Swiss Re cuts casualty at July renewals: total premiums down 8% y/y
Swiss Re cut its renewal book by 8% at the July renewals, enacting major cuts to its casualty covers in the Americas and seeing overall Q2 renewal growth slow in remaining lines versus the levels claimed at the end of the first quarter.
Premium volume of $4.3 billion was down 8% year on year, a presentation for the pending Q2 earnings call showed.
“Swiss Re had successful mid-year renewals and was able to improve margins significantly,” management said in a statement to its H1 earnings release. “Portfolio quality was further improved by targeted management actions.”
For the July renewals, Swiss Re is estimating a $0.1 billion gain in economic pre-tax earnings from the book renewal.
The premium decline came despite a 21% gross price increase which management restated as 5% risk-adjusted net price increase after a 16% hike in loss assumptions.
The decline is traceable to casualty lines, accounting for just over one third of the YTD renewed books. YTD casualty renewals had been up 6% year on year after the first quarter, but had slipped to 3% y/y erosion YTD after the second quarter, a comparison across recent earnings presentations indicated.
Of that year-to-date 3% decline in casualty, management said it had written lower volumes “due to targeted reductions” in motor and liability in the Americas. YTD total renewal premium is down 6% in the Americas, after having been down only 2% y/y after Q1.
US liability and motor is suffering from loss trend, Swiss Re said, and inflationary assumptions on longer-tail lines “are expected to further impact profitability levels.” The inflow of new capital and increased competition in financial lines “continues to influence the market dynamics.”
Remaining lines were up year on year, albeit at a reduced pace, the data further suggested. In property catastrophe, YTD premium volume change at renewals was down to 12% after 6M after having shown 17% growth after Q1. Non-cat property reinsurance renewal premium growth was down to a 9% annual pace after 6M versus an 11% pace after Q1.
Management claimed property and nat cat markets have “stabilised at attractive levels” with profitability still in focus. Competition is said to have increased across markets, particularly on higher layers and terms and conditions have improved enough to date to be “less of a focus going forward.”
Specialty reinsurance renewal premium growth was down to an 11% annual growth rate after having been 14% up after the first 3M. Swiss Re likes the opportunities it sees in engineering. Aviation and marine markets are said to have “stabilised, with opportunities in selected sub-portfolios.”
The year-to-date renewals have seen a full 82% of Swiss Re's treaty books renewed on an 18% gain in gross pricing, which Swiss Re adjusted down to a 5% net pace following a 13% rise in its loss assumptions. That should take 3 points from the underwriting year combined ratio, management believes.
Total renewals YTD cover $17.1 billion in premium volume, up 5% from the sums in the renewing books. Growth is tilted towards the smallish Asian book, ahead of the growth rate for the larger EMEA book and the outright decline in the still-dominant American portfolio.
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