COVID ravages earnings at global multiline insurers: S&P

The COVID-19 crisis dented global multiline insurers' earnings in 2020. But thanks to their good base of recurring profitability,  S&P Global Ratings says that it sees a recovery in earnings in this and coming years, once vaccinations increase and the pandemic abates. This is according to its report COVID-19 Took A $8 Billion Bite Out Of Global Multiline Insurers' Earnings.

"We calculate that, for the 16 GMIs we rate, net income fell about $8 billion in 2020 on net profit of $36 billion due to the pandemic," said S&P Global Ratings analyst Marc-Philippe Juilliard. "To put this into perspective, GMIs reported a much larger overall decline of nearly $20 billion in net income."

This does not include all of the financial consequences of the pandemic, which could include unrealised capital gains, reserve adequacy, and new business volume and value. A number of players, notably in the life business, did not single out the pandemic in their financial reporting as a key driver.

"As we had believed, the crisis has turned out to be an earnings event for GMIs, and a manageable one--not a serious capital event," said Juilliard. "That is, no insurer in this group fell into a position where its capital resources became insufficient to meet expectations by regulators, who would have advised the company to materially reduce its risk exposure or find additional capital resources."

Beyond 2020, S&P believes additional COVID-19-related losses could be manageable, given that GMIs reported a large share of incurred but not reported losses in 2020 earnings, and also due to the exclusion of pandemic claims that insurers have added to the terms and conditions of policies.

Since the end of 2019, most ratings on GMIs have been affirmed and other rating actions have so far been limited to one downgrade, one upgrade, one outlook change, and one Credit Watch placement, only one of them directly prompted by the pandemic.

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