Fitch Ratings has affirmed Beazley Insurance Designated Activity Company's (Beazley Insurance DAC) Insurer Financial Strength Rating (IFS) at 'A+'.

It has also affirmed the Issuer Default Ratings (IDR) of Beazley Insurance DAC and ultimate parent and holding company of the group, Beazley plc (together, Beazley) at 'A'. The Outlooks are Stable.

A full list of rating actions is below.

KEY RATING DRIVERS

The affirmation reflects Beazley's very strong capitalisation and leverage, financial performance and reserve adequacy and strong business profile.

Fitch believes that Beazley will maintain a very strong capital position following a capital raise of approximately USD300 million in May 2020, despite the uncertainty regarding the ultimate adverse impact of the pandemic. This is reflected in an estimated Fitch Prism Factor-Based Model (FBM) score of 'Very Strong' category based on 1H20 numbers, despite losses arising from claims relating to Covid-19. The group's financial leverage ratio (FLR) was 23% at 1H20 (end-2019: 26%), which Fitch views as very strong.

Fitch expects Beazley's underlying run-rate earnings to remain very strong, supported by double-digit rate increases during 2020. However, Beazley's 2020 earnings will be heavily impacted by one-off Covid-19 claims net of reinsurance of USD340 million, increased by Beazley's previous estimate of USD170 million driven by further events cancellation losses. Fitch expects the outcome of the FCA test case regarding business interruption claims to have a limited impact on Beazley.

Fitch views Beazley's business profile as strong. Its gross written premiums (GWP) grew by 16% to USD2.5 billion in 3Q20 (3Q19: USD2.1 billion), supported mainly by growth in cyber and executive risk and specialty lines. Beazley's business profile score is supported by the group's favourable diversification by geography and line of business, but constrained by its operating scale, which Fitch views as moderate compared with that of all other UK non-life insurance companies.

Fitch believes that Beazley's reserve adequacy is very strong and will continue to contribute to technical profitability. The group targets a margin on net held reserves of 5%-10% above the actuarial estimate, which in itself has a prudential margin within it, and has been able to report continuous strong prior-year reserve releases. The margin in net held reserves above the actuarial estimate is 7.0% in 2020 (2019: 6.8%).

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

A material adverse change in Fitch's rating assumptions with respect to the coronavirus impact.

Prism FBM score declines to the lower end of the 'Strong' category.

Deterioration in profitability, reflected in a combined ratio above 100% on a sustained basis or net income return on equity below 8% assuming normal levels of catastrophe losses.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

A material positive change in Fitch's rating assumptions with respect to the coronavirus impact.

An upgrade of Beazley's ratings is unlikely given the group's business profile, which we do not expect to improve materially in the medium term.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579]

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG CONSIDERATIONS

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

RATING ACTIONS

ENTITY/DEBT	RATING		PRIOR
Beazley Insurance DAC	LT IDR	A 	Affirmed		A
Ins Fin Str	A+ 	Affirmed		A+

subordinated

LT	BBB+ 	Affirmed		BBB+
Beazley plc	LT IDR	A 	Affirmed		A

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

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