European reinsurers’ yearend targets “blown away” by storm losses: Benfield

Just as the European reinsurance industry was producing strong results, global storm losses in the third quarter of 2004 stand to wipe out yearend profit forecasts, notes the quarterly review by Benfield Group.Despite good results in the first half, recent unprecedented tropical storm losses have blown away earlier profit expectations for the year,” according to the European Quarterly Review. “Aggregate losses reported to date by our selected group stand at almost US$2 billion.”The storms including the Atlantic hurricane and Pacific typhoon seasons put a damper on a largely profitable year for the sector. Despite some signs of softening, senior managements have generally stuck to “rigid pricing policies” and firm terms and conditions. With the exception of Converium, reinsurers posted combined ratios around the 95% mark in the first half of 2004.Profits were tempered by currency issues, reflecting the negative effects of the weakening U.S. dollar. And while investment returns were lower, strong cash flows helped to offset this trend. The first half of 2004 saw shareholders’ funds rise modestly for most companies.The notable exception in the sector is Converium, where at US$428 reserve boost and write-off of intangible assets wiped out more than one-third of net assets.