A Gallagher Re analysis found that while investment losses increased and weighed on the average full-year ROE, which fell to 10%, the combined ratios of global reinsurers slightly worsened to 95.7% for FY2022, but they are still solid.
In accordance with the Global Reinsurers’ Financial Performance for FY2022 report, the reinsurers Gallagher monitors reported an overall average gain in P&C premiums of 12.1% for FY2022, with the Global Reinsurers (+16.7%) experiencing the largest increase.
The broker noted that higher policy retention and organic growth, in addition to price hikes, continue to sustain the double-digit growth in premiums on a quarterly and annual basis.
“Inflation hit a 40-year high in several global markets in 2022 and continues to have an impact on industry premium trends,” according to Gallagher Re analysts. With the exception of AIG, every company we follow reported an increase in premium year over year. In our data set, there were 26 companies. Of them, 16 showed double digit premium rise, and five of those companies reported increases of more than 20%.
“Companies continued to press for rate hikes in reaction to the unstable economy and inflationary trends, which was a theme that was addressed throughout the year, according to the earnings call commentary on pricing. Notwithstanding the continued modest rate increases, several management teams anticipate total margin growth for their commercial lines sector in 2023’’.
The price of commercial property has benefited from increased reinsurance costs, analysts highlighted, while margin trends differed by commercial line of business. Workers’ compensation and professional liability lines are seen as challenging.
Despite the fact that personal lines margins remained difficult in 2022, management teams are confident about an improvement in those margins in 2023 as recent rate hikes take effect. According to the broker, insurers anticipate that significant premium increases would last all the way until 2023.
The firm’s Gallagher Re tracks reported an average combined ratio of 95.7% for FY2022, up from 94.7% for FY2021.
The research claims that the attritional loss ratio increased as a result of inflation, which was the main cause of this decline.
‘’Although natural cat losses were less severe and reserve development in the prior year was slightly better than in the prior year, the broker noted that the overall loss ratio trended higher due to inflationary pressures’’.
“Among the subgroup of businesses that reveal the split, only three reported an improvement in the FY2022 attritional loss ratio compared to FY2021, with AIG reporting the highest improvement of 1.8 points due to that company’s ongoing portfolio reconfiguration,” according to the research.
Investment losses caused the average full-year ROE to fall from 12.6% reported in FY2021 to 10% on average. 19 out of the 26 companies tracked registered reductions, according to the survey.
‘’Several North American and Bermudan (re)insurers reported significant decreases in ROE, which analysts attributed primarily to unrealised investment depreciation brought on by declining equity markets (which flows through the P&L under US GAAP)’’.
“This was the primary cause of Cincinnati and Markel’s significant declines in ROE. The drop in ROE for the big Japanese insurers can be attributed to higher than anticipated natural catastrophe losses. A lower combined ratio and better realized investment gains helped AIG’s FY 2022 ROE climb significantly from the prior period. All segment ROEs are still being supported by rising reinvestment yields’’.
Read the full report on http://chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.ajg.com/gallagherre/-/media/files/gallagher/gallagherre/financial-results-report-for-the-first-9-months-22.pdf
