Analysts at Barclays predict the Q4 2020 results season will show continuing effects surrounding COVID-19 losses, pricing and dividends.
Barclays expects the uncertainty around COVID-19 losses and dividends to start to decrease throughout 2021.
Retail motor insurers are expected to see the more immediate earnings upgrades and could perform better in the first part of the year owing to material lockdown-related frequency benefits.
At same time, as the incurred but not reported (IBNR) portion of COVID-19 losses reduces, giving some finality to the ongoing crisis, commercial re/insurers should emerge as relative winners as the year progresses given positive pricing dynamics.
Cumulatively, the global re/insurance industry has reported c.$30.4 billion of COVID-19 losses, largely IBNR, which suggests the risk of further adjustments remains. Additionally, the fourth-quarter witnessed an active U.S. hurricane season, although weather in Europe was relatively benign, note analysts.
Barclay’s expects natural catastrophe and COVID-19 losses to remain largely within budgets and/or earlier announcements for primaries, offset by frequency benefits on activity-based lines.
Analysts note that as a result of the recent UK Supreme Court ruling for business interruption coverage, they do not expect to see 2020 guidance revisions from either Munich Re or Hannover Re.
“While initial indications from the 1/1 renewals have been, as usual, somewhat underwhelming in terms of headline rate increases, we expect 4Q commentary to be more upbeat/supportive of earnings revisions. We expect reinsurers to talk about low-single-digit improvements in real terms (complemented by strong volumes), while primary commercial players should continue to see double-digit increases,” say analysts.