Global non-life reinsurer profits to peak in 2024: Fitch Ratings

Fitch Ratings has released mid-year underwriting results for 19 general reinsurers, finding the group’s average combined ratio for the first half of 2024 was 84.2 and forecasting continued profits for the rest of 2024 and 2025.

But while reinsurers will continue to maintain underwriting discipline and achieve favorable yields in 2025, “margins will peak in 2024,” Fitch Ratings analysts said in their mid-2024 report.

“Fitch anticipates that market conditions will continue to support attractive returns for reinsurers through 2025 as rates are generally adequate, with supply and demand reaching a balance,” said the report, in which Fitch analysts also estimate that premiums written net of general reinsurance. increased by 6% in the first half of 2024 compared to the first half of 2023.

Munich Re and Swiss Re Both Top List of Largest Reinsurers in 2023

Premium growth reflects “strong performance during reinsurance renewals as market conditions remained favorable,” the report said.

While premium growth is likely to continue, it will happen “at a reduced pace as the market becomes more competitive,” the report said.

The report refers to an equilibrium point that the reinsurance market has reached “with an increased supply of capital from retained earnings meeting the higher demand for reinsurance protection from precedents”.

With that balance already achieved, “Fitch expects market rates to be largely flat in 2025 and terms to remain broadly stable,” the report said, backing the forecast for a peak in profit margins in 2024.

Still, discipline remains a feature of reinsurance markets in 2024 and 2025, the report suggests, pointing to limited new capacity entering the market, deteriorating US casualty loss cost trends due to social inflation, and increased catastrophe risk and climate change .

The report includes charts of revenues, combined ratios and shareholders’ equity for four reinsurers reporting results using a new accounting standard, IFRS 17, and for 15 additional reinsurers. Below, we’ve extracted some of the results to show all four IFRS 17 filings and seven of the others – those with net written premiums of $2 billion or more.

For those reinsurers using IFRS 17 as their accounting standard, the report shows reported income from general reinsurance rather than net written premiums, and the combined reports of IFRS 17 reporters include the impact of the update.

Overall, the aggregate combined ratio for the 19 reinsurers, at 84.2, improved from 85.9 in the first half of 2023. For the first half of 2024, the combined ratio included approximately 5.9 points attributable to catastrophe losses — down from 6.9 points in the same semester. last year’s period. And the evolution of loss reserves was about 0.5 points less favorable, reducing the combined ratio for the group of 19 companies by 2.8 points this year, compared with 3.3 points last year.

An annex to the report also shows life reinsurance results for eight of the reinsurers, including all four IFRS 17 reporters.

Adding together general and life reinsurance income for the two biggest – Munich Re and Swiss Re – produces a higher total for Munich Re in the first six months of the year. Fitch’s analysis shows that Munich Re’s net reinsurance income for the first half of 2024 is $20.6 billion — $14.2 billion for non-life business and $6.4 billion for life. Swiss Re’s total revenue for the first half of the year stands at $17.2 billion – adding $9.1 billion in non-life premiums and $8.1 billion in life premiums for the period.

Mixed results

While Fitch calculated a global growth rate of 6% for the 19 general reinsurers and a 1.7 point improvement in the combined ratio in the first half of 2024, a handful reported extraordinary premium growth and nearly half saw their combined rates increase.

On the growth front, RenaissanceRe’s net written premiums increased 35% in the first half of 2024 compared to the first half of 2023. Fitch reported that this was driven by the renewal of business acquired following the acquisition of Validus Holdings, Ltd. from American International Group, Inc. in November 2023.

Among the larger reinsurers, Everest and Arch Capital each reported premium growth of nearly 20%. Smaller players Hamilton Insurance Group and Aspen Insurance Holdings posted increases of 38% and 30% in the first half of the year to $788 million and $571 million, respectively.

Reinsurers with premium declines included PartnerRe (-8.8 percent), AXIS Capital Holdings (-6.3 percent) and SiriusPoint (-3.9 percent). According to Fitch, AXIS increased premiums ceded under a rate rollback agreement, while SiriusPoint had lower net premiums in the US and Bermuda casualty specialty.

While nine of the 19 reinsurers saw their combined impaired ratios deteriorate anywhere from 0.1 to more than 14 basis points, PartnerRe led the pack, with its H1 2024 combined ratio increasing by 14.4 basis points , at 97.9. SiriusPoint’s combined ratio rose 13.9 points to 87.3 in the first half of 2024.

The Fitch report also includes discussion of potential M&A activity in the global reinsurance sector and the impact of alternative capital.

• Reinsurance M&A deals could return as organic opportunities slow and the market inevitably becomes soft again.
• Fitch expects continued strong supply growth in the alternative reinsurance capital market through 2025, barring substantial ILS catastrophe losses in the second half of 2024.

Bottom line, Fitch said the 19 reinsurers analyzed in the report generated a net return on equity of 19.9 percent in the first half of 2024 – right in line with an ROE result of 20.1 percent for the first half of the year 2023.

SCOR SE was the only company to report a net loss from a charge in its healthcare business, Fitch said.

Otherwise, “underwriting earnings remained solid and investment results remained positive, with strong equity market returns and higher reinvestment returns.

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Reinsurance for loss of profit