2022Premium growth rates/Retention rates \u2013 The Group has used a terminal growth rate of 0% (2021: 0%) to extrapolate
projections beyond the covered five year period.
The Group\u2019s intangible assets relating to syndicate capacity is allocated across all CGUs. The fair value of syndicate capacity
can be determined from the latest Lloyd's of London capacity auctions. Based upon the latest market prices, management
concludes that the fair value exceeds the carrying amount and as such no impairment is necessary.
US insurance authorisation licences represent the privilege to write insurance business in particular states in the US. Licences
are allocated to the relevant CGU. There is no active market for licences, therefore the recoverable amount is deemed to be the
fair value. As described above, a WACC discount rate applied to projected future cash flows sourced from management
approved budgets. Key assumptions are the same as those outlined above. Based upon all available evidence the results of
the testing indicate that no impairment is required.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-362": {
"value": "
Impairment tests
Goodwill, syndicate capacity and US insurance authorisation licences are deemed to have indefinite life as they are expected to
have value in use that does not erode or become obsolete over the course of time. Consequently, they are not amortised but
annually tested for impairment. For the purpose of impairment testing, they are allocated to the Group\u2019s cash-generating units
(CGUs) as follows:
Value in use is defined as the present value of the future cash flows expected to be derived from the CGU and represents
recoverable amount for goodwill. It is estimated by discounting future cash flows sourced from financial budgets approved by
management which cover specific estimates for a five year period. The key assumptions used in the preparation of future cash
flows are: premium growth rates,combined ratios, retention rates and expected future market conditions.
A discount rate, based on weighted average cost of capital (WACC) of 10.9% (2021: 9%) has been applied to projected future
cash flows. This has been calculated using independent measures of the risk-free rate of return and is indicative of the Group\u2019s
risk profile relative to the market. The impairment test for goodwill confirms that no impairment is required.
The Group has taken the following measures to ensure that the key assumptions used in deriving value in use for each CGU
considers the potential adverse effects of these potential changes in economic and regulatory environments:
\u2022Projected combined ratio \u2013 The Group has used projected combined ratios consistent with its five year financial budgets.
Sensitivity testing (a 5% increase in combined ratio for all classes and all years) has been performed to model the impact of
reasonably possible changes in combined ratio to our base case impairment analysis and headroom. Within these ranges,
the recoverable amounts remain supportable.
\u2022Future market conditions \u2013 to test the segment\u2019s sensitivity to variances (including those caused by the factors listed above)
from forecast profits, the discount rate has been flexed to 5% above and 5% below the central assumption. Within this range,
the recovery of goodwill was stress tested and remains supportable across all CGUs. Headroom was calculated in respect of
the value in use of all the Group\u2019s other intangible assets.
\u2022Premium growth rates/Retention rates \u2013 The Group has used a terminal growth rate of 0% (2021: 0%) to extrapolate
projections beyond the covered five year period.
The Group\u2019s intangible assets relating to syndicate capacity is allocated across all CGUs. The fair value of syndicate capacity
can be determined from the latest Lloyd's of London capacity auctions. Based upon the latest market prices, management
concludes that the fair value exceeds the carrying amount and as such no impairment is necessary.
US insurance authorisation licences represent the privilege to write insurance business in particular states in the US. Licences
are allocated to the relevant CGU. There is no active market for licences, therefore the recoverable amount is deemed to be the
fair value. As described above, a WACC discount rate applied to projected future cash flows sourced from management
approved budgets. Key assumptions are the same as those outlined above. Based upon all available evidence the results of
the testing indicate that no impairment is required.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-363": {
"value": "
13 Plant and equipment
| | | |
| | | |
| | | |
| | | |
Balance at 1\u00a0January 2021 | | | |
| | | |
| | | |
Foreign exchange gain / (loss) | | | |
Balance at 31\u00a0December 2021 | | | |
Balance at 1\u00a0January 2022 | | | |
| | | |
| | | |
Balance at 31\u00a0December 2022 | | | |
| | | |
Balance at 1\u00a0January 2021 | | | |
Depreciation charge for the year | | | |
| | | |
| | | |
Balance at 31\u00a0December 2021 | | | |
Balance at 1\u00a0January 2022 | | | |
Depreciation charge for the year | | | |
Foreign exchange gain / (loss) | | | |
Balance at 31\u00a0December 2022 | | | |
| | | |
| | | |
| | | |
The Group\u2019s investment in associates consists of:
| | | |
| Country/region of incorporation | | |
| | | |
Falcon Money Management Holdings Limited (and subsidiaries) | | | |
Pegasus Underwriting Limited | | | |
| | | |
| | | |
1259 St Paul Street, Valletta, Malta.
2Suite 126, 12/F Somptuex Central, 52-54 Wellington Street, Hong Kong
38130 Lakewood Main Street, Suite 103 #329. Lakewood Ranch, FL 34202
The CyberAcuView LLC board is charged with governance over its affairs. The board is composed of individuals who are selected
by the investors. The Group has the ability to appoint a member to the board of CyberAcuView LLC to represent the Group\u2019s
interest. As a result, the Group is deemed to have significant influence over CyberAcuView LLC and therefore this investment is
recognised as an associate.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-365": {
"value": "
15 Deferred acquisition costs
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDeferredAcquisitionCostsArisingFromInsuranceContractsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-366": {
"value": "
16 Financial assets and liabilities
Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities.
| | |
| | |
| | |
| | |
Financial assets at fair value | | |
| | |
| | |
| | |
\u00a0 \u2013 Investment grade | | |
| | |
| | |
Total debt securities and syndicate loans | | |
| | |
| | |
| | |
| | |
Total capital growth assets | | |
Total financial investments at fair value through statement of profit or loss | | |
Derivative financial assets | | |
Total financial assets at fair value | | |
Our capital growth assets have no defined maturity dates and have thus been excluded from the above maturity table. However,
all $159.4m (2021: $209.6m) of equity funds could be liquidated within two weeks, $416.8m (2021: $378.1m) of hedge fund
assets within six months and the remaining $113.8m (2021: $100.0m) of hedge fund assets within 18 months, in normal
market conditions. Illiquid credit assets are not readily realisable and principal will be returned over the life of these assets,
which may be up to 12 years.
| | |
| | |
| | |
Tier 2 subordinated debt (2026) | | |
Tier 2 subordinated debt (2029) | | |
Derivative financial liabilities | | |
Total financial liabilities | | |
The Group has given a fixed and floating charge over certain of its investments and other assets to secure obligations to Lloyd\u2019s
in respect of its corporate member subsidiary. Further details are provided in note 32.
Valuation hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a
whole. If the inputs used to measure the fair value of an asset or a liability could be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire measurement.
Level 1 \u2013 Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which
transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect
prices at which an orderly transaction would take place between market participants at the measurement date.
16 Financial assets and liabilities continued
Level 2 \u2013 Valuations based on quoted prices in markets that are not active, or based on pricing models for which significant
inputs can be corroborated by observable market data, directly or indirectly (e.g. interest rates and exchange rates). Level 2
inputs include:
\u2022Quoted prices for similar assets and liabilities in active markets;
\u2022Quoted prices for identical or similar assets and liabilities in markets that are not active, the prices are not current, or price
quotations vary substantially either over time or among market makers, or in which little information is released publicly;
\u2022Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves
observable at commonly quoted intervals, implied volatilities and credit spreads); and
\u2022Market corroborated inputs. Included within level 2 are government bonds and treasury bills, equity funds and corporate
bonds which are not actively traded, hedge funds and senior secured loans.
Level 3 \u2013 Valuations based on inputs that are unobservable or for which there is limited market activity against which to
measure fair value. The availability of financial data can vary for different financial assets and is affected by a wide variety of
factors, including the type of financial instrument, whether it is new and not yet established in the marketplace, and other
characteristics specific to each transaction. To the extent that valuation is based on models or inputs that are unobservable in
the market, the determination of fair value requires more judgement. Accordingly the degree of judgement exercised by
management in determining fair value is greatest for instruments classified in level 3. The Group uses prices and inputs that
are current as of the measurement date for valuation of these instruments.
Our valuation approach for fair value assets and liabilities classified as level 2:
a) For the Group\u2019s level 2 debt securities, our fund administrator obtains the prices used in the valuation from independent
pricing vendors. The independent pricing vendors derive an evaluated price from observable market inputs. These inputs are
verified in their pricing assumptions such as weighted average life, discount margins, default rates, and recovery and
prepayments assumptions for mortgage securities.
b) For our hedge funds , the pricing and valuation of each fund is undertaken by administrators in accordance with each
underlying fund\u2019s valuation policy. Individual fund prices are communicated by the administrators to all investors via the monthly
investor statements. The fair value of the hedge fund portfolios are calculated by reference to the underlying net asset values of
each of the individual funds.
c) Subordinated debt and tier 2 subordinated debt fair value are based on quoted market prices.
Our valuation approach for fair value assets and liabilities classified as level 3:
a) Our illiquid credit fund investments are managed by third party managers (generally closed ended limited partnerships or
open ended funds). While the funds provide full transparency on their underlying investments, the investments themselves are
predominantly in private and unquoted instruments. The valuation techniques used by the fund managers to establish the fair
value of the underlying private/unquoted investments may incorporate discounted cash flow models or a more market-based
approach, whilst the main inputs might include discount rates, fundamental pricing multiples, recent transaction prices, or
comparable market information to create a benchmark multiple.
b) The syndicate loans are loans provided by our Group syndicates to the Central Fund at Lloyd\u2019s in respect of the 2019 and
2020 underwriting years. These instruments are not tradeable and are valued using discounted cash flow models, designed to
appropriately reflect the credit and illiquidity risk of the instruments.
There were no changes in the valuation techniques during the year compared to those described in the Group's 2021 Annual
Report and Accounts.
16 Financial assets and liabilities continued
The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value
hierarchy.
| | | | |
| | | | |
| | | | |
Financial assets carried at fair value | | | | |
Fixed and floating rate debt securities | | | | |
| | | | |
| | | | |
\u00a0 \u2013 Investment grade | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Derivative financial assets | | | | |
Total financial assets carried at fair value | | | | |
Financial liabilities carried at fair value | | | | |
Derivative financial liabilities | | | | |
Financial liabilities not measured at fair value | | | | |
Tier 2 subordinated debt (2029) | | | | |
Tier 2 subordinated debt (2026) | | | | |
Total financial liabilities measured at fair value | | | | |
| | | | |
| | | | |
| | | | |
Financial assets carried at fair value | | | | |
Fixed and floating rate debt securities | | | | |
| | | | |
| | | | |
\u00a0 \u2013 Investment grade | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Derivative financial assets | | | | |
Total financial assets carried at fair value | | | | |
Financial liabilities carried at fair value | | | | |
Derivative financial liabilities | | | | |
Financial liabilities not measured at fair value | | | | |
Tier 2 subordinated debt (2029) | | | | |
Tier 2 subordinated debt (2026) | | | | |
Total financial liabilities measured at fair value | | | | |
16 Financial assets and liabilities continued
The table above does not include financial assets and liabilities that are, in accordance with the Group\u2019s accounting policies,
recorded at amortised cost, if the carrying amount of these financial assets and liabilities approximates their fair values at the
reporting date. Cash and cash equivalents have not been included in the table above; however, the full amount of cash and
cash equivalents would be classified under level 1 in both the current and prior year.
Transfers
The Group determines whether transfers have occurred between levels in the fair value hierarchy by assessing categorisation at
the end of the reporting period.
The following transfers between levels 1 & 2 for the period ended 31 December 2022 reflect the level of trading activities
including frequency and volume derived from market data obtained from an independent external valuation tool.
| | |
| | |
31\u00a0December 2022 vs 31\u00a0December 2021 transfer from level 2 to level 1 | | |
\u2013 Corporate Bonds \u2013 Investment grade | | |
| | |
| | |
31\u00a0December 2022 vs 31\u00a0December 2021 transfer from level\u00a0 1 to level 2 | | |
\u2013 Corporate Bonds \u2013 Investment grade | | |
| | |
The values shown in the transfer tables above are translated at foreign exchange rate as at 31\u00a0December 2022.
Level 3 investment reconciliations
The table below shows a reconciliation from the opening balances to the closing balances of level 3 fair values.
Unconsolidated structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant
activities are directed by means of contractual arrangements.
As part of its standard investment activities the Group holds fixed interest investments in high yield bond funds, as well as
capital growth investments in equity funds, hedge funds and illiquid credit assets which in accordance with IFRS 12 are
classified as unconsolidated structured entities. The Group does not sponsor any of the unconsolidated structured entities. The
assets classified as unconsolidated structured entities are held at fair value on the statement of financial position.
16 Financial assets and liabilities continued
As at 31 December the investments comprising the Group\u2019s unconsolidated structured entities are as follows:
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Investments through unconsolidated structured entities | | |
Apart from a relatively small exposure to high yield bond funds, our unconsolidated structured entity exposures fall within our
capital growth assets. The capital growth assets are held in investee funds managed by asset managers who apply various
investment strategies to accomplish their respective investment objectives. The Group\u2019s investments in investee funds are
subject to the terms and conditions of the respective investee fund\u2019s offering documentation and are susceptible to market
price risk arising from uncertainties about future values of those investee funds. Investment decisions are made after extensive
due diligence on the underlying fund, its strategy and the overall quality of the underlying fund\u2019s manager and assets.
The right to sell or request redemption of investments in high yield bond funds, asset backed securities, equity funds and
hedge funds ranges in frequency from daily to semi-annually. The Group did not sponsor any of the respective structured
entities.
The Group\u2019s maximum exposure to loss from its interests in investee funds is equal to the total fair value of its investments in
investee funds and unfunded commitments.
Currency exposures
The currency exposures of our financial assets held at fair value are detailed below:
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
Fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Derivative financial assets | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
Fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Derivative financial assets | | | | | | |
| | | | | | |
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-367": {
"value": "
16 Financial assets and liabilities
Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities.
| | |
| | |
| | |
| | |
Financial assets at fair value | | |
| | |
| | |
| | |
\u00a0 \u2013 Investment grade | | |
| | |
| | |
Total debt securities and syndicate loans | | |
| | |
| | |
| | |
| | |
Total capital growth assets | | |
Total financial investments at fair value through statement of profit or loss | | |
Derivative financial assets | | |
Total financial assets at fair value | | |
Our capital growth assets have no defined maturity dates and have thus been excluded from the above maturity table. However,
all $159.4m (2021: $209.6m) of equity funds could be liquidated within two weeks, $416.8m (2021: $378.1m) of hedge fund
assets within six months and the remaining $113.8m (2021: $100.0m) of hedge fund assets within 18 months, in normal
market conditions. Illiquid credit assets are not readily realisable and principal will be returned over the life of these assets,
which may be up to 12 years.
| | |
| | |
| | |
Tier 2 subordinated debt (2026) | | |
Tier 2 subordinated debt (2029) | | |
Derivative financial liabilities | | |
Total financial liabilities | | |
The Group has given a fixed and floating charge over certain of its investments and other assets to secure obligations to Lloyd\u2019s
in respect of its corporate member subsidiary. Further details are provided in note 32.
Valuation hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a
whole. If the inputs used to measure the fair value of an asset or a liability could be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire measurement.
Level 1 \u2013 Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which
transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect
prices at which an orderly transaction would take place between market participants at the measurement date.
16 Financial assets and liabilities continued
Level 2 \u2013 Valuations based on quoted prices in markets that are not active, or based on pricing models for which significant
inputs can be corroborated by observable market data, directly or indirectly (e.g. interest rates and exchange rates). Level 2
inputs include:
\u2022Quoted prices for similar assets and liabilities in active markets;
\u2022Quoted prices for identical or similar assets and liabilities in markets that are not active, the prices are not current, or price
quotations vary substantially either over time or among market makers, or in which little information is released publicly;
\u2022Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves
observable at commonly quoted intervals, implied volatilities and credit spreads); and
\u2022Market corroborated inputs. Included within level 2 are government bonds and treasury bills, equity funds and corporate
bonds which are not actively traded, hedge funds and senior secured loans.
Level 3 \u2013 Valuations based on inputs that are unobservable or for which there is limited market activity against which to
measure fair value. The availability of financial data can vary for different financial assets and is affected by a wide variety of
factors, including the type of financial instrument, whether it is new and not yet established in the marketplace, and other
characteristics specific to each transaction. To the extent that valuation is based on models or inputs that are unobservable in
the market, the determination of fair value requires more judgement. Accordingly the degree of judgement exercised by
management in determining fair value is greatest for instruments classified in level 3. The Group uses prices and inputs that
are current as of the measurement date for valuation of these instruments.
Our valuation approach for fair value assets and liabilities classified as level 2:
a) For the Group\u2019s level 2 debt securities, our fund administrator obtains the prices used in the valuation from independent
pricing vendors. The independent pricing vendors derive an evaluated price from observable market inputs. These inputs are
verified in their pricing assumptions such as weighted average life, discount margins, default rates, and recovery and
prepayments assumptions for mortgage securities.
b) For our hedge funds , the pricing and valuation of each fund is undertaken by administrators in accordance with each
underlying fund\u2019s valuation policy. Individual fund prices are communicated by the administrators to all investors via the monthly
investor statements. The fair value of the hedge fund portfolios are calculated by reference to the underlying net asset values of
each of the individual funds.
c) Subordinated debt and tier 2 subordinated debt fair value are based on quoted market prices.
Our valuation approach for fair value assets and liabilities classified as level 3:
a) Our illiquid credit fund investments are managed by third party managers (generally closed ended limited partnerships or
open ended funds). While the funds provide full transparency on their underlying investments, the investments themselves are
predominantly in private and unquoted instruments. The valuation techniques used by the fund managers to establish the fair
value of the underlying private/unquoted investments may incorporate discounted cash flow models or a more market-based
approach, whilst the main inputs might include discount rates, fundamental pricing multiples, recent transaction prices, or
comparable market information to create a benchmark multiple.
b) The syndicate loans are loans provided by our Group syndicates to the Central Fund at Lloyd\u2019s in respect of the 2019 and
2020 underwriting years. These instruments are not tradeable and are valued using discounted cash flow models, designed to
appropriately reflect the credit and illiquidity risk of the instruments.
There were no changes in the valuation techniques during the year compared to those described in the Group's 2021 Annual
Report and Accounts.
16 Financial assets and liabilities continued
The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value
hierarchy.
| | | | |
| | | | |
| | | | |
Financial assets carried at fair value | | | | |
Fixed and floating rate debt securities | | | | |
| | | | |
| | | | |
\u00a0 \u2013 Investment grade | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Derivative financial assets | | | | |
Total financial assets carried at fair value | | | | |
Financial liabilities carried at fair value | | | | |
Derivative financial liabilities | | | | |
Financial liabilities not measured at fair value | | | | |
Tier 2 subordinated debt (2029) | | | | |
Tier 2 subordinated debt (2026) | | | | |
Total financial liabilities measured at fair value | | | | |
| | | | |
| | | | |
| | | | |
Financial assets carried at fair value | | | | |
Fixed and floating rate debt securities | | | | |
| | | | |
| | | | |
\u00a0 \u2013 Investment grade | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Derivative financial assets | | | | |
Total financial assets carried at fair value | | | | |
Financial liabilities carried at fair value | | | | |
Derivative financial liabilities | | | | |
Financial liabilities not measured at fair value | | | | |
Tier 2 subordinated debt (2029) | | | | |
Tier 2 subordinated debt (2026) | | | | |
Total financial liabilities measured at fair value | | | | |
16 Financial assets and liabilities continued
The table above does not include financial assets and liabilities that are, in accordance with the Group\u2019s accounting policies,
recorded at amortised cost, if the carrying amount of these financial assets and liabilities approximates their fair values at the
reporting date. Cash and cash equivalents have not been included in the table above; however, the full amount of cash and
cash equivalents would be classified under level 1 in both the current and prior year.
Transfers
The Group determines whether transfers have occurred between levels in the fair value hierarchy by assessing categorisation at
the end of the reporting period.
The following transfers between levels 1 & 2 for the period ended 31 December 2022 reflect the level of trading activities
including frequency and volume derived from market data obtained from an independent external valuation tool.
| | |
| | |
31\u00a0December 2022 vs 31\u00a0December 2021 transfer from level 2 to level 1 | | |
\u2013 Corporate Bonds \u2013 Investment grade | | |
| | |
| | |
31\u00a0December 2022 vs 31\u00a0December 2021 transfer from level\u00a0 1 to level 2 | | |
\u2013 Corporate Bonds \u2013 Investment grade | | |
| | |
The values shown in the transfer tables above are translated at foreign exchange rate as at 31\u00a0December 2022.
Level 3 investment reconciliations
The table below shows a reconciliation from the opening balances to the closing balances of level 3 fair values.
Unconsolidated structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant
activities are directed by means of contractual arrangements.
As part of its standard investment activities the Group holds fixed interest investments in high yield bond funds, as well as
capital growth investments in equity funds, hedge funds and illiquid credit assets which in accordance with IFRS 12 are
classified as unconsolidated structured entities. The Group does not sponsor any of the unconsolidated structured entities. The
assets classified as unconsolidated structured entities are held at fair value on the statement of financial position.
16 Financial assets and liabilities continued
As at 31 December the investments comprising the Group\u2019s unconsolidated structured entities are as follows:
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Investments through unconsolidated structured entities | | |
Apart from a relatively small exposure to high yield bond funds, our unconsolidated structured entity exposures fall within our
capital growth assets. The capital growth assets are held in investee funds managed by asset managers who apply various
investment strategies to accomplish their respective investment objectives. The Group\u2019s investments in investee funds are
subject to the terms and conditions of the respective investee fund\u2019s offering documentation and are susceptible to market
price risk arising from uncertainties about future values of those investee funds. Investment decisions are made after extensive
due diligence on the underlying fund, its strategy and the overall quality of the underlying fund\u2019s manager and assets.
The right to sell or request redemption of investments in high yield bond funds, asset backed securities, equity funds and
hedge funds ranges in frequency from daily to semi-annually. The Group did not sponsor any of the respective structured
entities.
The Group\u2019s maximum exposure to loss from its interests in investee funds is equal to the total fair value of its investments in
investee funds and unfunded commitments.
Currency exposures
The currency exposures of our financial assets held at fair value are detailed below:
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
Fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Derivative financial assets | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
Fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Derivative financial assets | | | | | | |
| | | | | | |
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-368": {
"value": "
16 Financial assets and liabilities
Set out below is a comparison of the carrying amounts and fair values of financial assets and liabilities.
| | |
| | |
| | |
| | |
Financial assets at fair value | | |
| | |
| | |
| | |
\u00a0 \u2013 Investment grade | | |
| | |
| | |
Total debt securities and syndicate loans | | |
| | |
| | |
| | |
| | |
Total capital growth assets | | |
Total financial investments at fair value through statement of profit or loss | | |
Derivative financial assets | | |
Total financial assets at fair value | | |
Our capital growth assets have no defined maturity dates and have thus been excluded from the above maturity table. However,
all $159.4m (2021: $209.6m) of equity funds could be liquidated within two weeks, $416.8m (2021: $378.1m) of hedge fund
assets within six months and the remaining $113.8m (2021: $100.0m) of hedge fund assets within 18 months, in normal
market conditions. Illiquid credit assets are not readily realisable and principal will be returned over the life of these assets,
which may be up to 12 years.
| | |
| | |
| | |
Tier 2 subordinated debt (2026) | | |
Tier 2 subordinated debt (2029) | | |
Derivative financial liabilities | | |
Total financial liabilities | | |
The Group has given a fixed and floating charge over certain of its investments and other assets to secure obligations to Lloyd\u2019s
in respect of its corporate member subsidiary. Further details are provided in note 32.
Valuation hierarchy
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy described as follows, based on the lowest level input that is significant to the fair value measurement as a
whole. If the inputs used to measure the fair value of an asset or a liability could be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire measurement.
Level 1 \u2013 Valuations based on quoted prices in active markets for identical instruments. An active market is a market in which
transactions for the instrument occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect
prices at which an orderly transaction would take place between market participants at the measurement date.
16 Financial assets and liabilities continued
Level 2 \u2013 Valuations based on quoted prices in markets that are not active, or based on pricing models for which significant
inputs can be corroborated by observable market data, directly or indirectly (e.g. interest rates and exchange rates). Level 2
inputs include:
\u2022Quoted prices for similar assets and liabilities in active markets;
\u2022Quoted prices for identical or similar assets and liabilities in markets that are not active, the prices are not current, or price
quotations vary substantially either over time or among market makers, or in which little information is released publicly;
\u2022Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves
observable at commonly quoted intervals, implied volatilities and credit spreads); and
\u2022Market corroborated inputs. Included within level 2 are government bonds and treasury bills, equity funds and corporate
bonds which are not actively traded, hedge funds and senior secured loans.
Level 3 \u2013 Valuations based on inputs that are unobservable or for which there is limited market activity against which to
measure fair value. The availability of financial data can vary for different financial assets and is affected by a wide variety of
factors, including the type of financial instrument, whether it is new and not yet established in the marketplace, and other
characteristics specific to each transaction. To the extent that valuation is based on models or inputs that are unobservable in
the market, the determination of fair value requires more judgement. Accordingly the degree of judgement exercised by
management in determining fair value is greatest for instruments classified in level 3. The Group uses prices and inputs that
are current as of the measurement date for valuation of these instruments.
Our valuation approach for fair value assets and liabilities classified as level 2:
a) For the Group\u2019s level 2 debt securities, our fund administrator obtains the prices used in the valuation from independent
pricing vendors. The independent pricing vendors derive an evaluated price from observable market inputs. These inputs are
verified in their pricing assumptions such as weighted average life, discount margins, default rates, and recovery and
prepayments assumptions for mortgage securities.
b) For our hedge funds , the pricing and valuation of each fund is undertaken by administrators in accordance with each
underlying fund\u2019s valuation policy. Individual fund prices are communicated by the administrators to all investors via the monthly
investor statements. The fair value of the hedge fund portfolios are calculated by reference to the underlying net asset values of
each of the individual funds.
c) Subordinated debt and tier 2 subordinated debt fair value are based on quoted market prices.
Our valuation approach for fair value assets and liabilities classified as level 3:
a) Our illiquid credit fund investments are managed by third party managers (generally closed ended limited partnerships or
open ended funds). While the funds provide full transparency on their underlying investments, the investments themselves are
predominantly in private and unquoted instruments. The valuation techniques used by the fund managers to establish the fair
value of the underlying private/unquoted investments may incorporate discounted cash flow models or a more market-based
approach, whilst the main inputs might include discount rates, fundamental pricing multiples, recent transaction prices, or
comparable market information to create a benchmark multiple.
b) The syndicate loans are loans provided by our Group syndicates to the Central Fund at Lloyd\u2019s in respect of the 2019 and
2020 underwriting years. These instruments are not tradeable and are valued using discounted cash flow models, designed to
appropriately reflect the credit and illiquidity risk of the instruments.
There were no changes in the valuation techniques during the year compared to those described in the Group's 2021 Annual
Report and Accounts.
16 Financial assets and liabilities continued
The following table shows the fair values of financial assets and financial liabilities, including their levels in the fair value
hierarchy.
| | | | |
| | | | |
| | | | |
Financial assets carried at fair value | | | | |
Fixed and floating rate debt securities | | | | |
| | | | |
| | | | |
\u00a0 \u2013 Investment grade | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Derivative financial assets | | | | |
Total financial assets carried at fair value | | | | |
Financial liabilities carried at fair value | | | | |
Derivative financial liabilities | | | | |
Financial liabilities not measured at fair value | | | | |
Tier 2 subordinated debt (2029) | | | | |
Tier 2 subordinated debt (2026) | | | | |
Total financial liabilities measured at fair value | | | | |
| | | | |
| | | | |
| | | | |
Financial assets carried at fair value | | | | |
Fixed and floating rate debt securities | | | | |
| | | | |
| | | | |
\u00a0 \u2013 Investment grade | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Derivative financial assets | | | | |
Total financial assets carried at fair value | | | | |
Financial liabilities carried at fair value | | | | |
Derivative financial liabilities | | | | |
Financial liabilities not measured at fair value | | | | |
Tier 2 subordinated debt (2029) | | | | |
Tier 2 subordinated debt (2026) | | | | |
Total financial liabilities measured at fair value | | | | |
16 Financial assets and liabilities continued
The table above does not include financial assets and liabilities that are, in accordance with the Group\u2019s accounting policies,
recorded at amortised cost, if the carrying amount of these financial assets and liabilities approximates their fair values at the
reporting date. Cash and cash equivalents have not been included in the table above; however, the full amount of cash and
cash equivalents would be classified under level 1 in both the current and prior year.
Transfers
The Group determines whether transfers have occurred between levels in the fair value hierarchy by assessing categorisation at
the end of the reporting period.
The following transfers between levels 1 & 2 for the period ended 31 December 2022 reflect the level of trading activities
including frequency and volume derived from market data obtained from an independent external valuation tool.
| | |
| | |
31\u00a0December 2022 vs 31\u00a0December 2021 transfer from level 2 to level 1 | | |
\u2013 Corporate Bonds \u2013 Investment grade | | |
| | |
| | |
31\u00a0December 2022 vs 31\u00a0December 2021 transfer from level\u00a0 1 to level 2 | | |
\u2013 Corporate Bonds \u2013 Investment grade | | |
| | |
The values shown in the transfer tables above are translated at foreign exchange rate as at 31\u00a0December 2022.
Level 3 investment reconciliations
The table below shows a reconciliation from the opening balances to the closing balances of level 3 fair values.
Unconsolidated structured entities
A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant
activities are directed by means of contractual arrangements.
As part of its standard investment activities the Group holds fixed interest investments in high yield bond funds, as well as
capital growth investments in equity funds, hedge funds and illiquid credit assets which in accordance with IFRS 12 are
classified as unconsolidated structured entities. The Group does not sponsor any of the unconsolidated structured entities. The
assets classified as unconsolidated structured entities are held at fair value on the statement of financial position.
16 Financial assets and liabilities continued
As at 31 December the investments comprising the Group\u2019s unconsolidated structured entities are as follows:
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Investments through unconsolidated structured entities | | |
Apart from a relatively small exposure to high yield bond funds, our unconsolidated structured entity exposures fall within our
capital growth assets. The capital growth assets are held in investee funds managed by asset managers who apply various
investment strategies to accomplish their respective investment objectives. The Group\u2019s investments in investee funds are
subject to the terms and conditions of the respective investee fund\u2019s offering documentation and are susceptible to market
price risk arising from uncertainties about future values of those investee funds. Investment decisions are made after extensive
due diligence on the underlying fund, its strategy and the overall quality of the underlying fund\u2019s manager and assets.
The right to sell or request redemption of investments in high yield bond funds, asset backed securities, equity funds and
hedge funds ranges in frequency from daily to semi-annually. The Group did not sponsor any of the respective structured
entities.
The Group\u2019s maximum exposure to loss from its interests in investee funds is equal to the total fair value of its investments in
investee funds and unfunded commitments.
Currency exposures
The currency exposures of our financial assets held at fair value are detailed below:
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
Fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Derivative financial assets | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Financial assets at fair value | | | | | | |
Fixed and floating rate debt securities | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Derivative financial assets | | | | | | |
| | | | | | |
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-369": {
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17 Derivative financial instruments
The Group uses a variety of derivative financial instruments, including both over-the-counter and exchange traded contracts.
These derivatives help the Group to manage exposure to market and foreign currency and/or interest rate risk on existing
assets or liabilities. The Group had the right and the intention to settle each contract on a net basis.
The assets and liabilities of these contracts at 31 December are detailed below:
| | | | |
| | |
| | Market value of derivative position | | Market value of derivative position |
Derivative financial instrument assets | | | | |
Foreign exchange forward contracts | | | | |
| | | | |
| | | | |
Foreign exchange forward contracts
The Group utilises over-the-counter foreign exchange forward agreements to economically hedge the foreign currency risk
resulting from transactions and balances held in currencies that are different to the functional currency of the Group.
Bond futures positions
The Group utilises bond futures transactions for the purpose of efficiently managing the term structure of its interest rate
exposures. A negative gross contract amount represents a notional short position that generates positive fair value as interest
rates rise.
",
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},
"f-370": {
"value": "
18 Insurance receivables
| | |
Recoverable from reinsurers | | |
Claims reported and loss adjustment expenses | | |
Claims incurred but not reported | | |
Reinsurers' share of claims liabilities | | |
| | |
Total reinsurers' share of insurance liabilities | | |
The gross claims reported, the loss adjustment liabilities and the liabilities for claims incurred but not reported are net of
recoveries from salvage and subrogation.
24 Insurance liabilities and reinsurance assets continued
24.1 Movements in insurance liabilities and reinsurance assets
a)Claims and loss adjustment expenses`
| | | | | | |
| | | | | | |
| | | | | |
Claims reported and loss adjustment expenses | | | | | | |
Claims incurred but not reported | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Arising from current year claims | | | | | | |
Arising from prior year claims | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Claims reported and loss adjustment expenses | | | | | | |
Claims incurred but not reported | | | | | | |
| | | | | | |
| | | | | | |
24 Insurance liabilities and reinsurance assets continued
b)Unearned premiums reserve
24 Insurance liabilities and reinsurance assets continued
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Estimated total ultimate losses ($m) | | | | | | | | | | | | |
| | | | | | | | | | | | |
Less unearned portion of ultimate losses ($m) | | | | | | | | | | | | |
Net claims liabilities ($m) | | | | | | | | | | | | |
Analysis of movements in loss development tables
We have updated our loss development tables to show the ultimate loss ratios as at 31 December 2022 for each underwriting
year. The impact of amounts reported in respect of the unexpired risk reserve are embedded within the loss ratios presented.
Cyber Risks
The 2021 underwriting year has released following favourable experience. The 2019 and 2020 underwriting years have
strengthened in response to adverse claims development on existing claims. However, as these years are recovering under
aggregate excess of loss reinsurance programmes, the impact is reduced net of reinsurance.
Digital
The deterioration on the 2018 underwriting year arises from adverse claims experience on the tech & media private enterprise
class. The recent underwriting years have released following the expiry of risk.
MAP Risks
The 2019 to 2021 underwriting years have been impacted by the Russian invasion of Ukraine. The impact is lower net of
reinsurance as a result of the excess of loss reinsurance programmes in place.
24 Insurance liabilities and reinsurance assets continued
Property Risks
Favourable developments on attritional claims and established catastrophe events have led to releases on the 2019 and 2020
underwriting years. The 2021 underwriting year has been impacted by weather related events in the US during 2022. The
impact is less gross of reinsurance due to favourable developments on established catastrophe events.
Specialty Risks
The 2017 and 2018 underwriting years have seen adverse claims development gross of reinsurance predominantly driven by
the healthcare book. Both these years are recovering under aggregate excess of loss reinsurance programmes, so the impact is
lower net of reinsurance. Recent underwriting years continue to improve as the risk expires.
Claim releases
The below table analyses our net claims between current year claims and adjustments to prior year net claims reserves. These
have been broken down by segment and underwriting year. Beazley\u2019s reserving policy is to maintain catastrophe reserve
margins either until the end of the exposure period or until catastrophe events occur. Therefore margins have been released
from prior year reserves where risks have expired during 2022.
The below table has been prepared on an underwriting year of account basis, whereas the net loss development tables on
pages 219 to 220 have been prepared on an accident year basis in relation to our US admitted business. However, in
aggregate the net release or strengthening is consistent.
Reserve releases during the year totalled $132.6m (2021: $209.8m). The net of reinsurance estimates of ultimate claims
costs have improved on the 2021, 2020 and 2019 and earlier underwriting years, with releases of $13.3m, $96.6m and
$22.7m respectively. Our MAP Risks division saw strong releases across all years of account, while the other four divisions
each saw a strengthening on one of the years of account. Our Cyber Risks division saw a large strengthening on the 2020 year
of account, while Specialty Risks saw a strengthening on 2019 year and earlier.
The movements shown on 2019 and earlier are absolute claim movements and are not impacted by any current year
movements in premium on those underwriting years.
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
\u2013 2019 underwriting year and earlier | | | | | | |
\u2013 2020 underwriting year | | | | | | |
\u2013 2021 underwriting year | | | | | | |
| | | | | | |
| | | | | | |
The total impairment provision in the statement of financial position in respect of reinsurance assets past due by more than 30
days at 31 December was $17.3m (2021: $2.1m). This provision in respect of overdue reinsurance recoverables is included
within the total provision of $29.3m.
Operating expenses include an impairment loss / (write back) on reinsurance assets of $17.8m (2021: $(3.3)m).",
"dimensions": {
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20 Cash and cash equivalents
",
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21 Share capital
| | | | |
| | | | |
| | | |
Ordinary shares of 5p each | | | | |
| | | | |
| | | | |
Issue of shares to satisfy employee share schemes | | | | |
| | | | |
| | | | |
issued at a price of 575 pence per share, representing a discount of 8.0% to the closing share price of 625 pence on 15
November 2022. In aggregate, the equity raise represented gross proceeds of \u00a3350.5m ($415.8m) and net proceeds of
\u00a3340.8m ($404.4m). The company incurred other transaction costs of $0.7m which were recognised in the consolidated
statement of profit or loss.
21 Share capital continued
The 60,403,895 Placing Shares were issued for non-cash consideration by way of a 'cash box' structure structure. involving a
newly incorporated subsidiary of the company (\u2018Cash Box\u2019). This structure involved the issue of ordinary and preference shares
by Cash Box to one of the investment banks advising the company in respect of the equity raise. These preference and ordinary
shares were subsequently acquired by the company and the preference shares were redeemed by Cash Box. The acquisition by
the company of the ordinary shares in Cash Box held by the investment bank resulted in the company securing over 90% of the
equity share capital of Cash Box. The company was therefore able to rely on Section 612 of the Companies Act 2006, which
provides relief from the requirements under Section 610 of the Companies Act 2006 to create a share premium account.
Therefore, no share premium was recorded in relation to the Placing shares.
The premium over the nominal value of the Placing shares was credited to a merger reserve and subsequently recognised in
retained earnings. The merger reserve created was determined to be distributable for the purposes of the Companies Act 2006.
Certain Directors of the company participated in the equity raise via the Placing Shares and the 26,086 Subscription Shares.
Retail investors were able to participate in the equity raise on the same terms as institutional investors via the retail offer,
which was hosted on the PrimaryBid platform. A total of 529,036 Retail Offer Shares were issued, and Share Premium of
$3.6m was recognised.",
"dimensions": {
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},
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"value": "
22 Other reserves
| | | |
| Employee share options reserve | Employee share trust reserve | |
| | | |
| | | |
Balance at 1\u00a0January 2021 | | | |
| | | |
Tax on share option vestings | | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2021 | | | |
| | | |
Tax on share option vestings | | | |
Acquisition of own shares held in trust | | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2022 | | | |
| | | |
| Employee share options reserve | Employee share trust reserve | |
| | | |
| | | |
Balance at 1\u00a0January 2021 | | | |
| | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2021 | | | |
| | | |
Acquisition of own shares held in trust | | | |
Transfer of shares to employees | | | |
Balance at 31\u00a0December 2022 | | | |
The merger reserve is shown within the statement of changes in equity as a separate category and as such has been excluded
from the other reserves note.
The employee share options reserve is held in accordance with IFRS 2: Share-based payment. For more information refer to
note 23.2.
More information on the employee share trust reserve is included in note 23.
",
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"value": "
23 Equity compensation plans
23.1 Employee share trust
| | | | |
| | | | |
| | | | |
Movements in employee share trust reserve | | | | |
| | | | |
| | | | |
Transfer of shares to employees | | | | |
| | | | |
The shares are owned by the employee share trust to satisfy awards under the Group\u2019s deferred share plan, retention plan, one-
off share incentive plan and long term incentive plan (LTIP). These shares are purchased on the market and carried at cost.
On the third anniversary of an award the shares under the deferred share plan are transferred from the trust to the employee.
Under the retention plan, on the third anniversary, and each year after that up to the sixth anniversary, 25.0% of the shares
awarded are transferred to the employee.
The deferred share plan is recognised in the statement of profit or loss on a straight-line basis over a period of three years,
while the retention share plan is recognised in the statement of profit or loss on a straight-line basis over a period of six years.
23.2 Employee share option plans
The Group has a long term incentive plan (LTIP), one-off share incentive plan, deferred share plan, retention plan and save-as-
you-earn (SAYE) plan that entitle employees to purchase shares in the Group.
The terms and conditions of the grants are as follows:
| | | | |
| | | | Contractual life of options |
| | | Five year\u2019s service + NAV + minimum shareholding requirement | |
| | |
| | |
| | |
| | |
| | |
| | | Three year\u2019s service + NAV + minimum shareholding requirement | |
| | |
| | |
| | |
| | | Three years\u2019 service | |
| | |
| | |
| | | | |
| | |
| | | | |
Total share options outstanding | | | | |
Vesting conditions
In summary the vesting conditions are defined as:
\u2022two years\u2019 service \u2013 an employee has to remain in employment until the second anniversary from the grant date;
\u2022three years\u2019 service \u2013 an employee has to remain in employment until the third anniversary from the grant date; and
\u2022NAV \u2013 the NAV growth, after adjusting for the effect of dividends, is greater than the risk-free rate of return plus a premium
per year.
23 Equity compensation plans continued
Further details of equity compensation plans can be found in the Directors\u2019 remuneration report on pages 112 to 139. The total
gain on Directors\u2019 exercises of share option plans during the period was \u00a30.2m (2021: \u00a3nil).
The number and weighted average exercise prices of share options are as follows:
| | | | |
| | |
| Weighted average exercise price (pence per share) | | Weighted average exercise price (pence per share) | |
| | | | |
Forfeited during the year | | | | |
Exercised during the year | | | | |
| | | | |
Outstanding at 31 December | | | | |
Exercisable at 31 December | | | | |
1The weighted average share price at the point of exercise of these options was 498.7p.
2The weighted average share price at the point of exercise of these options was 366.2p.
The range of exercise prices for options outstanding at the end of the year was \u00a30 to \u00a34.56 (2021: \u00a30 to \u00a34.56). The weighted
average remaining contractual life for the outstanding options at end of the year was 1.89 years (2021: 1.87 years).
The share option programmes allow Group employees to acquire shares of the company. The fair value of options granted is
recognised as an employee expense with a corresponding increase in the employee share options reserve. The fair value of the
options granted is measured at grant date and spread over the period in which the employees become unconditionally entitled
to the options. The fair value of the options granted is measured using the Black Scholes model, taking into account the terms
and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest.
The following is a summary of the assumptions used to calculate the fair value of share options awarded during the period:
| | |
| | |
| | |
Share options charge to employee share options reserve | | |
| | |
Weighted average share price (pence per option) | | |
Weighted average fair value (pence per option) | | |
Weighted average exercise price (pence per option) | | |
Average expected life of options | | |
| | |
| | |
Average risk-free interest rate | | |
| | |
Weighted average share price (pence per option) | | |
Weighted average fair value (pence per option) | | |
Weighted average exercise price (pence per option) | | |
Average expected life of options | | |
| | |
| | |
Average risk-free interest rate | | |
The expected volatility is based on historic volatility over a period of at least two years.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTermsAndConditionsOfSharebasedPaymentArrangementExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-376": {
"value": "
25 Borrowings
The carrying amount and fair values of the non-current borrowings are as follows:
| | | |
| Tier 2 subordinated debt (2029) | Tier 2 subordinated debt (2026) | |
| | | |
Balance at 1\u00a0January 2021 | | | |
Amortisation of capitalised borrowing costs | | | |
Balance at 31\u00a0December 2021 | | | |
Amortisation of capitalised borrowing costs | | | |
Balance at 31\u00a0December 2022 | | | |
Lease liabilities
| | | | |
| | | | |
| | | | |
Balance at 1\u00a0January 2022 | | | | |
| | | | |
Interest on lease liabilities and dilapidation provision | | | | |
Additions to lease portfolio | | | | |
Foreign exchange translation differences | | | | |
Balance at 31\u00a0December 2022 | | | | |
Right of use assets
| | | | |
| | | | |
| | | | |
Balance at 1\u00a0January 2021 | | | | |
Depreciation charge for the year | | | | |
Additions of right of use assets | | | | |
Disposals of right of use assets | | | | |
Foreign exchange translation differences | | | | |
Balance at 31\u00a0December 2021 | | | | |
29 Leases continued
Lease liabilities
| | | | |
| | | | |
| | | | |
Balance at 1\u00a0January 2021 | | | | |
| | | | |
Interest on lease liabilities | | | | |
Additions to lease portfolio | | | | |
Foreign exchange translation differences | | | | |
Balance at 31\u00a0December 2021 | | | | |
Amounts recognised in profit or loss
| | |
| | |
| | |
| | |
Interest on lease liabilities | | |
| | |
Income from sub-leasing right of use assets | | |
Expenses relating to low value leases | | |
Expenses relating to short-term leases | | |
Total recognised in profit or loss | | |
Extension options
Some property leases contain extension options exercisable by the Group before the end of the non-cancellable contract period
or the option to continue with the lease on a monthly rolling basis. The Group reassess whether it is reasonably certain to
exercise the options if there is a significant event or changes in circumstances within its control.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfLeasesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-380": {
"value": "
30 Related party transactions
The Group and company have related party relationships with syndicates 623, 4321, 5623, 6107, its subsidiaries, associates
and its Directors.
30.1 Syndicates 623, 4321, 5623 and 6107
The Group received management fees and profit commissions for providing a range of management services to syndicates 623
and 6107 which are all managed by the Group. In addition, the Group ceded portions or all of a group of insurance policies to
syndicates 6107 and 5623. The participants on syndicates 623, 6107 and 5623 are solely third party capital while the Group
provides 10% of the capital for syndicate 4321.
Details of transactions entered into and the balances with these syndicates are as follows:
| | |
| | |
| | |
Written premium ceded to syndicates | | |
Other income received from syndicates | | |
| | |
| | |
Due (to) / from syndicate 623 | | |
| | |
| | |
30.2 Key management compensation
| | |
| | |
| | |
Salaries and other short term benefits | | |
| | |
| | |
| | |
30 Related party transactions continued
The key management of Beazley plc as a standalone entity is deemed to be the same as that of the wider Beazley Group. The
majority of costs are incurred by other Group companies and are not recharged to the Company. Amounts paid to key
management by Beazley plc were $1.1m (2021: $1.1m).
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-381": {
"value": "
30.2 Key management compensation
| | |
| | |
| | |
Salaries and other short term benefits | | |
| | |
| | |
| | |
Please see page 232 for registered addresses.
31 Parent company and subsidiary undertakings continued
The following is a list of Group registered office locations:
| | | |
| | | |
United Kingdom and Continental Europe | | | |
| | | |
C/O RSM UK Restructuring Advisory LLP, 25 Farringdon Street ~ | | | |
| | | |
| | | |
| | | |
| | | |
2711 Centerville Road Suite 400** | | | |
30 Batterson Park Road*** | | | |
160 Greentree Drive, Suite 101**** | | | |
55 University Avenue, Suite 550 | | | |
| | | |
138 Market Street, 03-04 Capita Green | | | |
Kensington Gardens, No. I1317, Lot 7616, Jalan Jumidar Buyong | | | |
| | | |
Level 15, 1 O\u2019Connell Street | | | |
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-383": {
"value": "Beazley plc",
"dimensions": {
"concept": "ifrs-full:NameOfUltimateParentOfGroup",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-384": {
"value": "Beazley plc",
"dimensions": {
"concept": "ifrs-full:NameOfParentEntity",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-385": {
"value": "
32 Contingencies
Funds at Lloyd\u2019s
The following amounts are held in trust by Lloyd\u2019s to secure underwriting commitments:
| | |
| | |
| | |
| | |
| | |
Financial assets at fair value and cash | | |
Letters of credit (\u2018LOC\u2019) | | |
Total Funds at Lloyd\u2019s | | |
The funds are held in trust and can be used to meet claims liabilities should syndicates fail to meet their claim liabilities. The
funds can be only used to meet claim liabilities of the relevant member.
Since 2020, $225m under the Group\u2019s syndicated short term banking facility has been utilised as letters of credit placed as
Funds at Lloyd\u2019s (FAL) to provide capital support for the Group\u2019s underwriting at Lloyd\u2019s. Letters of credit issued under the
facility are uncollateralised. No liability was recognised for these letters of credit in the current or prior period, amounts would
only become due if the letters of credit were called upon to fund liabilities.
Other than the letters of credit these balances are included within financial assets at fair value and cash and cash equivalents
on the statement of financial position.
",
"dimensions": {
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"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
}
},
"f-386": {
"value": "
34 Subsequent events
There are no events that are material to the operations of the Group that have occurred since the reporting date.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory",
"language": "en",
"entity": "scheme:213800VTOMUWD41GIT12",
"period": "2022-01-01T00:00:00/2023-01-01T00:00:00"
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}
}
}