Global reinsurers’ combined ratios deteriorated marginally to 95.7% for FY2022, despite this it remains strong while investment losses went up weighing on the average full-year ROE, which dropped to 10%, a Gallagher Re report revealed.
According to the the Global Reinsurers’ Financial Results for FY2022 report, the reinsurers tracked by Gallagher reported total average growth in P&C premiums of 12.1% for FY2022, with the strongest FY2022 increase coming from the Global Reinsurers (+16.7%).
The double-digit growth in premiums on both a quarterly and annual basis continues to be supported by not only price increases but also higher policy retention and organic growth, the broker pointed out.
Gallagher Re analysts said: “Inflation hit a 40-year high in many global economies in 2022 and continues to have an impact on industry premium trends. Apart from AIG, all companies we track reported a year-on-year increase in premium. Sixteen of the 26 companies in our data set reported double digit premium growth and of those, five reported increases over 20%.
“Earnings call commentary on pricing echoed a theme presented throughout the year that companies continued to push for rate increases in response to the volatile economy and inflationary trends. Although rate increases continue to moderate, some management teams expect overall margin expansion for their commercial lines business in 2023.”
Analysts noted that margin trends varied by commercial line of business with workers’ compensation and professional liability lines being viewed as challenged, while commercial property pricing has benefited from rising reinsurance costs.
Management teams are optimistic about personal lines margins improvement in 2023 as recent rate increases earn through, this is despite the fact they continued to be challenged in 2022. Generally, insurers expect strong premium growth to continue throughout 2023, the broker highlighted.
For FY2022, the companies tracked by Gallagher Re reported an average combined ratio of 95.7%, compared to the 94.7% reported for FY2021.
According to the report, this deterioration was mainly due to an inflation-driven increase in the attritional loss ratio.
“While prior year reserve development was modestly more favourable compared to prior year, and natural cat losses more benign, the overall loss ratio trended higher on inflationary pressures,” said the broker.
“Of the subset of companies that disclose the split, only three reported an improvement in the FY2022 attritional loss ratio compared to FY2021, with AIG reporting the largest improvement of 1.8 points resulting from that company’s continued reshaping of its portfolio.”
Investment losses weighed on the average full-year ROE, which dropped to 10%, compared to the 12.6% reported in FY2021. According to the report, 19 out of the 26 companies tracked registered declines.
“Significant drops in ROE were reported by several North American and Bermudan (re)insurers, largely due to unrealised investment depreciation as a result of falling equity markets (which flows through the P&L under US GAAP),” analysts explained.
“This was the main driver of the notable drops in ROE by Cincinnati and Markel. Higher than expected natural catastrophe losses were a contributor to the decline in ROE for the major Japanese insurers. AIG’s FY 2022 ROE increased significantly from the prior period supported by a lower combined ratio and higher realised investment gains. Rising reinvestment yields continue to support ROEs for all segments.”
