Social
Insurer reporting season has concluded for the latest quarter and whilst a common theme was rising premiums and the insurers taking a battering from weather claims in Australia, it is not all bad news for policyholders. We took a closer look at the ASX-listed insurers Suncorp (SUN), IAG, and QBE and compared their performance to some international peers.
Insurers report differently, and below we look at key metrics and headlines that typically signal what underwriting conditions to expect over the remainder of the year:
Gross written Premium (GWP) growth was achieved across the board, predominantly through premium increases. However, GWP growth was tempered slightly by insurers exiting portfolios that have not been profitable, preferring to walk away than accept risks for the sake of their top line.
In Australia, GWP growth was offset mainly by weather-related claims on the eastern seaboard earlier this year and the rising costs of property repairs. Interestingly, IAG also noted the higher costs for liability claims, including worker injuries and silicosis from prior years. This is directly measured by the Loss Ratio, which insurers aim to keep as low as possible.
Like all businesses, insurers are looking to improve operating efficiency which is tracked by their Expense Ratio. This includes all costs of acquiring business such as commissions, technology, and people costs.
Also of note is the Combined Operating Ratio (COR) which represents the underwriting profit of an insurer. A COR below 100% indicates an underwriting profit, whereas above 100% means the insurer is paying out more money in claims than it is receiving in premiums. Most insurers work to a COR of 90% as their hurdle.
Despite volatile investment markets, the influx of catastrophe claims, rising inflation, and supply chain issues, insurer sentiment was relatively positive with most pointing to improved underlying performance due to pricing increases and rebalancing their portfolios by exiting high hazard industries.
Insurers will continue to push for premium increases in the range of mid to high single digits for better performing risks at renewal to offset claims inflation and higher reinsurance costs (this is insurance for insurers). We have found insurers are scrutinising policies more closely than ever to limit the impact on their bottom line, so policyholders will need to demonstrate to insurers that good risk management practices are in place. That said, from our daily discussions, insurers are telling us they are very much open for business and are in search of new business to fuel their growth.
With tougher conditions set to continue, Honan can help enhance a renewal outcome by presenting risks in the right way, looking at alternative insurance program structures, and sourcing local and overseas insurers to help you optimise your insurance program. To find out more, feel free to reach out at any time.
National Facilities Placement Manager
