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Several reinsurers have announced mostly strong investment numbers in fixed maturity for Q2 results. Whilst revenue in underwriting was also mostly strong business leaders highlighted the role that increased market volatility played in stalling growth, which has put more attention on investment results.
Fixed income investments were the key to a solid performance for many in the market, which showed why the area continues to dominate in insurance investment portfolios.
Conduit Re issued its interim H1 2023 results, which saw the Bermuda-based reinsurer achieve a net investment result of $22.6 million for the six months ending on 30 June 2023. This was contrasted with a $50 million loss in over the same time in 2022 – illustrating a 145.2% change.
“In a half year [that] has seen high industry losses, our underwriting strategy has delivered strong results which, coupled with our low expense base, have delivered a very attractive combined ratio of 72.5% (83.1% on undiscounted basis),” said Trevor Carvey, CEO.
“We continue to maintain our conservative approach to managing our invested assets with a strong emphasis on preserving capital and liquidity.”
The company’s investment portfolio has an average credit quality of AA, with a book yield of 3.2% and a market yield of 5.5%.
“In line with our stated strategy, we continue to maintain our conservative approach to managing our invested assets with a strong emphasis on preserving capital and liquidity,” said Conduit Re in its statement. “Our strategy remains maintaining a short duration, highly-rated portfolio, with due consideration of the duration of our liabilities. Our investment portfolio does not hold any derivatives, equities, alternatives or emerging market debt.”
Net investment income – excluding realised and unrealised gains and losses – was $17.2 million for the six months ending on 30 June 2023. This was compared to H1 2022’s $6.4 million. Total investment return – including net investment income, net realised gains and losses, and net change in unrealised gains and losses – saw a gain of $22 million, the company said.
Conduit Re stated that it had nearly 92% of its managed investment portfolio in fixed maturity securities, and 8% in cash or cash equivalents.
Fellow Bermuda-based reinsurer, RenaissanceRe, said its net investment income was $292.7 million, which showed 173% growth compared to Q2 2022.
“[We] delivered a strong quarter, distinguished by a 28.8% operating return on average common equity with robust underwriting income and record fee and net investment income,” said Kevin O’Donnell, President and CEO.
Net investment income for the company increased by $185.5 million compared to Q2 2022, which the report said was primarily driven by higher interest rates, higher yielding assets in the fixed maturity, and “short-term portfolios as a result of our reinvestment of the portfolio during the rising interest rate environment throughout 2022 and 2023, as well as increased catastrophe bond yields”.
“The growth in net investment income in the 2023 second quarter primarily
reflected the effects of higher interest rates available in the market.”
RenaissanceRe’s total investments were at $25.5 billion on 30 June 2023 – up from 31 December 2022’s number of $22 billion. Of that, $15.9 billion was listed as fixed maturity investments.
Arch Capital Group – which includes reinsurance arm, Arch Re – saw pre-tax net investment income of $242 million, compared to $106 million in the same period last year, and compared to $199 million for Q1 2023.
“The growth in net investment income in the 2023 second quarter primarily reflected the effects of higher interest rates available in the market along with growth in invested assets, which benefited from strong operating cash flows,” said the company’s results statement.
“Net realised losses were $123 million for the 2023 second quarter, compared to losses of $267 million in the 2022 second quarter, and reflected sales of investments as well as the impact of financial market movements on the Company’s equity securities and investments accounted for under the fair value option method,” it said.
Arch Re saw an overall 41.9% jump in gross written premiums between Q2 2023 and Q2 2022.
Meanwhile, Everest Re – a part of the Everest Group – improved its net investment income to $357 million compared to $226 million in Q2 of the prior year, which it said was driven by strong fixed income and alternative investment returns. “We generated nearly $360 million in net investment income with our well positioned portfolio,” said Juan Andrade, President and CEO.
French giant SCOR saw insurance revenue of €3.93 billion in Q2 2023, up 4.3% from Q2 2022. It was one of the first European reinsurers to announce results.
The company reported what it called, “a strong performance in Q2 2023 across its three business lines, with strong P&C renewals and an increasing return on invested assets”.
“In investments, [we continue] to benefit from high reinvestment rates and reports a strong increase in the regular income yield,” said its results statement. Investments generated a regular income yield of 3.1% in Q2 2023, benefitting from a high reinvestment rate of 5.1% as of 30 June 2023.
“The invested assets portfolio remains liquid and financial cash flows of
€8.9 billion are expected over the next 24 months.”
At the close of Q2 2023, the company’s total invested assets amounted to €21.7 billion. “[We have] a high-quality fixed income portfolio with an average rating of A+ and a duration at 3.2 years. [Our] asset mix is optimised, with 79% of the portfolio invested in fixed income,” it said.
Total investment income on invested assets stands at €162 million in Q2 2023. The return on invested assets stands at 3.0%, compared to 2.9% in Q1 2023. The regular income yield was at 3.1% compared 2.8% in Q1 2023.
“The reinvestment rate stands at 5.1% as of 30 June 2023, compared to 4.6% at the end of Q1 2023,” it said. “The invested assets portfolio remains highly liquid and financial cash flows of €8.9 billion are expected over the next 24 months, enabling [us] to benefit faster from high reinvestment rates.”
CEO Thierry Léger said the company was doing well – and that it would unveil a new strategic plan come September.
