The life reinsurance business units of the four major European reinsurers have presented a strong return to profitability in 2022 as pandemic-related claims declined and the overall claims experience was positive, according to Fitch Ratings.
Even though pandemic-related claims still burdened 1Q22 results, on average, Covid-19-related claims declined to 3.3% in 2022 from 8.6% of life and health reinsurance NEP in 2021.
With excess mortality losses of 4.0% and 4.2%, respectively, Swiss Re and SCOR remained the most-exposed to the pandemic, Fitch pointed out.
Munich Re continued to benefit from its relatively low market share in the US (claims of 2.8% of NEP), while Hannover Re remained protected by its excess mortality cover pushing net claims lower (2.4% of NEP).
For 2023, Fitch expects another significant decline in excess mortality claims related to the pandemic, as well as a stable underlying profitability of the life and health business for these major European reinsurers.
The rating agency highlighted that primary insurance activities were a strong support for earnings. Fitch said:
“Both Munich Re and Swiss Re run significant primary insurance operations, which had very strong performances in 2022 and added 28% and 13%, respectively, to group premium income.”
Munich Re’ ERGO Group AG (ERGO), the primary insurance arm of the German reinsurer, reported a net profit of €826m in 2022, up from €605m in 2021.
According to Fitch, ERGO’s net result benefitted from a one-off gain of approximately €200m related to a change in the IFRS profit-sharing assumptions at ERGO L&H Germany.
For 2022 the combined ratio in Germany improved to 90.6%, compared to the 92.4% reported in 2021, as both attritional losses and the nat cat loading reduced.
However, due to competitive pressures in Poland and the Netherlands, ERGO’s international business underwriting result deteriorated, although it was partially mitigated by Spain and the Baltics.
Against the market trend, its German life business had healthy premium growth and travel also continued its recovery after the pandemic, Fitch added.
Swiss Re’s Corporate Solutions, the Group’s commercial insurance arm, maintained a very strong earnings level due to strong premium rate increases that helped to offset upward pressure on claims due to high economic inflation and the war in Ukraine.
Prior-year reserve releases remained at healthy levels despite being lower than the year before. The reported combined ratio of 93.1% – slightly higher compared to the 90.6% reported in 2021- remained within its target range of below 95% in 2022.
