The top four European reinsurers all reported a solid underwriting performance over the first half of 2018, with limited large losses, moderate rate improvements, and strong premium growth, according to a recent report by Fitch Ratings.
Fitch largely attributed the strong underwriting performance of the group, which included Munich Re, Swiss Re, Hannover Re, and SCOR, to limited natural catastrophe losses over the period.
However, it noted that Munich Re’s underwriting performance was adversely affected by large man-made losses during the second quarter, and observed that the combined ratios of all four reinsurers remained close to, or above, 100% for 1H18 on a normalised basis.
Fitch also reported a slight improvement in the pricing environment over 2018, with all four reinsurers experiencing moderately positive premium rate development in June/July, in line with the January and April renewal periods.
Absent any large catastrophe losses in the second half of 2018, Fitch said it expects pricing for the group to remain broadly stable.
Hannover Re and Munich Re in particular reported strong property and casualty (P&C) reinsurance growth, as shown by the chart below. This was driven by structured reinsurance and individual large transactions in China and Australia for Hannover Re, and by a large Australian deal and new U.S quota-share arrangements for Munich Re.
Gross written premium on the life & health side remained broadly flat for Swiss Re, Hannover Re and SCOR, as shown by the next chart, although it dropped 25% for Munich Re due to the termination of a large volume treaty.
Fitch also identified an improvement in Hannover Re’s legacy U.S mortality business, which hampered performance less in 1H18 than in 1H17, and noted that the company is likely to see some long term economic gain from the significant recaptures that will take place in 2H18.
Meanwhile, Swiss Re is exploring a potential IPO in 2019 of its closed book consolidation business, ReAssure, in order to reduce its holding and lower the capital requirements of the business under the Swiss Solvency Test, decreasing the business’s overall capital burden.
Going forward, Fitch expects all four European reinsurers to continue to manage capital through special dividends and share buybacks, with Hannover Re reporting a 1H18 S2 ratio of 256% and SCOR reporting a S2 ratio of 221%.
