Top European reinsurers report strong H1 2024 earnings amid peak cycle
Top European reinsurers report strong H1 2024 earnings amid peak cycle | Insurance Business Australia
Reinsurance
Top European reinsurers report strong H1 2024 earnings amid peak cycle
Fitch Ratings highlights robust P&C results with stable credit profiles
Reinsurance
By
Kenneth Araullo
The four leading European reinsurers reported strong earnings in the first half of 2024, driven by peak cycle underwriting performance in property and casualty (P&C) sectors, according to a recent report by Fitch Ratings.
Munich Reinsurance Company (Munich Re), Swiss Reinsurance Company Ltd (Swiss Re), Hannover Rueck SE (Hannover Re), and SCOR SE (SCOR) collectively achieved an average return on equity of 15.5% in the first half of 2024, down from 20.5% in the same period in 2023.
SCOR, however, reported a loss due to adverse changes in its life and health (L&H) reserving assumptions.
Munich Re, Swiss Re, and Hannover Re reported further improvements in earnings from their already strong performance in the first half of 2023, largely due to better underwriting results across most business lines. A higher return on investments also contributed to the earnings for all four reinsurers in the group.
Fitch Ratings affirmed that the credit profiles of these reinsurers remain stable within the ‘AA’ and ‘A+’ range. The agency believes the group is well-positioned to navigate potentially less favorable market conditions in the next 12 to 24 months.
The peer group’s average combined ratio for P&C reinsurance was 84.2%, aligning with their targets for the full year of 2024. This marks a 1.8 percentage point improvement from the previous year, driven by sustained pricing levels and a benign large loss experience.
Although natural catastrophe insured losses reached approximately $60 billion in the first half of 2024, they largely stayed within the retention limits of primary insurers and below the budgets of reinsurers.
Fitch anticipates that the reinsurance pricing cycle, along with reinsurers’ margins, will peak in 2024, as risk-adjusted price increases have begun to level off.
In life and health (L&H) reinsurance, Munich Re and Swiss Re, and to a lesser extent Hannover Re, reported strong results supported by sustained contractual service margin (CSM) releases and strong new business and in-force margins.
However, SCOR’s review of its reserving assumptions led to a decision to strengthen selected reserves, resulting in a significant decline in its L&H reinsurance service results. In contrast, Hannover Re and Munich Re reported positive experience variance, which supported their reinsurance service results.
All four reinsurers maintained or improved their capital adequacy by the end of the first half of 2024. Strong earnings and positive market effects generally offset the capital deployment for new business and increased capital requirements.
Munich Re, Hannover Re, and Swiss Re’s solvency ratios remain significantly above their target ranges as the hurricane season approaches. The financial debt leverage of the group showed little change, remaining at low to moderate levels.
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