Although the property and casualty (P&C) operations of reinsurers Munich Re, Swiss Re, Hannover Re, and SCOR were hit by elevated large loss costs in the first quarter of 2025, driven by the historic Los Angeles wildfires, analysts at Fitch Ratings feel the four companies are still on track to meet their “ambitious targets” for 2025.
Together, the big four European reinsurers suffered losses of more than $2.5 billion from the January 2025 wildfires in California, but despite the active quarter for cat activity and subsequent insured losses, each firm reported a strong set of results for the opening quarter of the year.
The underlying performance in P&C was strong, which combined with improved life and health (L&H) results and steady investment income, supported net earnings for the group.
As a result, Fitch Ratings believes that “the four European reinsurers are still in a position to meet their ambitious targets for 2025, as increasing earnings diversification, capital and reserves strength provide buffers against future shocks related to underwriting, investments or the economy.”
Munich Re has maintained its €6 billion profit guidance for 2025 despite the costly Q1, while Swiss Re is still targeting net income of more than $4.4 billion for the year. Hannover Re is aiming for net income across the Group of around €2.4 billion in 2025, while SCOR is targeting an economic value growth rate of 9% per annum.
“P&C combined ratios (CR) deteriorated to 87.2% in 1Q25 from a low of 82.4% in 1Q24. They exceeded the full-year target for all reinsurers with the exception of SCOR, reflecting SCOR’s lower exposure to LA wildfires and natural catastrophes in general. We estimate that the natural catastrophe annual budget consumption ranged from 27% to 36%.
“The normalised CRs remain in line with full-year guidance. Discount benefit on CR was substantial, ranging between 8% and 10% due to the large share of US claims,” explains Fitch.
As noted by the ratings agency, L&H results did improve for the group, driven by a steady contractual service margin (CSM) release for each firm, and bolstered by positive experience variance for both Munich Re and Hannover Re.
“The CSM grew for all reinsurers but Hannover Re, due to the adverse currency effect and other adjustments. Munich Re’s new business CSM was significantly in excess of CSM release, indicating future profit growth,” adds Fitch.
Investment results were also positive for the four firms in the opening three months of the year, which Fitch notes is a reflection of recurring income, supported by higher reinvestment rates and investment gains, partly offset by negative fair-value changes.
“Solvency ratios remained very strong as a strong operating capital generation offset new business strain and capital management. As a result, the capital levels remained above or at the upper end of their capital target ranges, paving the way for future capital repatriation or bolt-on acquisitions. There was little change in the low financial debt leverage, which is likely to fall further for Munich Re and Hannover Re in the next few quarters,” says Fitch.
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