European reinsurers’ earnings prove resilient to storm losses

Europe’s top six reinsurance companies saw profitability rise over 2004 despite the unprecedented insured cost of natural catastrophe losses incurred over the same period, observes reinsurance and risk intermediary Benfield. The reinsurers in question primarily benefited from higher primary company retentions of catastrophe storm-related risks, Benfield says.The reinsurance companies also enjoyed higher realized gains for 2004, which boosted investment returns and sent pre-tax profits sharply higher, Benfield says. Of the group of companies reviewed, Hannover Re, Munich Re and Swiss Re were able to reduce combined ratios below the 100% for 2004. Reserve strengthening measures increased the combined ratios for Converium and Alea to 118%.All six reinsurers reviewed saw gross premium levels drop last year as companies sacrificed volume for profitability, Benfield notes. "Earnings from non-catastrophe exposed business proved remarkably resilient as pricing discipline held up and losses were moderate, says Lewis Phillips, a member of Benfield’s industry analysis and research team.