Peak Re grows 2016 premium income by 20%
Underwriting profit increased by 33%
Technical profitability unchanged at a combined ratio of 97.6%
In 2016 Peak Reinsurance Company Limited (“Peak Re” or “the Company”) made further progress in growing its global multi-line franchise. The Company’s premium income increased by 20% to USD 698 million. Top-line growth went hand in hand with a stable combined ratio, yielding a technical underwriting profit of USD 38 million, after USD 31 million in 2015. Net income was USD 7 million as a result of a lower investment return.
Commenting on the Company’s performance, Chief Executive Officer Franz Hahn said: “For Peak Re, 2016 was another year of strong and steady growth. Since inception, our technical results have been consistently profitable. Our gross written premium grew by USD 115 million, a 20% increase compared to last financial year, and our underwriting profit also increased 33% to USD 12 million in 2016. We successfully weathered the unabated softening of global and regional reinsurance market conditions. This performance testifies to the quality of our underwriting and the effectiveness of Peak Re’s strategic portfolio steering.”
Political surprises were characteristic of the year 2016. Most commentators were wrong-footed when the British electorate decided to leave the European Union and Donald Trump won the US presidential elections. Both events left their marks on global financial markets through a massive depreciation of Sterling and spiking risk-free rates, respectively. In Peak Re’s Asian home markets, financial conditions stabilised following a tumultuous beginning of the year as fears about a hard landing of China’s economy and a global spiral of deflation receded. Overall, economic growth across Asia was stronger than in 2015 and more robust than predicted.
Strong premium growth at stable technical profitability
Against this backdrop, Peak Re’s Gross Premiums Written reached USD 698 million in 2016, up from USD 583 million from the previous year. The combined ratio came in at 97.6%, virtually unchanged from the previous year (96.8%). Technical underwriting profit (before administrative expenses) grew by 22% from US$ 31 million to US$ 38 million.
Peak Re’s focus on managing the portfolio to produce a low level of volatility continued to serve the Company well. Peak Re is also committed to a prudent approach to reserving with technical provisions growing faster than the premium income.
Peak Re’s performance continues to profit from a highly competitive administrative expense ratio of 4.7%, a slight improvement compared with the previous year. This achievement reflects the effectiveness of the Company’s integrated global underwriting platform and the cost discipline characteristic of its entrepreneurial start-up culture.
2016 saw further progress in building a portfolio with a sound diversification by line of business and geography. While the Company has a portfolio that is diversified, it is still focused on Asia Pacific, with 65% from Asia Pacific and 35% from the rest of the world.
Challenging investment markets
As a long-term value and total return investor, Peak Re suffered some impairment losses on equity positions in 2016. The Company continues to tolerate volatility on the assets side of the balance-sheet while carefully avoiding it on the liabilities side. As a result, the Company’s total investment return was 1.5% in 2016 and net investment return stood at 3.0%.
In 2016, Peak Re’s total investable assets have grown by 33% to US$ 1.22 billion. This strong momentum will continue to support the Company’s total return investment strategy going forward. Overall, the investment mix corresponds to the risk-return profile of Peak Re’s high-growth home markets in Asia. Fixed-income securities and equities account for close to a third each. Almost a quarter of Peak Re’s investable assets is held in cash as making prompt claims payments is at the core of its value proposition to customers.
Outlook for 2017
Peak Re’s outlook remains confident. The year-end renewals have confirmed the Company’s continued ability to grow profitably on the back of higher shares and new business with existing clients in particular.
Peak Re’s new European subsidiary will go a long way in broadening its footprint in this part of the world. The Solvency II equivalency of Switzerland is a key asset for Peak Re. At the same time, the Company will continue to diversify into the Americas and selectively capture opportunities in the Middle East and Africa.
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About Peak Re
Peak Re is headquartered in Hong Kong with shareholder funds of US$841.1 million as of 31 December 2016. It is authorized by the Office of the Commissioner of Insurance of Hong Kong and is rated “A-” by A.M. Best, a leading international insurance industry credit rating agency. The Company is backed by Fosun International Limited (HK.656) and the International Finance Corporation, member of the World Bank Group, who have respectively invested 86.93% and 13.07% in the Company. Peak Re offers reinsurance services covering a range of lines across Asia Pacific, EMEA and the Americas, tailor-making risk transfer and capital management solutions to best fit clients’ needs.
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