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Global reinsurers' underwriting profits down in first half of 2014: Fitch

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Global reinsurers' underwriting profits down in first half of 2014: Fitch

The underwriting profits posted by global reinsurers fell in the first half of 2014 compared with the first six months of 2013, although the sector remained profitable, according to a report published Tuesday by Fitch Ratings Inc.

For the first half of 2014, the 22 global reinsurers tracked by Chicago-based Fitch posted a combined ratio of 87.4% compared with 85.9% in the first half of 2013, according to the rating agency in “Global Reinsurers' Mid-Year 2014 Financial Results, Underwriting Results Profitable, but Pressured as Capital Remains Strong.”

Fifteen of the 22 reinsurers Fitch tracks reported a higher combined ratio in the first half of 2014 than in 2013, although all but one reported a combined ratio of lower than 100%.

“Results were still profitable though because of continued manageable catastrophe-related losses and sustained favorable loss reserve development,” the report said.

In the first six months of 2014, worldwide insured catastrophe losses totaled about $17 billion, according to the report, compared with $21.1 billion in the first half of 2013.

Yet reserve releases remained almost constant between the end of 2013 and the end of the first half of 2014, according to the report.

“Although Fitch believes that the surplus held within nonlife reinsurance industry loss reserves remains adequate, releases are expected to decline,” the report said.

“Continued dwindling in the release of excess reserves from prior favorable pricing cycles will put pressure on future profitability,” it added.

Fitch currently has a negative outlook on the reinsurance sector “as the fundamentals of the reinsurance sector have deteriorated with declining premium pricing and weakening of terms and conditions across a wide range of lines,” the report states.

“Fitch views current market conditions as unlikely to improve in the near term given the competition in the reinsurance market,” according to the report.

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