Major European reinsurers report sustained earnings growth in 1H24: Fitch

Among the four largest European reinsurers, Munich Re, Swiss Re, and Hannover Re all saw further improvements in earnings in 1H24, driven by better underwriting results across most business lines, according to Fitch Ratings.

In contrast, SCOR reported a loss due to unfavourable changes in its life and health insurance (L&H) reserving assumptions.

Higher return on investments helped boost earnings for all four reinsurers. Their credit ratings remained stable in the ‘AA’ and ‘A+’ range.

Fitch Ratings believes these companies are well-positioned to handle potentially less favourable market conditions over the next 12 to 24 months.

All four reinsurers reported a solid average return on equity of 15.5% in the first half of 2024, though slightly below the 20.5% achieved in the same period of 2023.

The group’s reported property and casualty (P&C) reinsurance combined ratio averaged 84.2%, meeting 2024 targets. This marks a 1.8pp improvement from the prior year, driven by sustained pricing level and fewer large losses.

Although natural catastrophe losses reached around USD 60 billion in the first half of 2024, they largely stayed within the primary insurers’ retention limits and below the reinsurers’ budgets.

Fitch expects the reinsurance pricing and profit margins to peak in 2024, as risk-adjusted price increases have begun to level off in recent renewals.

Munich Re, Swiss Re, and to a lesser extent Hannover Re, saw strong life and health (L&H) results, driven by sustained contractual service margin (CSM) release supported by robust new business and in-force margins.

SCOR’s review of reserving assumptions resulted in a decision to strengthen selected reserves, significantly reducing its L&H reinsurance service results.

Unlike Swiss Re and SCOR, Hannover Re and Munich Re benefited from positive experience variances, which supported its reinsurance service results.

Fitch also noted that capitalisation remained very strong: “All the main reinsurers maintained or further improved a very strong capital adequacy at end-1H24. Strong earnings generation and positive market effect broadly offset capital deployment for new business and higher capital requirements. Munich Re, Hannover Re and Swiss Re’s solvency ratios are significantly above their target ranges, as we enter the height of the hurricane season. There was little change in the low to moderate financial debt leverage of the group.”

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