Hong Kong-based global reinsurer Peak Re is expected to post a record net profit of $200 million for 2023, despite the year being characterised by high inflation, rising interest rates and a continuation of costly natural catastrophe events.
According to the Fosun annual results which includes unaudited figures for Peak Re, these factors resulted in a more cautious attitude of reinsurance capital providers, though a “favourable tailwind prevailed” throughout the year as reinsurance prices increased and terms of conditions tightened.
Fosun additionally noted that the series of expensive natural catastrophe events in recent years kept demand for reinsurance at a high level, assisting Peak Re.
“Over the year, Peak Re continued to focus on stringent risk selection, adequate pricing, managing claims and expenses, and finding new risk transfer solutions,” the firm stated.
Peak Re reportedly realigned its property and casualty (P&C) portfolio to reduce result volatility while maintaining global diversification.
“Actions taken included reducing exposure to severe natural catastrophe perils, primarily in the US, Europe and Japan, shifting to higher layers and raising attachment points, and diversifying into non-catastrophe lines of business,” Fosun reports.
These efforts cumulated in a strong P&C underwriting combined ratio, which fell to 87.3% compared to 2022’s 110.1%, a reinsurance service result (underwriting profit) of $157 million, and a contractual service margin (an indication of future profits) of $70 million.
Fosun observed that Peak Re’s portfolio adjustments made before 2023 “proved prudent”, given that all business lines and regions contributed positively to its 2023 record performance.
Meanwhile, in 2023, gross written premiums from the life and health (L&H) reinsurance business increased to $438 million from $270 million a year ago.
Fosun noted that Peak Re continued to strengthen its business franchise and invest in L&H capacity.
“Since 2022, Peak Re has started to reposition its investment portfolio to shorten the duration and upgrade the investment quality, for example, by reinvesting into higher credit ratings fixed-income instruments,” the firm said.
As per the unaudited Peak Re data, these strategic actions, together with the progressive reversal of previous unrealised losses on fixed-income instruments, saw the investment portfolio making a healthy contribution to its 2023 results.
Based on total assets of $3.73 billion, Peak Re achieved a healthy investment yield of 3.8% for the year 2023.
Overall, Peak Re’s figures show a record net profit of $200 million in 2023 up massively from a loss of $261 million in 2022. The firm’s total gross written premiums in 2023 were $1.76 billion, down from $2.29 billion in 2022, while reinsurance revenue was $1.55 billion, down from $1.82 billion in 2022.
