SCOR, Swiss Re and MS&AD experienced the most deterioration in combined ratios following Hurricane Ian - Gallagher Re
The (re)insurers tracked by Gallagher Re reported average year-on-year premium growth of 13% at 9M 2022, with the strongest increase coming from the Global Reinsurers (+18.2%).
Premium increases by Hannover Re (28.9%), Munich Re (25.9%), and SCOR (19.9%) were supported by growth in traditional treaty and structured reinsurance business and benefitted from an FX tailwind due to the strong US dollar (all three report in Euros).
17 out of the 25 companies in the reinsurance broker’s dataset reported year-on-year double-digit premium growth at 9M 2022.
Earnings call commentary on pricing was similar to the half-year position; commercial lines continue to benefit from rate increases, albeit at a slowing pace, and margin expansion is typically expected into 2023.
Personal lines business is much more challenged with several management teams noting that higher rate increases are needed to outpace claims inflation.
Q3 characterised by large losses
Increased loss activity in Q3 2022 resulted in a higher average combined ratio of 102.1%, up 3.3% points from Q3 2021. During the quarter, results were mixed with just over half of (re)insurers reporting sub-100% combined ratios.
SCOR, Swiss Re and MS&AD reported the most significant deterioration in their combined ratios, stemming largely from natural catastrophe loss activity (including Hurricane Ian), and reserving increases related to social and economic inflation.
MS&AD was also impacted by large hail and typhoon events, as well as losses from COVID19 and those related to the Russia-Ukraine War.
On a nine-month basis, results remained strong with an average combined ratio of 96.9%, up modestly from 95.5% from 9M 2021, driven by more favourable performance in the first half of 2022.
The level of profitability for 9M 2022 was supported by continued double-digit premium growth, modestly lower natural catastrophe loss activity (even with the impact from Hurricane Ian) for the overall 9M period, and a reduction in the expense ratio.
Profitability offsets included increases in the attritional loss ratio, partially due to a rise in personal lines loss trends, and prior year reserve development.
Although not a significant driver of overall nine-month results, some (re)insurers established reserves for claims exposure relating to the war in Ukraine. Significant uncertainty remains around ultimate loss estimates.
On the investment side of the balance sheet, shareholders’ equity declined by 28% during 9M 2022, largely due to a rise in interest rates which resulted in lower market values of bonds and equities held by global (re)insurers.