Allianz Ireland, the second largest general insurer in the State, suffered more than €154 million of paper losses on its investment portfolio last year as the value of bonds held by the company dropped amid rising interest rates globally as a result of central banks seeking to fight spiralling inflation.
The unrealised losses, which are not recorded in their profit and loss account, pushed the company into a loss at its so-called comprehensive income level and reduced its capital reserves.
Allianz Ireland separately recorded €19.4 million of realised investment income gains in its profit and loss statement, however, which helped lift profit after tax to €50.2 million from €44.7 million for 2021, the company said in its latest annual solvency and financial conditions report (SFCR), published on its website.
The paper loss is the largest reported to date among the main Irish general insurance companies as balance sheets across the globe with large bond holdings grapple with the impact of rising interest rates. Moody’s said last month that most European insurers are sitting on unrealised losses on their bond portfolios.
While Moody’s said it 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.
Allianz Ireland’s shareholder funds declined by €140 million last year to €227.5 million, reflecting the paper losses on investments and payment of €39 million of dividends to other parts of wider German-based Allianz Group, but partly offset by the €50 million profit.
Total funds that are eligible for its regulatory solvency capital declined to €281.7 million from €338.6 million – but remained a healthy €117 million above its solvency capital requirement, according to the report.
Elsewhere in the sector, Aviva Insurance Ireland, the third-largest insurer in the Republic by gross premiums, reported €19 million of investment losses last year through its profit and loss statement, according to its latest SFCR.
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RSA Insurance Ireland recorded €23.3 million of unrealised investment losses. FBD reported €10 million of investment losses through its profit and loss account and a further €90 million of losses at comprehensive income level, according to its latest annual report.
Axa Ireland, the largest among the top-five general insurers in the market, has yet to publish an SFCR or annual report for 2022.
Allianz Ireland’s gross premiums dipped 2 per cent last year to €616 million, wholly related to its exit from Northern Ireland in 2021, which was mostly offset by growth in Republic. The increase in Republic of Ireland premium was driven by both retail and commercial business where policy volumes increased, while maintaining underwriting discipline.
While net profits from insurance underwriting rose to €37.5 million to €32.8 million, the result for motor insurance, its largest business line, slid to €4.1 million from €25.6 million as a result of higher inflation and incident frequency.
