Market volatility affecting Q4 2022 investments
Several mid-sized insurers from around the world announced preliminary Q4 results, which revealed disparate trends.
Andrew Putwainposted on Wednesday, January 25, 2023
Some of the world’s largest insurers will announce their results on or around February 17 – including QBE, Allianz, and Munich Re – but many smaller players have announced theirs over the first few weeks of January.
Other insurers have already released their results.
New-Jersey-based Selective Insurance Group said it expected to report fourth-quarter diluted earnings per share of $1.38 and non-Generally Accepted Accounting Principles (GAAP) operating earnings per share of $1.461, with the difference principally reflecting after-tax net realised and unrealised investment losses, in a statement on Monday.
"“[Selective] expects its fourth quarter combined ratio to be 94.7%, inclusive of catastrophe losses of 5.2 points."
“[Selective] expects its fourth quarter combined ratio to be 94.7%, inclusive of catastrophe losses of 5.2 points and net prior year favourable casualty reserve development of 4.4 points,” it said. Net investment income, after-tax, is expected to be $65.5 million, inclusive of $0.1 million of after-tax alternative investment income.
Last year, Selective said it had a disappointing Q3.
Florida-based brokerage Brown & Brown, Inc. said its unaudited financial results for the fourth quarter and full year of 2022 showed large increases in revenue.
Revenues for the fourth quarter of 2022 were $901.4 million, increasing $162.9 million, or 22.1%, compared to the fourth quarter of the prior year.
"Danish insurer Topdanmark released its Q4 and 2022 results, which showed a loss on investments."
Revenues for the twelve months ended December 31, 2022, under GAAP, were $3.57 billion, increasing $522 million, or 17.1%, as compared to 2021.
Some larger insurers have also experienced a better Q4 than the difficulties in Q3.
In Europe, Danish insurer Topdanmark released its Q4 and 2022 results, which showed a loss on investments.
The company saw a profit after tax of DKK 2,049m (£243.05m) - compared to 2021’s DKK 2,138m (£253.6m). The investment return, after return on non-life insurance provisions, was DKK -477m (-£56.7) compared to 2021’s DKK 554m (£65.7m).
For Q4, after return on non-life insurance provisions, the investment return was DKK 78m (£9.25m) – compared to 2021’s DKK 193m (£22.9m).
"This development should be seen in the light of the volatility in the financial markets during 2022 caused in part by the war in Ukraine and rising inflation, whereas the investment return in 2021 was impacted by favourable market conditions, especially for equity investments and Collaterised Loan Obligations (CLO)," said Topdanmark's statement on their results.
"2022 was a very turbulent year," said Peter Hermann, Group CEO, in his summary of the results. "The Russian invasion of Ukraine brought hardship to millions of innocent people. In addition, rising inflation, weak financial markets, and sharply increasing interest rates affected individuals and companies alike all over the world."
Topdanmark is one of the country’s main non-life insurers with leading market shares in several lines and a subsidiary of Nordic conglomerate Sampo.