Euro reinsurers' RoE slips to 17.5% in Q1, but 2025 targets within reach: Fitch

May 21 - (The Insurer) - European reinsurers’ average return on equity (RoE) declined to 17.5% in the first quarter of 2025 from 21.2% a year earlier owing to large loss expenditures, Fitch Ratings said in a report released on Tuesday.

Scor and Swiss Re bucked the trend with improved RoEs in the quarter.

Fitch said the cohort of reinsurers remain on track to meet their 2025 targets after delivering a robust Q1 performance despite losses from the Los Angeles wildfires.

The credit rating agency attributed this performance to rising earnings diversification, strong capitalisation and sufficient reserve strength.

Strong underlying performance in property and casualty (P&C), improved life and health (L&H) results, and steady investment income boosted the reinsurers’ net earnings, Fitch said.

Across the four reinsurers, the aggregate P&C combined ratio declined to 87.2% from 82.4% a year earlier on the back of the rise in catastrophe losses.

This exceeded the full-year target for all but Scor, which has a lower catastrophe exposure than its peers.

Fitch said natural catastrophe budget consumption across the four reinsurers was in the 27% to 36% range for the quarter.

Life and health earnings improved across the board, owing to steady contractual service margin (CSM) releases and positive experience variance for Munich Re and Hannover Re.

These margins rose for all reinsurers but Hannover Re due to the adverse currency effect and other adjustments. CSM represents the future unearned profit expected to be earned over the duration of an insurance contract.

Solvency ratios remained strong, buoyed by solid operating capital generation. The capital levels were at the upper end of their target ranges, facilitating future capital repatriation or bolt-on acquisitions.

Investment returns also grew, with the average return on investment rising to 3.7% from 3.5% in the first quarter of 2024.