The various insurance news websites are telling a consistent story following the recent interim results announcements. Many insurers, although announcing losses, feel that they have dodged a bullet. The full impact of COVID-19 is still very much uncertain, but the media appears to be reporting resilience in the sector.
Claims pay-outs to date are suggested to be around the $7bn mark, but there are many other loss factors to take into consideration. Bigger losses can be expected from more indirect sources; being litigation, and investment losses resultant of market volatility and uncertainty.
Litigation regularly features in the news as many businesses seek interruption pay-outs for shutdowns. News sources suggest that the proportion of claimants likely to succeed seems quite high. Many interruption policies require proof of physical damage, however, courts could well force pay-outs as has been witnessed in France and Germany.
But it is not all doom and gloom. Solvency ratios remain healthy at 150% – 190%, globally, compared with 200% at the start of the year, and still well above the regulatory 100% threshold.
Lloyd’s of London have indicated global industry insured losses of $107bn from the virus.
During unprecedented times like these, tightening of purse strings is to be expected. Now more than ever is a great opportunity for insurance companies to consider reducing their Total Cost of Operations.
We are witnessing a greater demand for rolling forecasting solutions across our customer base. Function Six see CPM playing an integral role in this regard, as insurers can recognise significant cost benefits and synergies by harmonising and rationalising their enterprise systems landscape, weeding out inefficiencies and leveraging the extended capabilities that a good CPM system has to offer.
Here is a small round up of some of the noteworthy announcements:
Insurance giant QBE has flagged a half-year net loss after tax of $750 million, reflecting the impact of the COVID-19 pandemic, higher claims and a loss on its investment portfolio.
The insurer said it currently estimates total COVID-19 related costs to be around $600 million on a pre-tax basis but warned that the business landscape remains highly uncertain.
“Despite the impact of COVID-19, I am encouraged by the strong underlying trends evident in the result,” group chief executive Pat Regan said.
QBE will publish Q2 results on 13 August.
Munich Re registered COVID-19-related losses totalling about €700m in reinsurance in Q2 of 2020. The largest share of these losses coming from cover for major events, with a lower impact reported in life and health business as well as other lines of property-casualty insurance, including business interruption.
Munich Re nevertheless posted a satisfactory net result of approx. €600m in the second quarter (consensus: €405m)*. This is due to lower-than-average major losses (excluding COVID-19) and good performance at ERGO. Munich Re will publish final Q2 results on 6 August, as scheduled.
* Average value of estimates from 20 financial analysts
SCOR has announced a significant loss of €136 million in Q2. Net income for the year has fallen to €26 million in H1 2020 from €286 million in 2019 H1.
Total COVID-19 costs for Q2 are estimated to be €456 million (net retrocession, reinstatement premiums and before tax), split by €248 million on P&C (property and casualty), €194 million on life and €14 million on investments. For P&C, the majority of the exposure comes from credit, surety, political risks and property business interruption.
Chair and chief executive Denis Kessler, however, remains positive and believes the company “has once again demonstrated both its capacity to absorb major shocks and the resilience of its business model.”
Beazley has disclosed a pre-tax loss of $13.8 million for H1 2020 compared to a pre-tax profit of $166.4 million for the same period in 2019. Investment income is down to $83.2 million from $170.3 million from the same period in 2019.
Beazley is bolstered, however, entering H2 as it raised capital of $292.6 million in May 2020 and Beazley believe that they will be able to maintain a low double digit top line growth for 2020.
Discussing the results further, Chief Executive Officer, Andrew Horton noted that strong premium growth of 12% was seen in H1 with 3 of the 7 divisions achieving double digit growth. Renewal rates increased across the market with an average rate increase of 11% across the business.
Zurich Insurance Group estimate a total of $750 million in claims related to COVID-19 after booking claims of $280 million in Q1. As a comparison, hurricanes Harvey, Irma and Maria in the US cost pegged at $700 million.
Zurich Chief Financial Officer, George Quinn, said “The impact of claims related to the COVID-19 outbreak and the sharp falls in financial markets in the latter part of the first quarter are expected to remain a 2020 earnings event. Group solvency remains strong and together with the diversity of our business and our conservative balance sheet, I am confident that the group is well placed to manage the current challenges.”
Everest Re have not posted any estimates but with positive underwriting income and gross written premium growth, a profitable quarter is expected to be posted, following a net income of $16.6 million in Q1.
Net investment income is forecasted at $38 million and losses estimated at $15 million pre-tax for catastrophe and $160 million pre-tax for pandemic.