Bank of America (BoA) has said that reinsurers in Europe should post strong last-quarter numbers for 2021, saying that figures for that period may be higher than expected.
The bank said it believes that a strong Q4 2021 will contrast well with the same period of the year before, which was severely impacted by the fallout from the Covid-19 pandemic.
The bank said in a statement: “On a FY basis, headline combined operating ratios (COR) should improve YoY against easy comps, but remain materially above underlying CORs. We believe the industry is taking necessary underwriting action to address the market’s concerns over large losses (discussed above). Meanwhile, underlying CORs continue to show impressive improvements (down 0.5-2.5%pts YoY) as attractive pricing earns through.”
BoA turned its attention to a handful of specific reinsurers. It said that it expected Hannover Re to deliver net income of €1.285bn, higher than the management’s expected €1.15-1.25bn. Swiss Re, it said, should deliver its first P&C underwriting profit since 2016, which was driven ‘strong underlying improvements in underwriting from portfolio restructuring earlier in 2021’.
Strong results are also expected by BoA to come from Beazley and Hiscox.
The bank added: “Solvency ratios should remain strong, remaining relatively stable throughout the period, with capital generation and modestly favourable market moves offset by dividend accruals and growth planning.” Regarding the London Market, BoA said that the outlook for growth and rates will be important. It added: “We expect management teams to confirm continuation of the attractive pricing backdrop for commercial and reinsurance lines, with growth likely skewed towards rate improvement. Importantly, we expect 2022 growth ambitions to be fully funded from existing resources.”
