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The gathering storm? Key takeaways from Q1

With the Q1 2014 results season complete, The Insurance Insider's Data Room highlights the key takeaways from the reporting period

It was a sluggish start for many of the global (re)insurers that we follow as their financial performances were generally weaker than this time last year, according to analysis conducted by The Insurance Insider's Data Room.

Despite the benign cat losses, the bottom line was affected by lower reserve releases and widening core loss ratios.

Meanwhile, capital management heated up as carriers concluded that there are few places to go for value creation with rates under pressure.

Over the next few pages, The Insurance Insider details the key trends and takeaways from this year's first quarter reporting season for our four company composites.

It should be noted that London-listed carriers are only included in our top-line analysis due to the limited information provided in Q1 interim management statements.

Top line pressured...

Rising competition and softening rates arising from overcapitalisation in the sector weighed down on top-line growth in the first quarter, albeit to varying extents.

With the influx of alternative investment into a market already rich with capital, global reinsurers felt the greatest pinch as declining reinsurance rates forced group-wide, non-life gross written premiums (GWP) to recede by 0.4 percent to $19.6bn on a currency-adjusted basis.

This follows fiercely competitive 1 January reinsurance renewals, where sources cited price reductions of up to 15-20 percent for US property cat lines.

This prompted carriers to exercise underwriting discipline by tightening cat books or even withdrawing from certain business altogether.

This was particularly true for our composite of short-tail carriers, which typically specialise in property cat business.

Their top-line growth decelerated to 4.1 percent in Q1 2014, compared to 11.1 percent expansion in the prior-year period, bringing total GWP to $2.3bn.

Across the Atlantic, London-listed carriers were also unable to escape the softening pressures, albeit to a much lesser degree than other peer groups.

Total gross premiums for the composite grew by 5.2 percent on average in Q1 to £3.5bn, down from the 7.9 percent rise in the same period of last year, with first quarter rate decreases listed in the region of 2.0 percent to 2.5 percent.

Overall growth also slumped for Bermudian carriers, with Q1 GWP climbing by just 4.4 percent to $8.5bn - more than half of the 9 percent increase recorded in the first quarter of 2013.

However, amid deteriorating conditions on the reinsurance side, a couple of firms took decisive action by shifting their focus to developing their insurance operations.

Key points:

• Strained top-line expansion across our entire universe of P&C (re)insurers in Q1

• Fuelled by the ongoing brawl for cat reinsurance business between traditional and alternative capacity, which has driven rates down significantly

• Greatest impact on global reinsurers and Bermudian cat specialists

• Carriers maintained underwriting discipline by scaling back on property cat premiums or retreating from lines that are no longer profitable

• (Re)insurers seen diversifying insurance business, where conditions are deemed more favourable

• Softening pressures also spread to other lines such as casualty

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