The Beazley share price rockets 15% on trading statement, dividend hopes!

The Beazley share price is soaring on an otherwise-quiet day for UK shares. Here’s why the insurance colossus has sprinted to multi-week highs.

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It’s another flattish day on UK share markets as Covid-19 jitters dampen investor appetite. Both the FTSE 100 and FTSE 250 are up by the merest of fractions in Friday trading. But there are some exceptions to this theme. The Beazley (LSE: BEZ) share price, for instance, has ripped 15% higher from last night’s close.

At 370p per share, Beazley is currently trading at its most expensive since early January. Much fanfare around the specialist insurance provider’s full-year trading statement has prompted the share price to detonate.

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Beating City forecasts

At first glance there’s doesn’t seem much to celebrate. Beazley reported a pre-tax loss of $50.4m for 2020, swinging from a profit of $267.7m a year earlier.

However, the market has cheered the fact that losses were less severe than anticipated. City analysts had expected the UK share’s pre-tax losses to be around double that $50.4m figure.

Beazley said that Covid-19 had adversely affected “a number of lines of business” last year. It said that the impact was felt most keenly at its contingency book as major events were postponed or cancelled across the globe.

All in all, Beazley made first-party losses of around $340m due to the pandemic, it said. Unsurprisingly, the insurance giant added that it expects further pain to come. However, it has taken steps to lessen the impact on its longer-tail liability classes where claims are anticipated to rise from this year onwards.

In other news, the company’s combined ratio rose nine percentage points from 2019 levels, to 109%, reflecting that significant increase in Covid-19-related claims.

Meanwhile, it saw gross premiums soar 19% year on year in 2020. This figure clocked in at $3.6bn and was supported by rate increases across Beazley’s divisions.

Hand holding pound notes

Beazley to reintroduce dividends soon?

Despite last year’s losses, Beazley chief executive Andrew Horton struck an upbeat tone. He said: “I am very positive about the year ahead. We have the capital strength to support our growth plans and look forward to a continued favourable rate environment and expansion of our specialist products globally.”

Investors have also responded positively to suggestions that dividends could be resumed at the business soon. Beazley said that last year’s heavy loss and uncertainty concerning Covid-19 prompted it to decide against paying a dividend at the end of that year.

However, it added that it is “fully committed to the progressive dividend strategy, and… focused on profitability and returning to paying dividends in 2021.”

City forecasts for Beazley could change in the event of the Covid-19 crisis persisting long into 2021. But today the number crunchers reckon the UK share will bounce back into the black this year and record pre-tax profits of $205m. They reckon the company will pay an 11.9p per share dividend in 2021 too. This creates a 3.2% dividend yield.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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