Most European insurers and reinsurers are likely to maintain existing pricing trends through 2019 as last year’s catastrophe losses look set to keep the market stable for now, according to analysts at Deutsche Bank.
A recent report from the firm noted that loss activity (particularly in the U.S) was lower year-on-year in 2018, although some reinsurers are set to benefit from pricing improvement in Asia at the April renewals following several recent natural catastrophes.
Analysts expect Swiss Re to benefit most from rate movements in Asia, while SCOR will enjoy the most positive spill-over effects from 2018.
Overall, re/insurance markets in most European countries will maintain existing trends, the report said, with some pricing pressure to continue in UK motor lines.
Despite this pricing stability, Deutsche Bank expects earnings momentum to slow in 2019, with results from reinsurers such as Munich Re likely to be disappointing if property and casualty (P&C) improvements fail to bridge the gap towards the company’s 2020 targets.
Similarly, analysts predicted that Zurich’s expectations for top line growth, investment results and realised gains are too high, while Direct Line may be too optimistic regarding its margin outlook.
In contrast, Allianz is expected to achieve significant top line growth and efficiency improvements in 2019, while Legal & General’s growth in pension de-risking may come as a positive surprise.
In terms of capital management, Deutsche Bank expects the more disciplined European re/insurers to continue in a healthy vein through 2019, with other companies also showing potential for excess returns to shareholders.
Finally, the report forecast that high levels of mergers and acquisitions (M&A) activity will remain an ongoing theme for the European re/insurance sector throughout 2019.
Deutsche Bank regards Coface, RSA and some of the smaller UK insurers as the likeliest targets for acquisition, although larger deals my be seen through SLA offloading India Life, Swiss Re’s planned IPO of ReAssure and Prudential’s UK demerger.