Big 4 reinsurers post outsized Q1 profits, double down on April renewals

Europe's Big 4 reinsurers outdid themselves in the first quarter, fending off a quarter of heavy nat cat and posting a notable boost to profits, the  Fitch ratings agency said in a review of Q1 financial statements.

“Better pricing and portfolio adjustments as well as higher discount rates for non-life claims resulted in better underwriting results on average for the reinsurers,” Fitch analysts wrote.

Combined ratios came down for three of the four European reinsurers, rising only for Munich Re as greater exposure to the Turkey earthquake overwhelmed of a suppressed prior year reading.

April renewals brought improved pricing gains for all four players, although not everyone let that flow straight through to premium growth.

“All four reinsurers took advantage of the very good market conditions and pushed through significant price increases during the renewal on 1 April,” analysts wrote.

The ongoing shift from quota share to excess of loss structures played a big part in the comparative muting of premium growth.

By the bottom line, average return on equity rose to 21% in 1Q23 from 9% a year ago, Fitch noted of the final tally, including improved investment returns.

It was a fortunate quarter in which to make the shift to IFRS17 accounting. The shake up to global interest rates rendered discounting effects to pad combined ratios.

But the introduction did blur the comparative view: differences in IFRS17 accounting options and differing business mix rendered different discount rates across the four groups, Fitch noted.

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