Global re/insurers take new growth & margins into 2022, but can't inspire added optimism

Global re/insurers ended 2021 with accelerating premium growth and a continued press for improved combined ratios, but not enough to convince market analysts for yet another round of earnings forecast upgrades.

Premium growth continued to look "robust" for financial year 2021 at an average of 8% and accelerated into an 11% rate in the fourth quarter, Gallagher Re said in research following Q4/FY earnings reports.

"Growth was fuelled by both the improving economic environment and favourable pricing for commercial lines in particular," analysts wrote. "Rate increases for reinsurance and retail insurance also supported premium growth, albeit to a lesser extent."

North American and Bermuda names led the pack with 13-14% premium growth. Intact led the P&C premium growth for FY2021 on the back of acquisitions. Everest Re, Arch Capital, Fairfax and Markel rounded out the top five with growth near or above 20%.

Underwriting profitability improved as combined ratios improved on average from 97.9% at FY 20 to 94.7%, with improvement again accelerating in the fourth quarter to a 93.0% reading. The strongest improvement came from global reinsurers who cut combined ratios from an average 105.2% to 98.2%.

The take-down year on year covered all elements, including a 0.9 percentage point (pps) reduction on the attritional loss ratio, 1.5 pps less from nat cat (counted to include Covid-19), and 1.3 pps in improved prior year developments, the Gallagher aggregate data showed.

Arch Capital, Cincinnati, Intact, Chubb and Markel became best performers for FY2021.

But strong premium growth and improved underwriting profitability no longer seem to merit upwards earnings revisions from equity market analysts, Gallagher noted.

Re/insurers tracked by Gallagher had taken "small but persistently positive" EPS estimate revisions following previous quarterly results, those forecasts held "broadly unchanged" following Q4 results.

North American and Bermuda names took the bulk of what upgrades could be found. On average, global reinsurers were the laggards, thanks in no small part to notable forecast downgrades for Swiss Re.

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