Fitch Ratings, in its latest assessment of large global reinsurers, has identified Bermuda-based Partner Re as the outlier in terms of company profile compared to its peers.
In a report from The Royal Gazette, the agency recognized most peers in this group as top-tier global reinsurers, both in company profile and premium volume. They were noted for their “very strong” company profiles, primarily due to a high degree of diversification. However, PartnerRe was marked as “moderate” in comparison, attributed to its moderate operating scale and business risk profile.
Fitch anticipates that all reinsurance peers will maintain their high reserving standards, characterized by prudence and discipline. This has been evidenced by additional reserves set aside in 2022 to address risks heightened by increasing inflation.
The report also highlighted strong to very strong capitalization among these reinsurers, coupled with moderate leverage during periods marked by substantial losses and improving earnings. The financial leverage ratios within the peer group were described as low to moderate, with percentages ranging from 16% to 33% at the end of 2022. This stability in leverage ratios is attributed to reinsurers financing growth through retained earnings, particularly in a hardening market environment.
Most global reinsurers within this peer group experienced large losses in 2022, largely due to natural catastrophes and compounded by the high-inflation environment. However, there was a notable decrease in excess mortality claims related to the COVID-19 pandemic.
The review also observed a strong increase in net income return on equity, averaging 18 to 21% for the first nine months of 2023. Property and casualty reinsurance sectors benefited from lower natural catastrophe claims, improved pricing, and robust revenue growth. Life and health reinsurance also saw improved operating margins, mainly due to reduced COVID-19-related mortality claims.
Significantly, investment income also saw an improvement. However, the report noted that 2022 was a challenging year, with markdowns on investments, high inflation, and elevated levels of large losses leading to a marked decline in profits. Consequently, the average return on equity dropped to 1.2% from 8.5% the previous year.
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