Analysts at KBW are expecting insurers and reinsurers to post a combined $10 billion of global natural catastrophe losses across their first quarter results.
These are likely to stem mostly from Australian and European floods, KBW says, as well as Japan’s March 16th earthquake and several US weather events.
Analysts added that earnings should reflect lower US but higher international catastrophe losses, with possible lower revenue growth for some companies due to Russian exposure.
Russian and Ukrainian losses are largely expected to be contested by re/insurers, which implies that first quarter losses will remain manageable, KBW believes.
Most reinsurers’ and commercial underwriters’ core combined ratios are expected to improve on earned rate increases over Q1, while personal auto insurers’ results should include very limited earned rate increases and rapidly rising claim costs.
However, rising interest rates and weak equity markets performance will pressure book value growth, and typically-lagged alternative investment income should mostly reflect positive Q4 2021 results.
KBW also reports that brokers’ organic revenue growth should include persistent P&C rate increases and material y/y exposure unit growth that should outpace difficult (not insurmountable) prior-year comparables, although suspended or terminated Russian operations will challenge revenue growth.
Looking at reinsurance business specifically, KBW expects manageable Q1 catastrophe and Russian/Ukrainian losses, with core loss ratios otherwise broadly declining year over year.
Commercial lines insurers, meanwhile, will probably see rate increases slow but remain above loss trends, with deceleration likely to persist throughout 2022. KBW expects the biggest rate increases for cyber insurance, and modest workers compensation rate decreases.
For personal lines, meanwhile, elevated loss cost inflation and still-modest earned rate increases suggest results will include higher core loss ratios, offset by declining market spend.
And for brokers, persistent commercial P&C rate increases and ongoing exposure unit growth will likely drive at least upper-single-digit organic revenue growth, KBW says, which should generally outpace otherwise difficult prior-year margin comparables.
On investment income, analysts believe that rising interest rates should only modestly boost fixed income yields, while sequentially-rising interest rates and weak equity markets performance should keep GAAP book value growth below operating earnings.
