In the previous year, leading insurance firms in Ireland managed to recover a sizeable portion of their financial losses incurred in 2022 on their investment portfolios. This development came as a result of decreased lending costs on global bond markets, with investors predicting the speed at which central banks will decrease rates.
Four out of the five major insurers have either presented solvency and financial condition reports (SCFR) on their websites for 2023 or, in the case of FBD, issued an annual report. These insurers include Allianz plc, Aviva Insurance Ireland, and RSA Insurance Ireland. However, the largest insurer in the nation, French company Axa Insurance, has not disclosed numbers yet.
Collectively, these insurers suffered losses totalling €303.8 million in 2022, both actual losses demonstrated in their income reports and unrealised losses, which remain unrecorded in profit and loss accounts. This financial burden stemmed from an increase in global bond market rates as central banks escalated official rates to combat high inflation.
In contrast, last year these insurers claimed combined profits of €164 million from both actual and unrealised revenues from their investment portfolios. These portfolios primarily consisted of corporate and government bonds, as per calculations based on their individual statements.
Bond values have an inverse relationship to market interest rates, known as bond yields. In 2023, German 10-year bond yields, a measure of long-term European lending costs, decreased from roughly 2.6 per cent to around 2 per cent. This was due to growing speculation about how quickly the European Central Bank (ECB) would reduce rates again.
The ECB had raised its primary deposits rate from negative 0.5 per cent to 4 per cent over the 15 months ending in September in a move to counteract inflation. Since the end of last year, Euro zone bond yields have been on the rise again, as investor expectations about rate reductions cooled down.
Moody’s estimated that in 2022, European insurers suffered more than €500 billion in unrealised losses from bond investments. Regardless, the sector continued to maintain healthy capital reserve positions, exceeding regulatory requirements, with many of the losses being offset.
The latest financial report from Allianz Ireland, the Republic’s second largest general insurer, reveals that its premiums rose to €649.1 million last year, from €624.4 million in 2022. However, its annual profit dropped to €41.9 million from €46.6 million. A €700,000 investment loss was reported through its profit and loss account, nonetheless, it noted €58 million in unrealised investment gains.
In comparison, Aviva Insurance’s gross premiums totalled €598 million and it saw a significant threefold increase in pretax profit to €19 million. RSA reported premiums worth €387 million and nearly doubled its net profit to €4.17 million.
Meanwhile, FBD disclosed in a report last month that it saw a 21 per cent rise in net profit to €70 million last year.