Insurers recover from bad start to post solid H1

Not all insurers reported a fall in their bottom line, according to figures compiled by Commercial Risk Europe from Allianz, Ace, AXA, RSA, XL and Zurich. But, as a group, the total profit figure fell by 7.6% down from a total of €4.47bn in the first half of 2010 to a combined net profit of €4.13bn for the first six months of 2011. In terms of percentage, net profit fell most noticeably at XL. The company posted a figure of €23m for the first half of 2011. This is down from €233m in the same period last year and a fall of 90.1%. The other insurers to post a decline in profits were ACE and Zurich. ACE saw half year net profit fall by 29.8%, down to €541m from €771m. Zurich’s profits fell to €763m from €951m, a 19.7% decline.hideAXA saw its net earnings rise to €989m from €843m, up 17.3%. Allianz’s half year non-life net profit was up 5.7% to €1.5bn from €1.43bn. RSA saw the largest percentage increase, up 23.7% to €307m from €248m. Combined ratios also rose in 2011 across the group as a whole, up by an average of 3.15 percentage points. This figure was particularly affected by the combined ratio at XL, which rose by 13.7% to 110.1% from 96.4% in the first half of 2010. As with reported profit, Zurich and Ace joined XL in reporting movement in the wrong direction on their combined ratios in the first half of the year. ACE’s rose by 7.2% to 98.4% from 91.2% in the same period last year. Zurich’s climbed 1.3% to 99.3% from 98%. The other three insurers posted decreases in their combined ratios. RSA saw the largest decrease and posted the lowest figures, down 1.6% to 93.2%. AXA’s was down 1.4% to 97.2% and Allianz’s 0.3% to 98.1%. As a group, total property and casualty (p/c) gross written premiums climbed for the six insurers we sampled, up 4% to €66.5bn. Gross written premiums for the individual insurers for the first half of this year were as follows: Allianz €24.4bn up 2%, ACE €6.3bn up 0.3%, AXA €15.3bn up 4.4%, RSA (net written) €4.6bn up 10.1%, XL €2.7bn up 12.6% and Zurich €13bn up 5.2%. Shareholder equity for the group reduced by 3.3% to €138.7bn. Shareholder equity fell by 4.3% at Allianz to €42.6bn, by 6.6% at AXA to €46.4bn and by 2.6% at Zurich to €21.5bn. The number was up 5% at ACE to €16.6bn, 3.8% at RSA to €4.3bn and 0.1% at XL to €7.3bn. Heavy natural catastrophe losses, particularly in the first quarter of 2011, were the main contributory factor for the three insurers that posted negative movement on their profits and combined ratios. According to Zurich its fall in profit ‘was mainly due to the extraordinary frequency and severity of loss events during the first three months of the year’. “During this period, the earthquakes in Japan and New Zealand and weather events in Australia resulted in aggregate losses totalling more than $500m. In the second quarter, significant weather events in the US, including multiple tornadoes and hail storms, lead to aggregate losses of $200m while aftershocks from the New Zealand earthquake also contributed $80m to the year-on-year increase in the combined ratio for the first six months,” the company said. Zurich’s combined ratio improved in the second quarter to 95.3%, which the company said reflected its ‘ongoing focus on disciplined underwriting and profit margins’. Zurich’s expense ratio developed favourably in the first half of this year, declining 0.5 percentage points in the first six months of the year to 26.5%. Rate increases were obtained in both the US and Europe despite slow economic growth and market uncertainty. In Europe, overall rate increases for personal and commercial lines of 4% were achieved in the first six months of 2011. ACE’s cat losses in 2011 stand at $557m compared with $224m in 2010. Speaking on the company’s second quarter results, Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, said: “For the industry, this was another difficult quarter for natural catastrophes, while the challenges of a competitive insurance market globally and sluggish economic conditions in developed markets continue to weigh on growth.” “Our p/c net premiums grew 15% in the quarter while our combined ratio was 92.6%, which included net catastrophe losses of just over $100m,” he added. Total pre-tax catastrophe losses including reinstatement premiums were $134m, compared with $81m for the second quarter of 2010. The catastrophe losses represent 4.1 percentage points of the combined ratio. For the quarter, ACE’s p/c combined ratio was 92.6% compared with 89.7% last year. In the second quarter Ace’s p/c net premiums written increased 15% and p/c net premiums earned increased 16%. P/c underwriting income was $245m compared with $294m in 2010. XL’s hit on profits occurred in the first quarter, as the insurer registered second quarter profits of €157.2m, up from €133.85 for the second quarter of 2010. Its combined ratio for this period rose only to 94.9% compared to 92.2% in last year’s second quarter, nowhere near as dramatically as its half year figure. Net losses and loss expenses incurred for its p/c operations totaled $2.03bn in the first six months of 2011 up from $1.64bn in 2010. All of which suggests heavy catastrophe losses in the first quarter of this year. The company said it suffered natural catastrophe losses of $68.3m, net of reinstatement premiums, for the second quarter. Gross p/c premiums written increased by 16.9% compared to the prior year quarter, said XL, driven by an increase in the insurance segment of 18.8% and in the reinsurance segment of 12.1%. On its second quarter results Allianz reported a 2.4% increase in gross written premiums on its p/c business during the second quarter of 2011 to €10.2bn from €10bn the year before. Internal growth amounted to 3.7% for the quarter. In addition to the rise in volume came an increase in profitability. Quarterly operating profit grew 15.9% to €1.33bn from €1.15bn in 2010. The combined ratio of 95% was among the best since late 2008. Positive impacts on the claims ratio included a lower natural catastrophe load in the second quarter, especially compared to the first quarter of 2011. “Our very good property and casualty insurance results demonstrate our continuous focus on profitable growth,” said Oliver Bäte, Chief Financial Officer of Allianz SE. “The accident year loss ratio excluding natural catastrophes is continuing the downward trend it has shown in recent quarters, and increased rates are now reflected both in top and bottom lines.” Allianz Global Corporate Specialty (AGCS) said that, after a challenging first quarter marked by a high level of natural catastrophes, the second quarter of 2011 was also notable for significant loss activity with a number of major claims for its clients worldwide. During the six month period, AGCS has paid out over €670m in claims payments to clients globally. Gross premiums written increased by 12% to €2.82bn from €2.52bn during the first half of 2011. This was largely because of the integration of new branches and legal entities, such as Hong Kong and Singapore, and new business. Driven by exceptional subrogation recoveries from prior years’ business, AGCS’s combined ratio was 90% for the first six months of 2011, compared with 94.1% for the same period in 2010. AGCS’ accident year combined ratio for 2011 is currently in excess of 100%, reflecting the significant loss activity seen so far this year. “In normal circumstances, the accident year figure would be reduced by several percentage points due to prior year adjustments to produce the overall combined ratio, but not to the exceptional level specifically caused by the unique recoveries seen during the six month period,” said AGCS. Total operating profit for the first half of 2011 was €320m, up from €256m in 2010. Of AXA’s increased p/c revenues so far in 2011 personal lines revenue grew 4%, largely driven by a 4% average price increase. Commercial lines grew 1% as the 2% average price increase was partly offset by lower volumes. Overall, prices increased by an average of 3.5%. On its increased earnings for the first half of this year AXA said its current year loss ratio was down 3.1 points driven by a lower nat cat charge (-1.5 points) and lower current year claims experience (-1.6 points). It reported a lower positive prior year reserve development by 2.6 points and a lower expense ratio improving by 0.7 points to 26.8%. Commenting on his company’s results Andy Haste, Group CEO of RSA, said: “We have made a strong start to the year on both the top and bottom line. Premium growth of 10% is driven by rate, targeted organic initiatives and the benefit of 2010 deals. The underwriting result is up by 51% and operating profit by 22%, despite the impact of the first quarter catastrophe events, demonstrating the benefits of our focus on underwriting discipline and our strong and diversified portfolio.” “We approach the second half of 2011 with confidence,” he continued. “While market conditions remain challenging, we continue to expect to deliver targeted profitable growth in the UK, around 10% growth in international and double digit growth in emerging markets.” Certain figures in this article were converted into Euros based on the exchange rate on 1 July 2011.

Insurers recover from bad start to post solid H1

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