Hard market bolsters insurers’, brokers’ financial results

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Hard market bolsters insurers’, brokers’ financial results


Hard Market Strengthens Financial Results of Insurers and Brokers | Insurance business America

“There is an industry that is ahead in terms of pricing.”

Insurance News

By Mark Schoeff Jr.

A tough insurance market has given insurers and brokers pricing power that is boosting their profits, experts said as first-quarter earnings season came to a close.

Carriers and reinsurers also performed well. Allstate Corp. reported adjusted net income of $1.4 billion, compared to a loss of $342 million in the first quarter of 2023. Liberty Mutual Insurance posted consolidated net income of $1.5 billion, compared to a loss of $67 million US dollars last year. Munich Re also recently reported strong first quarter results. Berkshire Hathaway’s insurance division contributed significantly to the conglomerate’s revenue and profitability.

The broader financial sector is performing better than the S&P 500 index, and that’s due in large part to insurance, said Cathy Seifert (pictured above, left), senior vice president and equity analyst at CFRA.

“Much of this is due to the strong performance in insurance, particularly because the property/casualty market is considered difficult, meaning insurers have pricing power,” Seifert said. “They have this industry as far as pricing goes.”

Another analyst also pointed out the optimistic attitude of the insurance industry.

“Many companies performed well on an absolute basis,” said Paul Newsome (pictured above, center), chief executive of Piper Sandler.

Insurers “agree on the need to increase rates”

Since 2016, the insurance industry has seen claims costs rise due to litigation losses, climate-related disasters such as wildfires and hurricanes, and rising prices for insured assets such as cars and homes.

In response to these factors, premium rates were increased. As the market hardened, it also became disciplined. Insurers are “more in agreement about the need to increase rates,” said Seifert. They don’t undercut each other by cutting interest rates.

“There is a more restricted market, a more disciplined market,” Seifert said. “This will make this pricing cycle, which continues to be on the upswing and acting as a catalyst for property/casualty insurers and reinsurers, last longer.”

The increase in insurance business was particularly noticeable in the commercial lines, said Seifert.

Retail banking results are also trending upward, as Allstate and Liberty Mutual demonstrated with their significant year-over-year turnarounds. This was seen as a natural outcome for a line of business where car insurance premiums have risen sharply.

“This was largely a confirmatory quarter,” Newsome said. “After several years of losses, retail banking is finally becoming profitable.”

Mixed results for E&S lines

The quarter was more of a mixed bag for other lines of insurance. The “secondary lines” such as excess and surplus and cybersecurity are losing some of their ability to dominate the market after previously having “a significant degree of pricing strength,” Seifert said.

The decline in E&S is the result of claims trends that “have not justified the price increases coupled with adequate insurance offerings in the market as some of the alternative carriers have increased their allocation for this area,” Seifert said. “So supply flowed and some of the prices went down a little bit.”

Even though E&S’s performance isn’t as strong as it used to be, that doesn’t mean it can’t be a win for insurers.

“It seems like growth has slowed, but it’s still extremely profitable,” Newsome said. “E&S Insurance is a good place to get insurance. If you think about pricing and how you structure your terms and conditions, you can achieve a lot.”

High interest rates help insurers with their balance sheets

A high interest rate environment has had a positive impact on insurers’ balance sheets, said Joe Pursley (pictured above right), head of insurance in the Americas at Nuveen. Their wealth has grown as they wait for their claims to be paid, thanks to the better returns they can earn on safe, fixed-income investments since the Federal Reserve began raising interest rates.

Insurers couldn’t get much of a return on their balance sheet assets if they only received a 2.5% coupon on two-, three- and four-year bonds, Pursley said. Now they can buy government bonds with a yield of 5% or more.

“This is the first time in a long time that what flows out of their portfolio is being reinvested at a higher interest rate,” Pursley said. “Whereas if you look back 10 years ago, every single bond that was taken out of the portfolio was reinvested at a lower interest rate. This gives these property and casualty insurers a real opportunity to think about what do we want to do with our portfolio?”

A recent Nuveen survey found that insurance companies tend to improve the quality of their investments as the market becomes more traditional in terms of interest rates and returns.

“The insurance industry feels reasonably OK about where we are from a macro perspective,” Pursley said.

The industry is not only benefiting from overall economic developments, but is also likely to continue to derive revenue and profits from the hardening of the insurance market.

Aeon:

  • Aon’s annual revenue for 2023 was $13.376 billion, an increase of 7.19% from 2022.
  • Aon’s annual revenue for 2022 was $12.479 billion, up 2.35% from 2021.
  • Aon’s annual revenue was $12.193 billion in 2021, an increase of 10.18% from 2020.
  • Aon’s annual net income for 2023 was $2.564 billion, a decrease of 0.97% from 2022.
  • Aon’s annual net profit for 2022 was $2.589 billion, an increase of 106.29% over 2021.
  • Aon’s annual net income for 2021 was $1.255 billion, a decrease of 36.26% from 2020.

2021

2022

2023

annual sales

12,193

12,479

13,376

Annual net income

1,255

2,589

2,564

From Aon Financial Release 2023

Gallagher:

  • Arthur J Gallagher’s annual revenue was $10.072 billion in 2023, an increase of 17.79% from 2022.
  • Arthur J Gallagher’s annual revenue was $8.551 billion in 2022, an increase of 4.16% from 2021.
  • Arthur J Gallagher’s annual revenue was $8.209 billion in 2021, an increase of 17.22% from 2020.
  • Arthur J Gallagher’s annual net income for 2023 was $0.97 billion, a decrease of 12.99% from 2022.
  • Arthur J Gallagher’s annual net income for 2022 was $1.114 billion, an increase of 22.87% from 2021.
  • Arthur J Gallagher’s annual net income for 2021 was $0.907 billion, an increase of 10.75% from 2020.

2021

2022

2023

annual sales

8,209

8,551

10,072

Annual net income

907

1,114

970

From Gallagher Financial Release 2023

Marsh & McLennan:

  • Marsh & McLennan’s annual revenue was $22.736 billion in 2023, an increase of 9.73% from 2022.
  • Marsh & McLennan’s annual revenue was $20.72 billion in 2022, an increase of 4.54% from 2021.
  • Marsh & McLennan’s annual revenue was $19.82 billion in 2021, an increase of 15.07% from 2020.
  • Marsh & McLennan’s annual net income for 2023 was $3.756 billion, an increase of 23.15% from 2022.
  • Marsh & McLennan’s annual net income for 2022 was $3.05 billion, a decrease of 2.96% from 2021.
  • Marsh & McLennan’s annual net income for 2021 was $3.143 billion, an increase of 55.9% from 2020.

2021

2022

2023

annual sales

19,820

20,720

22,736

Annual net income

3,143

3,050

3,756

From Marsh Financial Release 2023

WTW:

  • Willis Towers Watson Public’s annual revenue was $9.483 billion in 2023, an increase of 6.96% from 2022.
  • Willis Towers Watson Public’s annual revenue was $8.866 billion in 2022, a decrease of 1.47% from 2021.
  • Willis Towers Watson Public’s annual revenue was $8.998 billion in 2021, an increase of 4.45% from 2020.
  • Willis Towers Watson Public’s annual net income was $1.064 billion in 2023, an increase of 4.56% from 2022.
  • Willis Towers Watson Public’s annual net income was $1.024 billion in 2022, down 76.1% from 2021.
  • Willis Towers Watson Public’s annual net income was $4.236 billion in 2021, an increase of 323.9% compared to 2020.

2021

2022

2023

annual sales

8,998

8,866

9,483

Annual net income

4,236

1,024

1,064

From the WTW financial release 2022 and 2023

Allstate:

  • Allstate’s annual revenue for 2023 was $57.094 billion, an increase of 11.05% from 2022.
  • Allstate’s annual revenue for 2022 was $51.411 billion, up 1.6% from 2021.
  • Allstate’s annual revenue for 2021 was $50.601 billion, an increase of 20.74% from 2020.
  • Allstate’s annual net income for 2023 was -$0.316 billion, a decrease of 77.33% from 2022.
  • Allstate’s annual net income for 2022 was -$1.394 billion, a decrease of 192.93% from 2021.
  • Allstate’s annual net income for 2021 was $1.5 billion, a decrease of 72.53% from 2020.

2021

2022

2023

annual sales

50,601

51,411

57,094

Annual net income

1,500

-1,394

-316

From the 2023 Allstate Financial Release

–Data visualization by Jazaj Reyes

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Hard market bolsters insurers’, brokers’ financial results



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2024-05-14 16:16:05

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