Top five Irish insurers stomach €411m investments hit in 2022 as rates soared

The five largest general insurers in the Irish market racked up a combined €411 million financial hit on their investment portfolios last year, mainly made up of paper losses as the value of their bond portfolios fell amid soaring interest rates.

The Irish units of international insurance groups Axa, Allianz, Aviva and RSA as well as domestic insurer FBD – who together account for about two-thirds of premiums written by Insurance Ireland members – booked a combined €15.6 million of investment losses through their income statements last year.

The five racked up €396.2 million of unrealised losses, which are not recorded in their profit and loss accounts, which pushed the sector into a loss at its so-called comprehensive level and reduced capital reserves levels across most of the insurers.

The figures are drawn from the latest annual solvency and financial conditions reports (SFCR) of each of the Dublin-based companies.

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Bond values move inversely to market interest rates, or what are known as bond yields. The European Central Bank (ECB) hiked its key deposits rate from minus 0.5 per cent in July to 2 per cent by the end of last year, before subsequently increasing it to 3.25 per cent.

Most European insurers are sitting on unrealised losses on their bond portfolios, Moody’s said in March. While Moody’s does not expect these losses to crystallise – because insurers will generally be able to hold the investments until they mature, by which time the losses will have likely been reversed – they can have an effect in the meantime on solvency capital reserves, which are in place to ensure insurers can pay out claims to policyholders in the event of shock losses.

Each of the top five Irish insurers retained capital reserves positions that were comfortably ahead of their regulatory requirements even after three of the five either paid out dividends last year or ring-fencing money for payouts, mainly to parent companies.

Axa Insurance, the Republic’s largest general insurer by premiums, booked €6 million of investment losses through its profit and loss account, and reported €129 million of additional unrealised investment losses through comprehensive income.

The combined hit to the two lines came to €134.8 million at Allianz Ireland, €19 million at Aviva Insurance Ireland, €23.3 million at RSA Insurance Ireland and €100 million at FBD.

Total net profits – before adjustments to comprehensive income – declined by 25 per cent across the five to just over €257 million. Aviva Insurance Ireland and RSA Insurance Ireland recorded small net losses last year, according to their solvency and financial conditions reports.

The median solvency capital ratio fell to 157 per cent of the amount of cash reserves the insurers estimate they would need to withstand a one-in-200-year loss event over the space of 12 months. That compared to a median ratio of 168 per cent a year earlier.

French-owned Axa Insurance accounted for a €70 million planned dividend to its immediate parent in calculating its solvency ratio, while FBD paid out almost €36 million to shareholders and German-owned Allianz Ireland handed up €39 million of dividends.