Global reinsurers’ combined ratios hit by attritional in 9M’22, cat loads down

Underwriting margins for the major global re/insurers slipped fractionally year on year for the first nine months, chiefly on a rise in attritional loss ratios with a positive impact coming from nat cat loads, a study by  Gallagher Re has indicated.

The 0.2 percentage point (pps) increase in the 9M combined ratio for Gallagher Re's panel of some 30 major players to 96.1% included a 1.1 pps increase from accident year attritional to 61.9%, more than offsetting a 0.6% downward impact from nat cat, last at 7.6%, the study showed.

"The level of profitability for 9M 2022 was supported by continued double-digit premium growth, modestly lower natural catastrophe loss activity (even with the impact from Hurricane Ian) for the overall 9M period, and a reduction in the expense ratio," authors wrote.

The group added net reserves, chiefly for inflation, the study indicates. Reserve adjustments for prior year developments adding 0.2 percentage points year on year. Non-claims expense took 0.5 pps from combined ratios.

Global reinsurers suffered a 2.2 pps increase in their aggregate combined ratio to 101.7% after nine months, placing the group with a worse technical performance than all other sub-segments of the panel.

For Q3 alone, attritional added 2.2 pps to render a 62.2% attritional loss ratio. Nat cat loads came down by 0.6 pps to a still heavy 12.6%.

But nat cat frequently told the tale for those names with the worst technical result.

"During the quarter, results were mixed with just over half of (re)insurers reporting sub-100% combined ratios," analysts wrote. SCOR, Swiss Re and MS&AD reported the most significant deterioration in their combined ratios, "stemming largely from natural catastrophe loss activity" plus reserve increases tied to social and economic inflation.

Premium growth measured 13% year on year after nine months supported by improved pricing for commercial lines and reinsurance business.

Global reinsurers led with 18.2% growth, including 28.9% at Hannover Re, 25.9% at Munich Re and 19.9% at SCOR, all supported by FX tailwinds on a strong dollar.

Some 17 out of the 25 surveyed companies reported double-digit year-on-year premium growth after nine months.

Management views to pricing were said to have held from that issued at the half-year mark. "Commercial lines continue to benefit from rate increases, albeit at a slowing pace, and margin expansion is typically expected into 2023," analysts wrote in summary. Personal lines are "much more challenged" in the pinch between high inflation and slow pricing action.

Consensus 2023 earnings per share (EPS) estimates amongst equity market brokers increased by a marginal 0.4% following 9M 2022 results, Gallagher Re noted.

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