By Carolyn Cohn, Tom Sims and Yadarisa Shabong
LONDON (Reuters) – Several European insurers posted bumper first-half profits on Thursday as customers hit by a pandemic, war and a surge in natural disasters in recent years continue to face higher premiums on their policies.
Higher interest rates have also given a boost to insurance investment portfolios, industry sources say.
Germany's Allianz (ETR:) beat forecasts with a 7.5% rise in second-quarter net profit and said it was on track to meet its full-year target, while Zurich Insurance posted a record profit and said it would likely beat its 2025 targets.
German reinsurer Munich Re also said it could beat full-year forecasts, and shares in Lloyd's of London insurer Beazley hit a record high after its pretax profits nearly doubled and it raised its forecasts. Lancashire firm Peer also reported earnings that analysts said beat expectations.
“Market conditions have remained more favourable than anticipated and we see many opportunities today to profitably grow the business,” said Mario Greco, CEO of Zurich.
Insurers and reinsurers (which insure insurers) faced unexpected claims as a result of the COVID-19 pandemic, the wars in Ukraine and Gaza, and historically high losses from storms, hurricanes and wildfires.
After the initial shock, many insurers raised premiums and canceled policies that left them uncomfortably exposed to infectious diseases or sites damaged by war, fire or flood.
These measures have left many facing less expensive claims and better positioned for any positive surprises.
Global commercial insurance rates rose for 26 consecutive quarters before leveling off in the second quarter of this year, according to insurance broker and risk advisor Marsh.
“The claims experience in the first half of the year was better than we had anticipated,” Beazley Chief Executive Adrian Cox told Reuters.
Beazley's pre-tax profit was 74% above consensus forecast, according to analysts at Jefferies, driving a 12% rise in the FTSE-100 insurer's share price.
Higher interest rates have also improved insurers' investment positions, after punishing years of ultra-low or negative rates in the wake of the global financial crisis.
The pandemic has also increased demand for life insurance, industry sources say.
However, insurers and reinsurers remain cautious.
Joachim Wenning, chief executive of Munich Re, was only willing to say it was “somewhat more likely” his firm would beat its full-year target after a strong first half, although he was being deliberately conservative.
“Who knows what hurricane season will bring?” he said.
This year's hurricane season in the United States is expected to be very active. Tropical Storm Debby inundated the coast of Georgia and South Carolina with a deluge of rain this week.
Concerns about natural disaster losses weighed on Zurich's share price, despite its better-than-expected financial results, with the stock falling 3%. Allianz shares rose 1.2%, Munich Re fell 0.8% and Lancashire fell 2.3%.
Recent market volatility is also giving food for thought, with Allianz CEO Oliver Baete calling government debt levels “really scary”.
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