2020 leaves an uneven mark on insurance companies’ bottom lines
In 2020, the pandemic was far from the only burden weighing on the insurance industry. Catastrophe claims, for example, were also notable and appeared to drain many companies’ resources in a period where their coffers were already strained by expenses brought on by COVID-19. QBE was one of the companies that was impacted on both ends (CATs and COVID) during 2020, posting an underwriting loss of $869 million, an insurance loss of $727 million, and a staggering net loss after income tax of $1.52 billion. By comparison, QBE reported a net profit after income tax for 2019 that totalled $550 million.
Other ‘losers’ for the 2020 period were AIG, which reported net loss attributable to AIG common shareholders of $6 billion – a monumental shift from the insurer’s net income of $3.3 billion in the prior year, that was in part driven by its sale and deconsolidation of Fortitude Group Holdings LLC – and Argo Group, which revealed net losses both in the fourth quarter and full-year (of $76.5 million for the latter) due to heightened 2020 catastrophe and COVID-19 losses. Specialist insurer Beazley also fell into this category, plunging from a pre-tax profit of $267.7 million in 2019, to a loss before tax worth $50.4 million for 2020. COVID-19 claims were again to blame for this company’s numbers.
Read more: AIG reports huge loss in 2020
Reinsurers likewise didn’t perform well overall, from those that have reported so far. Swiss Re posted a net loss of $878 million, compared to a profit of $727 million for year-end 2019, and Everest Re Group held on to profits, albeit at a lower level compared to the previous year with net income coming in at $514.2 million for 2020 versus $1 billion in 2019. The pandemic had a big hand in the results, with Swiss Re noting that its property and casualty reinsurance arm would have seen a net income of $1.3 billion had it not been for COVID-19.
On the other hand, companies that performed better than their peers in the industry included Marsh & McLennan Companies, which reported 2020 full-year revenue growth of 3%, and MAPFRE, which posted an operating result of about US$798.7 million in 2020, despite being “highly affected” by the COVID-19 pandemic in the first six months of the year. Other insurers reported declines from prior years, but still remained in the black, like Zurich, whose net income attributable to shareholders was down 8% from 2019, but still amounted to $3.8 billion; Allianz SE had a similar story.
Global brokers and merger partners Aon and Willis Towers Watson also came out well for the year, with the latter reporting total revenue of $9.35 billion for 2020, a bump up of 3% from the $9.04 billion reported for 2019, while the former saw its total revenue for the year come in flat at $11 billion.
Notably, the 2020 numbers have tended to vary from region to region – US P&C insurers’ net income after taxes dropped 27.5% to $35.1 billion in the first nine months of 2020, according to a new report, while Asia remains an area of growth for many companies, like Manulife, whose Hong Kong and Macau units revealed that earnings for the fourth quarter and full year of 2020 both grew to record highs.
Moreover, several Canadian players came out well for the year, like Trisura, which grew its net income by 536.9% from the prior year, The Co-operators, which doubled its net income from 2019, and Economical, which experienced a spike of $136.5 million in net income. By contrast, several European insurers did rather poorly, with Zurich UK revealing a 73% drop in its business operating profit and Netherlands-headquartered insurance group Aegon reporting a net loss worth €147 million.
Results season is far from over, with several big firms’ results still to be revealed. There are likely to be more poor showings for 2020 on the way, such as AXA, which warned that there would be a hit to its results thanks to the COVID-19 pandemic.
For those companies that were hurt by COVID, catastrophes, and other developments in 2020, the one comfort that they can take is the fact that the year was one that laid low many profitable companies and completely changed their financial trajectory. Hopefully, 2020 stays one-of-a-kind, and insurers can bounce back into 2021 now that they’ve had an opportunity to readjust their exposures to COVID-19 and other risks.