US-listed reinsurers see stocks rise after strong Jan. 1 renewals

Shares of U.S.-listed reinsurance companies posted gains this week after the sector as a whole logged solid rate increases during the Jan. 1 renewal season.

Initial reports from Gallagher Re Inc. show that reinsurance rates for U.S. primary carriers with no reinsurance claims were up 15% to 25%, while those with past claims saw increases of between 35% and 150%. Rates for companies without catastrophe claims rose 25% to 50%, while rates for those with prior catastrophe claims jumped 45% to 100%.

Howden Broking Group Ltd. reported that global property-cat rates jumped an average of 37%, the largest increase since 1992.

As of 2 p.m. ET on Jan. 6, shares of Everest Re Group Ltd. had risen 5.11% for the week. Reinsurance Group of America was higher by 3.70%, while RenaissanceRe Holdings Ltd. was up 3.67%.

Following the September 2022 annual industry conference in Monte Carlo, some reinsurers voiced concerns that pricing and demand would not be as robust as they had hoped given how calm the Atlantic hurricane season had been up to that point. That all changed just days later when Hurricane Ian slammed into the Florida Gulf Coast, with insured losses that Swiss Re AG estimated to be between $50 billion and $65 billion.

A number of reinsurers had expected pricing to improve further even before Ian, according to James Eck, vice president and senior credit officer for Moody's Investors Service's Financial Institutions Group. After the storm hit, Eck said some primary carriers he spoke with were genuinely concerned about getting enough property coverage and had been talking with their reinsurers to find out what was available for them.

"The companies that had good long-standing relationships were able to fill their programs or get pretty close with adjustments, such as raising attachment points and paying more," Eck said in an interview. "The companies that didn't have those relationships, or had been more transactional in the past, had a much more difficult time filling their programs."

Eck said the renewal season overall was "a winner" for the sector based on reports from reinsurance brokers citing "broad-based price increases" around the globe for almost every product.

"Casualty is not as strong but still going up, ceding commissions are coming down and interest rates are up, so you can make more money on the investment portfolio, which hasn't been the case for a long time," he said. "So, in general, the sector overall is looking much better from a profitability perspective."

Taking off in 2022

The largest U.S.-listed reinsurers outperformed both the S&P 500 and the S&P 500 Insurance index over the course of the last year.

RGA finished the year up 29.77%, Everest Re's stock gained 20.94% and RenRe closed out 2022 up 8.80%. In comparison, the S&P Insurance index climbed 8.14% for the year, while the broader S&P 500 plummeted 19.44%.

Those strong performances were realized despite heavy catastrophe losses fueled by Ian during the third quarter. For instance, Everest Re recorded estimated pretax net catastrophe losses of $730 million for the third quarter of 2022. The company's loss estimate from Ian came in at $600 million, with $500 million of that total landing in the reinsurance segment.

RenRe said its catastrophe losses in the third quarter of 2022, which totaled $650 million, were driven by a net negative impact of approximately $540 million from Ian.