With the 1st January Japanese earthquake representing the largest natural catastrophe loss for reinsurers during the quarter, the major uncertainty surrounded the extent of man-made losses related to March's Baltimore bridge collapse.
Messaging from the four reinsurers around this loss has largely reassured investors, particularly in light of the below-average natural catastrophe quarter.
As a result, all four remain largely on track to meet full-year targets, while sentiment following 1 April remains positive ahead of the upcoming June/July renewals.
Munich Re, the world’s largest reinsurer, was the first to report on 8 May, having predisclosed its headline figures on 23 April. A 75.3 percent combined ratio and P&C reinsurance profit of €1.336bn ($1.45bn) set a high bar for its peers to follow.
On 14 May, Hannover Re reported a combined ratio of 88 percent for Q1, within its target range of below 89 percent, with the group’s P&C reinsurance service result improving by 61 percent year on year to€509mn.
Reporting on an IFRS basis for the first time on 15 May, Swiss Re delivered a Q1 P&C reinsurance combined ratio of 84.7 percent. At group level, net income rose to $1.1bn for the quarter – around 30 percent of its full-year $3.6bn target
Completing the peer group’s reporting season on 17 May, Scor achieved a combined ratio of 87.1 percent but missed consensus by 1.5 percentage points. P&C insurance revenue rose to €1.84bn, up 3.8 percent on a constant currency basis but missing consensus by 1.7 percent.
Cat losses well within budget despite Italian hail deterioration
Europe’s reinsurers experienced a low level of natural catastrophe losses during the first quarter of 2024.
At Munich Re, natural catastrophe losses fell to €232mn from €870mn in last year’s first quarter. Even with man-made major losses rising to €418mn, major loss expenditure came in at 9.9 percent of net insurance revenue, significantly below the budgeted 14 percent.
Swiss Re reported natural catastrophe losses of $66mn for the quarter, largely driven by the 1 January earthquake in Japan.
Hannover Re reported large losses (excluding an as-yet-unspecified hit from the Baltimore bridge collapse) of €52mn, well below its budget of €378mn. However, it booked its full large loss budget for the quarter, in line with its standard practice. Prior year reserve movement was positive overall, despite a deterioration of €102mn on last year’s Q3 Italian hail losses.
Scor’s quarterly combined ratio included 7.2 points of nat cat losses, which it said was mainly driven by further reserving for last year’s Italian hail losses. This was significantly below Scor’s quarterly budget of 10 percent.
Baltimore bridge commentary provides reassurance for investors
One of the major talking points in the run-up to the earnings season was around the extent of losses from the Baltimore bridge collapse.
Given that as reinsurers they remain one step removed from initial claims activity, the quartet were largely reluctant to put a number on their likely exposures to the event but were keen to reassure investors that claims would be within expectations.
Munich Re said the bridge collapse was the largest individual loss within its man-made claims bill of €418mn, which was up from €165mn in Q1 2023.
Swiss Re, in contrast, said it had lower-than-expected large man-made losses. During the group’s Q1 earnings call it said gross losses from the event will be less than $100mn.
Like Munich Re, Hannover Re declined to put a number on its losses from the event at this stage. While it said it expected this event to be its largest loss within the quarter, the reinsurer said the bridge loss will remain “comfortably within the booked large loss budget”.
April renewals point to continued favourable conditions
While direct comparisons on renewals outcomes are made challenging by the different metrics used by each reinsurer, the general sentiment suggested that the mood remained positive for June/July despite clear indications that rates were now starting to plateau.
Munich Re said it grew its volume of business written by 6.1 percent to €2.6bn at 1 April, with pricing essentially flat overall.
Swiss Re said it renewed contracts with $2.5bn in treaty premium volume, a 6 percent volume increase compared with business up for renewal.
While it said P&C reinsurance achieved a price increase of 12 percent at the renewals, loss assumptions also increased by 12 percent based on Swiss Re’s updated view of inflation.
Hannover Re said it obtained slight improvements to risk-adjusted pricing and overall conditions at 1 April, with the renewed volume growing by 7.5 percent to €1.64bn on the back of inflation and risk-adjusted price increases on renewed business of 1.5 percent.
CEO Jean Jacques Henchoz said the renewals provided further confirmation that the market environment has stabilised on a high level after the substantial improvements in prices and conditions recorded in recent years
"We are optimistic that this level can be sustained in the coming renewals as well,” he said.
Scor reported a 3.2 percent price improvement overall at the 1 April renewals, with a 1.5 point improvement in the net expected technical profitability of its underwriting ratio for the year-to-date.
Looking ahead
Full-year guidance has remained unchanged following the Q1 disclosures with increased optimism that profit targets may be surpassed in 2024.
Munich Re said it was maintaining its €5bn full-year profit target, with its Q1 result making it more likely it will beat that target.
Hannover Re continues to guide towards a P&C reinsurance combined ratio under 89 percent and group net income of at least €2.1bn in 2024.
Swiss Re’s Q1 net income of $1.1bn represented around 30 percent of its full-year $3.6bn target, with its quarterly combined ratio of 84.7 percent ahead of its full-year 87 percent guidance.
Scor was the only one of the quartet to disappoint analysts with its Q1 results missing consensus across several key metrics, prompting a 6 percent fall in its share price in the aftermath of Friday’s earnings announcement.
However, Scor’s P&C reinsurance combined ratio of 87 percent was largely in line with target aside from one-off impacts.
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