Global reinsurers’ mid-year 2014 underwriting results profitable, but pressured: Fitch

Global reinsurers underwriting results were profitable for the first half of 2014 despite deterioration as a result of increased non-cat property losses and a higher underlying run-rate loss ratio, notes a new report issued Tuesday by Fitch Ratings.

The group of reinsurers that Fitch tracks generated a calendar-year reinsurance combined ratio of 87.4% in first half of 2014 compared to 85.9% for the first half of 2013, and 85.5% at year-end, concludes the report, Global Reinsurers’ Mid-Year 2014 Financial Results.

“The weaker results partially reflect an increase in non-catastrophe property losses that have hit several reinsurers,” notes a statement from Fitch. “It also reflects a shift in business mix by traditional reinsurers away from the property catastrophe business, which historically has the highest margins, as competitive market pressures have pushed property catastrophe premium rates to inadequate levels,” the statement adds.

Despite the deterioration, Fitch reports that underwriting results “were still profitable due to continued manageable catastrophe-related losses and sustained favourable loss reserve development.”

Results are perhaps more optimistic with regard to shareholders’ equity, which showed a solid 13.9% increase over its position at the first half of 2013 and growth of 5.2% since year-end 2013.

“The adverse changes in the unrealized investment gain/loss position on fixed maturities during 2013 have largely reversed or turned favourable for non-life reinsurers in 1H14, relieving some of the pressure from anaemic premium growth,” notes the Fitch statement.

Fitch’s view is that current market conditions are unlikely to improve in the near term given the continuing competitive reinsurance market environment. Its global reinsurance sector outlook is negative, the statement notes, as the fundamentals of the reinsurance sector have deteriorated with declining premium pricing and weakening of terms and conditions across a wide range of lines.