The impact of the global pandemic on re/insurance was writ large in the H1 and Q2 results for 2020. The big four reinsurers Swiss Re, Munich Re, SCOR and Hannover Re all recorded losses, as did many large insurers.
Overall Munich Re reported €1.5 billion in COVID-19-related losses for the first half of 2020, with the majority of that, about €1.4 billion, attributable to property and casualty (P&C) reinsurance. The reinsurer said its P&C profits had halved in the second quarter of 2020 as it recorded COVID-19-related losses of €700 million from business interruptions and event cancellations.
Swiss Re suffered a significant net loss in H1 2020—$1.1 billion—which it said was due to the “extraordinary crisis caused by the pandemic”. COVID-19-related claims and reserves reached $2.5 billion. But the Swiss reinsurer’s chief executive Christian Mumenthaler said he expected the future impact to be manageable.
Hannover Re saw its net profit plummet to €402.4 million in H1 2020 compared with €662.5 million in the first half of 2019.
The pandemic prompted the reinsurer to increase reserves in its P&C reinsurance business.
P&C reinsurance at the group was sideswiped by COVID-19, which pushed up the reserves for estimated losses to €600 million, from an earlier estimate of €380 million, covering business interruption, trade credit or event cancellation.
French reinsurer SCOR swung to a €136 million loss in the second quarter of 2020 due to the impact of COVID-19 pandemic compared with a profit of €155 million a year earlier. For H1 2020, the group’s net income stood at €26 million, representing a 90.9 percent decline from €286 million in H1 2019.
“We are growing profitably, while taking steps to benefit from the significantly improved market conditions for reinsurers.”
Joachim Wenning, Munich Re
Size no difference
Large insurers were not immune, with many reporting substantial drops in profit in H1 2020, mainly related to the pandemic.
Liberty Mutual saw its profit decline 81.3 percent in the first half of the year, even though it made a net profit of $199 million for H1 2020. Its combined ratio deteriorated under the combined pressures of COVID-19 and the consequent economic downturn as well as above average catastrophe losses.
A decline in half-year profit was also seen at AXA, which reported a notable impact in AXA XL commercial lines. Chief executive Thomas Buberl said the rest of the group was “resilient”, with the impacts from COVID-19 claims largely offset by lower frequency in motor and growth in health and asset management.
The group net profit decreased by 39 percent to €1.4 billion in the first half of 2020, compared with €2.3 billion in the same period of 2019, while the firm reported €1.5 billion COVID-19 claims in the first half of 2020.
Allianz called its half-year results “robust” and “resilient” despite revealing a 29 percent decline in its profits, driven by the impact of the COVID-19 crisis and severe financial market turmoil for the P&C business. The group made a net profit of €2.9 billion in H1 2020.
Specialist global insurer Hiscox raised its COVID-19 loss estimate to $232 million from $175 million, and reported a significant deterioration in loss ratio for the first half of the year. The insurer made a pre-tax loss of $138.9 million for the H1 2020, compared with a profit of $168 million in the same period in 2019. The group’s combined ratio jumped to 114.6 percent for the first half of the year, compared with 98.8 percent in the first half of 2019.
Many leaders in the industry emphasised the resilience of re/insurance businesses and pointed to the opportunities brought by the ever-hardening market.
Munich Re chairman Joachim Wenning said the firm “will emerge from this crisis economically stronger”.
“We are growing profitably, while taking steps to benefit from the significantly improved market conditions for reinsurers. In addition, we are utilising the capital originally earmarked for the 2020/2021 share buy-back programme—which we will not implement—to invest in profitable reinsurance growth.”
Wenning said that prices have risen in nine consecutive renewal rounds, and premium income has grown correspondingly.
“With our high-quality portfolio, we expect to post a premium volume of €54 billion in 2020—which would set a new record in the 140-year history of Munich Re.”
Swiss Re’s group CEO Mumenthaler was also bullish about his firm’s results.
“Based on current information and a prudent analysis of our businesses, and recognising the inherent uncertainty of the ongoing pandemic, we expect the claims and reserves we have booked in the first half of 2020 to cover the majority of our ultimate COVID-19 losses.
“While the impact on our earnings is significant, it remains manageable as our operations continue uninterrupted, all our businesses are performing well and our capital position allows us to take advantage of attractive opportunities in an improving market.”
Image: Shutterstock / Photo Spirit