Record profits at Europe’s big four reinsurers as revenues slow

Europe’s four largest reinsurers recorded their strongest ever first-half profitability, but Fitch Ratings has warned that revenue growth is faltering as the reinsurance cycle turns.

Munich Re, Swiss Re, Hannover Re and SCOR reported a combined average return on equity of 21.1% in the first six months of 2025, surpassing the 20.5% peak set two years earlier.

The uplift from 15.5% in the prior-year period was driven by SCOR’s recovery, alongside consistently strong underwriting and investment returns, credit ratings firm Fitch reported in its analysis.

Property and casualty results were particularly robust. Fitch highlighted a record-low average combined ratio of 81.5%, aided by benign catastrophe experience and the discounting benefits of IFRS 17.

“Most reinsurers used strong underwriting results to build up further prudence in reserves,” the agency noted, despite global insured catastrophe losses estimated at more than $80 billion in the first half.

The Los Angeles wildfires consumed almost 40% of reinsurers’ annual budgets but were offset by lighter losses elsewhere.

Life and health reinsurance also contributed more stable and consistent earnings compared with recent years.

Contractual service margin releases and positive experience variance supported results, with new business volumes remaining healthy even if slightly below last year’s levels.

Fitch pointed out that SCOR’s sharp improvement followed prior reserving hits, though its margins continue to trail peers.

Investment income remained a pillar of profitability, supported by reinvestment rates of 4.0–4.5%. Recurring yields of about 3.5% lifted returns above the 2022 trough, though Fitch cautioned that the upside is narrowing as recurring and reinvestment yields converge.

Currency movements also played a significant role. Munich Re reported a €1.1bn loss from the depreciation of the US dollar, which led it to trim revenue guidance. By contrast, Swiss Re benefitted from reporting in dollars.

Capitalisation remains a key strength, Fitch observed.

Munich Re, Hannover Re and Swiss Re all maintained solvency ratios above target ranges, while SCOR stayed within its range.

Dividend distributions and buybacks were higher than in 2024, with Munich Re executing a €2bn repurchase programme and Hannover Re paying an additional bonus dividend.

Yet behind the record profits, signs of a slowdown are emerging.

Fitch said revenue growth “slowed year on year in 1H25 and at mid-year renewals on price and volume reductions as reinsurers focused on diversification and profitability over growth”.

June and July reinsurance renewals brought further price softening and lower volumes, particularly in US casualty and property, where reinsurers judged rates inadequate.

Average revenues fell 2.7% compared with 6.7% growth a year earlier, with Swiss Re posting a 5.9% decline and SCOR only marginal growth.

While earnings resilience underscores the sector’s strong capital buffers and disciplined underwriting, Fitch concluded that the sustainability of current performance will hinge on reinsurers’ ability to withstand catastrophe volatility and navigate weaker growth prospects over the next two years.