The 2019 results season is almost upon us, and sneak previews will be floating around in the market, along with various guesses, informed or uninformed.
So, for the sake of it, here is our guess – you can judge how informed it is by around the end of May. We will go at this from four different angles:
- Premium – with new business rates still falling, the churn impact and a zero general increase for 2018-19, this should fall by around 10% from $ 3,700 million to perhaps $ 3,400 million, net of return of premium decisions. reinsurance premiums will be down a little but not significantly.
- Claims – most reports suggests these have bottomed out and are likely to increase. Pool experience has not been great and the incidence of large claims remains pervasive. lets say these rise by around 7.5% from $ 2,500 million to $ 2,700 million
- This suggests that last year’s $ 100 million underwriting loss could head towards $ 600 million, but much depends on what rabbits the clubs can pull out of the hat as regards “favourable development on back year losses”.
- Investment income will by most reports be lucky to keep its head above water. Most interim reports are gloomy and last year’s $ 470 million contribution seems like a distant memory already. Lets say investment income and exchange gains net out to nothing.
So the above points to an overall deficit in the region of $ 500 million, which would see reserves fall to $ 5,250 million, Hardly a disaster as this would only result in the clubs being back where they were 2 years ago, but they still have to survive, in all but one case, on another zero premium GI for 2019-20. Action will need to be taken in the autumn of 2019 before the underwriting outcome falls even further out of balance.