We are at the start of the results season. Almost all international insurers and reinsurers annual reporting periods coincides with the end of the calendar year. We have seen a few results so far, and many more are due in the next few weeks. Aggregate results for the Lloyd’s market are almost the last to be reported and are due on March 28.

As regards syndicate results for the 2016 account and updated forecasts for the 2017 accounts, managing agents are required to submit their quarterly returns to Lloyd’s next week. We expect that these will be released to us piecemeal, starting next week and we anticipate that we will have all results for syndicates supported by clients of Argenta by the end of this month. Managing agents are not required to make a formal forecast for the 2018 account until it reaches the 15 month stage, or at 31 March 2019. These first forecasts will be available to us in May. The complete listing of all syndicate results and forecasts for 2016 and 2017, including the aggregate performance of the Lloyd’s market, will be released alongside the market results at the end of March.

Three of the big European reinsurers have released trading updates this week following the 1 January renewal season. Hannover Re, Munich Re and SCOR report similar themes; there were some rate increases at renewal, but these are still small; Hannover Re reported rate increases of 0.9% on proportional business and 1.1% on non-proportional business, Munich Re reported flat rating across its book of proportional and non-proportional treaty reinsurance while Scor said risk adjusted rates increased by 1.2% on proportional business and 1.8% on non-proportional business. All three business reported much larger increases in projected written income for 2019 than the simple rate increase, largely because they say they were able to secure increased lines on some programmes and also because the reinsured insurance companies are increasing their overall premium income. There are of course differences in the books of business written by these large European reinsurers when compared to reinsurance business written at Lloyd’s, notably the European reinsurance market writes more business on a pro-rata basis and has a larger exposure to continental Europe. Lloyd’s syndicates tend to write more US business and it is typically on an excess of loss (non-proportional basis). Analysts’ presentations for companies’ trading updates are available here in respect of Hannover Re, here in respect of Munich Re and here in respect of Scor.

Beazley plc was the first of the London market insurers to report results to the year end. As last year, it reports the results of its Lloyd’s syndicates separately, we expect GAAP and year of account results for syndicates 623, 5623 and 6107 by the end of the month, but the group GAAP results give a good insight to the themes we can expect to see this year. Although the combined ratio was marginally better, there was a lower release from reserves and a much lower investment return. These combine to mean year-end profit is down by more than 50%. This was despite the group growing gross premium income by 12% in 2018. The smart tracker Syndicate 5623 was launched in 2018.

There have been a number of noteworthy changes in personnel.  Neil Maidment retired as Chief Underwriting Officer and Active Underwriter of Syndicates 623 and 6107 at the end of 2018 and has been succeeded by Adrian Cox, who until then was leader of the largest underwriting section of the business, the Specialty Lines division. James Eaton has been promoted to head the specialty lines division, although a new division of cyber and executive risk has been formed and this will be led by Mike Donvan. Clive Washbourn stood down as head of the marine division in November last year, and has been succeeded by Tim Turner, while Head of Property, Mark Bernacki, has also announced that he will be leaving the group this year. CFO Martin Bride will retire this year and Sally Lake, who is currently Group Actuary, will take over that role.

Beazley puts the cost of last year’s windstorms (hurricanes Florence and Michael in the USA and typhoons Trami and Jebi in Japan) at $105m, adding 5 percentage points to the net loss ratio, while the wildfires in California are estimated to have cost the group a further $40m.

The catastrophe activity in 2017 did have some positive impact on market rating levels, with the group reporting an overall 3% improvement in rating in 2018, following a 1% reduction in average rates in 2017. This is the first improvement in rating levels according to Beazley’s index since 2011. Beazley’s larger than average exposures to specialty lines and cyber business (where rates have increased throughout this period) has insulated the group from the softening market elsewhere.

The group has a strong history of favourable reserve developments, with a release from prior years improving the 2018 result by $115m. This was down on previous years. Initial reserves include a risk margin which means the total reserve exceeds actuarial best estimate, with the surplus targeted to be in a range between 5% and 10%. The excess of total reserve over actuarial best estimate has been reducing in recent years; it was 8.2% at the end of 2015, but fell to 5% at the end of 2017. At the end of 2018, it has increased to 5.6%. Beazley warns that it does not expect reserve releases to return to former levels in the medium term.

The investment income fell from $138m in 2017 to $41m in 2018 following a series of interest rate hikes in the USA. Return on assets was 0.8% compared to 2.9% in 2017. Although increasing interest rates mean that the outlook for investment returns improves, the immediate impact of an increase is a reduction in value for a bond portfolio (government and investment grade bonds account for almost 80% of the overall portfolio, valued at more than $5 billion). Beazley compares the lost investment income as comparable to a modest catastrophe loss

The full press statement can be found here and the analysts’ presentation slides here.