Why don’t Beazley’s numbers add up?

See if you can spot the apparent mistake in the table below:

Did you get it? Here’s a clue: try dividing the 2022 net asset value by the share count. Now compare your answer to the 2022 net asset value per share.

The table is from Beazley’s recently released annual report (PDF link). The FTSE 100-listed Lloyd’s of London insurer describes net asset value per share as its “central key performance indicator”. Since 2012 it has been the only metric used for management’s long-term incentive plan.

It therefore matters quite a lot whether Beazley’s 2022 NAV was more than $4.20 per share, as reported above, or less than $3.87 per share, as the application of simple arithmetic would indicate. By our calculations, using the share count data provided, actual dollar-value growth would be approximately half the 20 per cent rate Beazley reported.

So, what explains the headline $4.20 per-share NAV given above? There’s a possible clue on page 232 of the annual report:

Using a 611.7mn share count makes sense of the higher NAV figure. This doesn’t seem to be “shares in issue at the end of the period”, however, even though that’s what’s stated both in the above blurb and the table. Instead, it looks like a net weighted average of the shares in issue during the year.

When reporting net assets it’s normal to use a period-end share count. Weighted averages are used mostly when calculating earnings per share, as per Financial Reporting Council guidance. That’s the context in which Beazley uses the lower figure elsewhere, such as on page 194:

Beazley’s weighted and period-end share counts are particularly far apart for 2022 because, in November, it issued more than 60mn shares via a cashbox placing to raise £350.5mn.

When launching the placing, Beazley reassured on capital levels and talked about investing to “deliver outsized returns” from its specialty and cyber lines. New shares were priced substantially above NAV, at 575p apiece, meaning the cash also helped improve the per-share metrics used for the LTIP scheme.

Beazley management is this week on a post-results roadshow. The company has not yet been able to respond to our questions; we’ll update this post as soon as it does.

(Hat tip, Manesh)