The largest general insurers in the Irish market last year recouped most of the financial hit sustained on their investment portfolios in 2022, thanks to a decline in borrowing costs on international bond markets as investors bet on the pace at which central banks will cut rates.
Four of the five largest insurers in the market have either published so-called solvency and financial condition reports (SCFR) on their websites for 2023, including Allianz plc, Aviva Insurance Ireland, RSA Insurance Ireland, or, in the case of FBD, an annual report. The largest insurer in the State, French-owned Axa Insurance has yet to report figures.
The four racked up a combined €303.8 million of realised losses, taken through their income statements, and unrealised losses, which are not recorded in profit and loss accounts, in 2022 as market rates on bonds globally soared as central banks hiked official rates to fight soaring inflation.
However, the same insurers posted a combined €164 million of realised and unrealised gains on their investment portfolios – which are mainly made up of corporate and Government bonds – last year, according to calculations based off figures in their individual reports.
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Bond values move inversely to market interest rates, or what are known as bond yields.
The yield on German 10-year bonds, a benchmark for long-term European borrowing costs, declined over the course of 2023 from almost 2.6 per cent to about 2 per cent, amid heightened speculation towards the end of the year about the pace at which the European Central Bank (ECB) will cut rates again.
The European Central Bank (ECB) had hiked its key deposits rate from minus 0.5 per cent to 4 per cent over the 15 months to last September in a battle against inflation. Euro zone bond yields have risen again since the end of last year, as investors have reined in expectations about the pace at which rates will be reduced.
Moody’s estimates that European insurers had racked up more than €500 billion of unrealised losses on their bond investments over the course of 2022. However, the sector continued to retain capital reserves positions that were comfortably ahead of their regulatory requirements, and much of the losses have been unwound.
The latest SCFR report for Allianz Ireland, the second largest general insurer in the Republic, shows its premiums rose last year to €649.1 million from €624.4 million in 2022. Profit for the year dipped, however, to €41.9 million from €46.6 million.
It posted a €700,000 investment loss through its profit and loss account, but recorded €58 million of unrealised investment gains.
Aviva Insurance’s gross premiums totalled €598 million, while its pretax profit tripled to €19 million. RSA’s premiums came to €387 million and its net profit almost doubled to €4.17 million.
FBD had previously reported last month that its net profit increased by 21 per cent to €70 million last year.
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