Net income has decreased in the insurance market to $18.8 billion in the first quarter of this year when compared to $29.3 billion last year, according to Howden Broking.
This has been driven by lower investment return offset by an increase in life underwriting profit.
According to the broker, macro fundamental trends – including inflation, interest rates and more risks – have driven returns on the asset side, which was probably the biggest factor in the first quarter earnings in that investment results are much lower than the same quarter last year.
David Flandro, Managing Director, Howden Analytics said: “The bulk of the Delta is driven, not by the change in underwriting, which was positive, but by significantly lower investment return. As yields have risen, carriers have begun to rebalance fixed income portfolios. Sometimes realising losses in order to do so.
“There have also been limited realised equities losses. We haven’t seen a large negative change in the asset side like this since the initial phases of Covid. What’s clear is that the investment return and interest rate in pictures are changing rapidly, and this is affecting insurers and reinsurers.”
He also explained that the asset side performance in the insurance sector is outperforming the rest of the market.
Flandro commented: “This may be a surprise to some, but it’s immediately evident here. Why? Well, P&C carriers generally tend to outperform during periods of inflation, during periods of higher interest rates and during periods of higher insurance pricing.”
