First half results show profit growth for insurers and brokers

So what have we learned from the first half-year results of insurers and brokers? It seems that despite a challenging reinsurance market, increased nat cats, and concerns over inflation – both economic and social, the insurance sector is doing extremely well. Press releases talk of strong growth in revenue, and, in many cases, a marked increase in profits, all driven by rate increases or ‘favourable pricing’ as the market calls it, though not for buyers.

Looking at the primary market, virtually all the major players reported positive net results and increases in gross written premiums. For example, Zurich saw its P&C gross written premiums increase 8% in the first half of the year, helped by commercial rates rises of 7%. Operating profit was $3.72bn for H1, close to the record $3.74bn in the same period of 2022.

AXA reported gross written premiums & other revenues up 2% to €55.7bn for the first six months of 2023, with net income stable at €3.8bn. P&C gross written premiums & other revenues were up 7% to €30.4bn, and commercial lines premiums increased by 9% to €18.9bn.

Allianz Global Corporate & Specialty’s (AGCS) operating profit increased to €479m in the first half of 2023 from €351m and premium written rose to €6.58bn from €5.92bn. Its combined ratio improved to 90.8% in the first six months from 93.3%.

AIG recorded a 10% increase in general insurance net premiums while commercial lines grew by 11% for the second quarter of 2023. Commercial lines net premiums grew 14% year-over-year. Net income attributable to AIG common shareholders fell but adjusted pre-tax income grew from $1.543bn for the second quarter of 2022 to $1.890bn for the same period in 2023.

Chubb booked a record first-half result on the back of low cat losses, continued strong premium rate increases and positive prior year reserve developments. The group reported net income for the first six months of $3.69bn. Total net written premium growth was 16.8% in constant dollars.

Generali’s adjusted net result grew by 60.9% to €2.3bn for the first half of 2023, with the operating result increasing by 28% to €3.7bn. Gross written premiums for 1H 2023 increased 3.6% to €42.2bn, driven by significant P&C growth.

Swiss Re Corporate Solutions reported net income of $323m for the first half of 2023, compared with $220m in the prior-year period. Net premiums earned decreased to $2.6bn in the first half of 2023 from $2.9bn in the prior-year period, reflecting the partial sale of the elipsLife business in mid-2022.

US insurers

For many of the big US insurers, it was much the same story. W.R. Berkley almost doubled its net income in the second quarter to $356.3m from $179.3m. It posted an 8.7% increase in net premiums written to $2.81bn.

Fairfax Financial Holdings recorded net premiums written of $11.86bn compared to $11.05bn for the first half of 2022. Net earnings for the first six months of 2023 were $2.23bn compared to $748.1m for the same period in 2022.

Travelers reported record net written premiums of $10.3bn, up 14% compared to the prior year quarter. But nat cats in the first half hit a number of US insurers’ profits. Travelers reported a 98% fall in quarterly profit, as severe wind and hailstorms in parts of the US pushed up its catastrophe losses.

The Hanover announced “significant” catastrophe losses in the second quarter of $262m and a projected combined ratio of 111.3%. And Liberty Mutual reported a net loss of $585m for the second quarter, compared with a $343m loss in the same period last year, as natural catastrophe claims mounted.

Brokers and reinsurers

Not surprisingly, brokers have benefitted from market conditions too. Marsh’s revenue rose to $3.04bn in Q2, which is up 10% on an underlying basis, and to $5.78bn for half year, an underlying increase of 9%. For the first half of 2023, Aon reported a 6% increase in revenue to $7.05bn, while net income attributable to Aon shareholders increased by 6% to $1.61bn.

For WTW, revenue was up 5% to $4.4bn for the first six months from $4.19bn, while six-month net income rose 26% to $302m from $239m. And Arthur J. Gallagher reported $2.41bn in second-quarter revenue, up 19.8% over the same period last year.

It was a mixed bag for the two leading reinsurers. Swiss Re reported net income of $1.4bn for the first half of the year, compared to net income of $157m for the same period in 2022. However, Munich Re saw its net result fall by 21% to €2.43bn in the first half of this year. However, insurance revenue from insurance contracts issued grew by 5.2% to €28.45bn for H1 2023.

Naturally, risk managers will be pleased that insurers and brokers are financially on a strong footing, providing stability and capacity to buyers. But at the same time, it will perhaps be a little galling to see such big profits on the basis of price hikes that have been continuing for a long time now.

The hope must be that insurers and brokers invest some of the profits and increased revenue in providing capacity and innovation for emerging risks, improving their expense ratios, and continuing to improve their digital technology. Or perhaps to ensuring that any difficulties in the reinsurance market are absorbed to an extent rather than passed on to the primary buyers.