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Q2 wrap: combined ratios

Underwriting results across The Insurance Insider's main groups of P&C (re)insurance companies were helped by a low level of catastrophe losses in the quarter, yet underlying deteriorations continued to pressure margins.

Q2 combined ratios

Combined ratios mostly improved year-on-year as significant catastrophe events were absent in the three months to 30 June, with the biggest decreases recorded at Bermudian carriers. The composite's Q2 combined ratio was down 5.7 percentage points year-on-year to 89.6 percent on a weighted average basis.

However, the drop masked underlying margin erosions.

For example, RenaissanceRe reported an 11.0 point reduction in its Q2 combined ratio to 72.5 percent, but on an accident-year ex-cat basis the carrier's loss ratio took on 7.4 points to 49.1 percent due to deteriorations mainly in the property book but also in casualty specialty lines.

Arch's P&C insurance and reinsurance divisions posted a weighted average core loss ratio increase of 4.0 points to 68.9 percent - which took the corresponding combined ratio to 100.0 percent. CEO Dinos Iordanou argued that the primary market "is not giving up enough rate to overcome loss trend and improve margins".

In London, underlying margins were pressured at Hiscox and Novae in the first half of the year.

Novae suffered from claims stemming from business placed into run-off, which fuelled a 6.9 percentage point hike in its core loss ratio to 54.7 percent. This led the carrier to an underwriting loss with a combined ratio of 105.4 percent, 9.7 points above the result generated in the same period of last year.

Meanwhile at Hiscox, the H1 accident-year ex-cat loss ratio grew by 4.8 points to 57.6 percent - the (re)insurer's worst H1 core loss ratio since at least 2013. Equity analysts had expected the climb, noting that it was a consequence of the difficult underwriting conditions in London.

Underlying loss ratios

Over at the continental reinsurers, Hannover Re was the only company in the group to post a combined ratio increase in its P&C reinsurance unit for the quarter, albeit by only 80 basis points (bps) to 97.3 percent.

This was led by a 7.0 point rise in the core loss ratio to 67.7 percent, yet CEO Ulrich Wallin remained confident in the underlying health of the book, noting that "attritional losses have been reasonably favourable".

At Everest Re, increased crop reinsurance and property pro rata writings led the accident-year ex-cat claims ratio to inflate by 4.1 points year-on-year to 56.9 percent in the second quarter, according to Everest's reinsurance CEO John Doucette.

US specialty carriers reported softer underlying deteriorations compared to the other groups in our analysis.

Argo reset the loss picks in its direct and facultative property book, which led the division's core loss ratio to take on 8.2 points to reach 56.3 percent, according to CEO Mark Watson III.

Elsewhere, RLI's struggle in commercial auto continued, with the carrier noting that it had monitored the claims activity closely "in light of increased loss experience, which has caused us to increase loss estimates for this business in recent periods".

The carrier's COO Craig Kliethermes added that the company had experienced a severity increase in casualty lines, mainly in transportation.




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