Average sports fans are big believers in the power of lady luck, particularly when their team has just crashed out of a tense cup tournament and come oh so close to glory again.
Take the average England football fan for instance. They are building up a store of wholly unjustified and totally blind faith that the national team will somehow stumble through the final of this summer’s World Cup in South Africa and maybe even steal it with a lucky 1-0 win over Brazil or Spain.
If challenged by any serious minded sports analyst or indeed bookmaker to justify this, in some respects admirable but largely pitiful, level of expectation the rose-spectacled fan will of course point to those outrageously unlucky moments in recent world and European cup finals that saw England crash out well before the final itself.
They will counter sober, actuarial style statistics that strongly suggest failure at the quarter final stage with retorts of dodgy foreign referees, odd shaped and weighted balls, too short studs and greasy surfaces
But, as any sensible individual who has actually participated in an organised sport will concede, this is all utter cobblers because you make your own luck in this harsh world.
So what has this got to do with the infinitely more exciting world of European insurance you may ask?
Well, just consider the outrageously bad luck of the leaders of the big European insurance companies as they try and work out what happened to their share prices after a seemingly excellent set of first-quarter results.
Allianz, Zurich, Axa, Generali, Mapfre, RSA, Ace (now based in Zurich of course) and XL (just relocated to Dublin) managed to grow revenues as a group by an average of just under 9%, according to our numbers.
Not bad during the worst recession in living memory when customer revenues are dwindling fast as they try to avoid going out of business and insurance buyer budgets are under severe pressure.
The life and health business came to the rescue in most cases as property/casualty revenues stuttered. But, of course, this was down to the careful and clever tactics from those clever CEOs and their management teams. And, while the general property/casualty revenues and large corporate accounts did fall, they did not exactly plummet.
The average combined ratio for the group of 98.1%, excluding Mapfre, RSA and Axa, which do not report such trifling details at this stage, was not bad given the scale of the catastrophes incurred during the first quarter of this year.
The overall sub-100% combined ratio, tight expense control plus generally improved investment returns save a couple of big outliers helped deliver much improved net profits. These averaged an increase of no less than 116.5% in profits for all companies (excluding Axa and RSA).
The net profit of Allianz and Generali took a big leap forwards, by 274.5% and 406% respectively. Zurich, XL and Ace posted more restrained improvements of 19%, 28% and 33% respectively. Mapfre managed a reduction of 4.8%.
Nevertheless, the stock market should have been impressed with such numbers.
Axa, Allianz, Zurich and Generali all reported improved solvency ratios that ranged from 1% at Generali up to 9% at Axa.
The CEOs of these companies may well have hoped that these numbers would have reaffirmed once again their reliability, the absence of any need for knee-jerk increases in solvency requirements and regulation on the back of Solvency II and quietly impressed investors seeking a safe haven.
But, it was not to be as investors reacted more like the CEOs had scored an own goal.
Overall, little has changed for the group since the end of last year, despite decent year-end results in March followed up by tidy first quarter numbers.
Allianz’s share performance is typical. It had fallen by 4.43% between December 30 and May 14 hitting a high in early April when it was up 9% on the year-end close. On May 17 it opened at E84.40 ($104.23) against a year to date high of E95.43 and low of E76.67.
Axa stood at E13.00 on May 17 against a year-end close of E16.63. The year to date high was E17.575 on April 14 and low E11.820 on May 7.
Europe’s leading listed insurers will of course have searched around for the causes of the plummet and, perhaps more importantly, the fact that their prices are still closer to the year-end than the year to date high by some margin despite the decent numbers.
The immediate cause of that plummet was reportedly down to the “fat finger trade” entered by a person at a big Wall Street bank that caused panic through the markets.
It was not helped by grave uncertainty over the Greek debt crisis, a collapse in the value of the euro and emerging exposure to sovereign debt of the insurers. An inconclusive UK election will also not have helped as the London market tried to work out what was going on.
So lady luck has again heaped misery on Europe’s long-suffering CEOs just like England’s penalty takers no doubt will endure again this summer?
Maybe, but maybe not. Perhaps this experience points to something deeper in the workings of this market.
Perhaps it suggests, along with the valiant but seemingly hopeless task of convincing finance ministers and even professional financial regulators that insurance is different to the rest of the financial industry and needs to be valued accordingly, that the market just does not get insurance.
If that is the case, even partially, then the big listed companies highlighted above need to redouble their efforts along with the reinsurers and brokers in platforms such as the Geneva Association and CRO Forum to shed some serious light and rapidly.
Adrian Ladbury is Reactions’ European editor, covering the continental European market.