Three out of four of the major European reinsurers reported their profits were negatively affected as a result of elevated natural catastrophe claims and a first round of claims reserves from the Russia-Ukraine war, according to Fitch Ratings in a report.
Swiss Re, Hannover Re and SCOR all reported combined ratios close to or above 100% in Q1 2022 – 103.7%, 99.5%, and 103.7%, respectively. (A combined ratio above 100% indicates an underwriting loss).
By contrast, Munich Re’s “diverse property portfolio meant it was better able to digest nat cat claims than peers, and it reported a combined ratio of 91.3%,” said Fitch in the report titled “European Reinsurance Dashboard: 1Q22 Results.”
“Normalized combined ratios deteriorated to 98% on average (1Q21: 95%), showing the mounting strain on underwriting results from inflationary pressures,” said Fitch.
Top Europe Reinsurers’ Q1 Results
Munich Re generated a Q1 profit of €608 million (US$632.6 million), compared with €589 million (US$612.9 million) in Q1 2022.
Swiss Re reported group net loss of US$248 million during the first quarter, compared with net income of US$333 million in Q1 2021.
Hannover Re reported Q1 net income of €264 million (US$274.7 million), a 13.8% decrease from €306 million (US$318.4 million) during the same period last year.
SCOR reported net loss of €80 million (US$83.2 million) in Q1 2022, compared with net income of €45 million (US$46.8 million) in Q1 2021.
Decline in RoE
“Elevated natural catastrophe claims, a first round of booked reserves for the Russia–Ukraine war, high COVID-19 mortality claims, and valuation losses for credit and equity investments all contributed to the decline in the average return on equity to 2.4% in 1Q22 from 7.4% a year ago,” Fitch continued in its report.
The four reinsurers “took advantage of very good market conditions and grew their non-life books that were up for renewal at 1 April 2022 by 8%–20%,” the ratings agency said, noting, however, that price increases continued to decelerate from the January 2022 levels.
Fitch said investment income declined significantly in Q1 2022 for Munich Re, SCOR SE and Swiss Re “as negative valuation adjustments on credit and/or equity investments reduced investment income.”
Conversely, inflation-linked bonds’ performance was strong for the quarter, which helped maintain strong results at Hannover Re, said Fitch.
“Elevated COVID-19 mortality claims in life reinsurance also added to a weaker return on equity for all four reinsurers, which declined to 2.4% on average from 7.4% a year ago.”
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