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Q2 wrap: top line

Softening rates and a competitive market environment led most of the companies in The Insurance Insider's coverage universe to post lower top line growth rates in the second quarter of 2017 compared to the same period of last year.

Similar to the first quarter, the Bermuda composite posted the largest reduction in top line growth from a 13.6 percent year-on-year rise posted in Q2 2016 to just 5.0 percent a year later. The group's aggregate Q2 gross written premiums (GWP) stood at $8.9bn, marking growth of 41.0 percent in the past four years.

Top line reductions

Most of the (re)insurers in the group stepped away from property cat reinsurance during the Q2 period due to market conditions. This led Validus Re to a 3.9 percent year-on-year top line reduction, while RenaissanceRe's property catastrophe premiums declined by 4.8 percent from Q2 2016 to $411.5mn.

Meanwhile, US specialty carriers continued to push for growth in the second quarter and wrote $6.1bn of gross premiums, 4.9 percent more than in the prior-year period. This was a relatively flat growth rate compared to the 4.3 percent yearly rise posted in Q2 2016.

Argo stood out among its peers with the strongest Q2 top line growth of 22.6 percent to $687.2mn. The result was fuelled by a 35.0 percent increase in its international segment to $322.1mn, while its domestic specialty premiums jumped by 79.4 percent to $34.8mn.

But there were also instances of GWP reductions, as RLI and WR Berkley both withdrew from unprofitable lines, mostly in reinsurance.

RLI dropped its property exposure in recreational vehicle (RV) and in treaty reinsurance- a line pressured by excess capital. WR Berkley's reinsurance division also contracted, by 27.9 percent, to $141.4mn.

Biggest movers

Across the ocean, top line strategies diverged at both the London-based carriers and the global reinsurers.

In London, Lancashire reduced its portfolio, Hiscox and Novae accelerated into double-digit growth for the first half of the year, while Beazley remained flat.

Lancashire's first-half top line was down 11.5 percent year-on-year to $381.2mn, with GWP contractions in all five of its segments except marine. The carrier shrank its Lloyd's book by 12.9 percent year-on-year to $127.9mn, driven by soft pricing in property, energy and terrorism business.

Hiscox scaled back its London Market division as well, by 16.9 percent year-on-year on an underlying basis to £314.6mn ($402.8mn), but pushed for growth in the US, where it expanded by 50.3 percent to £275.6mn.

Continental reinsurers also found growth opportunities in the US.

Hannover Re upped its North American premiums by around 15.0 percent in the first half of the year. This pushed GWP in its P&C reinsurance division to EUR2.6bn ($3.1bn), up 22.9 percent on the prior-year period.

And Scor noted that large US contracts written in H2 2016 contributed to a 9.6 percent climb in premiums in its P&C reinsurance segment to EUR1.6bn.

In Bermuda, Everest Re expanded GWP by 17.1 percent in the US to $475.0mn, which fuelled 13.7 percent growth in its reinsurance segment to $1.0bn.

Meanwhile, Munich Re posted its highest Q2 top line contraction since at least 2010 as P&C reinsurance premiums fell by 8.0 percent to EUR 4.2bn, following substantial declines at the 1 January renewals.

But it was Swiss Re that posted the largest top line decline in our coverage universe, with its P&C reinsurance book down by 11.9 percent to $3.6bn, as management reported that it had employed very strict underwriting discipline.


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