Q4 2012 numbers, released in February-March, came in broadly in line with expectations. Companies continue to focus on underwriting performances and recurring RoIs remain under pressure (3.1% on average for the companies we cover in 2012 vs. 3.4% in 2011 and 4.1% in 2007). Total RoI went up to 3.8% vs. 3.3% in 2011 due to higher realised gains (mainly bonds) and lower impairments. NAVs at end-2012 were 16% higher than a year ago thanks to retained earnings and higher unrealised capital gains.
Poor management of the Cypriot situation generated, as of mid-March 2013, a new wave of flight to quality (10Y Euro rates back to lowest levels, driven by Bund) and some stress on risky assets (starting with spreads on Southern European countries and financials). Let’s call it the “Dijsselbloem’s touch”! For sure, deepening of the economic crisis in most European countries and political issues in Italy did not help. In the end, market valuation trends for most asset classes have been negative in Q1 2013, which should lead to some pressure on NAV at end-March. The main drivers that have driven the insurance sector in H2 2012 (the “Draghi’s touch”: lower risk premium and higher NAVs) have disappeared, at least momentarily.
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