The Aon Benfield Analytics’ Market Analysis team has published the latest edition of its Aon Benfield Aggregate (ABA) report, which assesses the financial performance of 28 of the world’s leading reinsurers in the first nine months of 2011, and examines how the year’s major natural catastrophe events have impacted their earnings and capital positions.
Aon Benfield Analytics estimates that global reinsurer capital declined 4 percent from $470 billion at December 31, 2010 to $450 billion at September 30, 2011. However, the report also notes that the reduction of 6 percent in the first quarter was partially “offset by growth of 1 percent in both the second and third quarters. This calculation is a broad measure of capital available for reinsurance and includes both traditional and non-traditional forms of reinsurance capital.”
The latest study, compiled by the Market Analysis team, found that the 28 ABA companies reported “capital totaling $245.1 billion at September 30, 2011, a decline of 0.6 percent or $1.5 billion since the end of 2010. ABA capital has thus rebounded to near peak levels since the 3.4 percent reduction reported in the first quarter. The main contributory factors were $7.0 billion of net income, $1.8 billion of new capital and $1.3 billion of unrealized investment gains, offset by $8.4 billion of dividend payments and $3.2 billion of share buybacks.”
The report also indicated that the “first half combined ratio for the ABA companies rose by 14.3 percentage points to 110.5 percent, with D20.7 billion of pre-tax natural catastrophe losses representing 25.0 percent of net premiums earned. This translated into a property and casualty underwriting loss of $8.7 billion. The total investment return reported by the ABA fell by 24 percent to $24.4 billion, driven by a swing from realized and unrealized capital gains of $9.4 billion to losses of $400 million.
“Overall, the ABA reported a pre-tax profit of $8.2 billion for the first nine months of 2011, a 64 percent reduction relative to the prior year period. Net income stood at $7.0 billion, representing a return on average common equity of 2.8 percent (non-annualized). This followed a return of $23.8 billion, or 10.4 percent, for the whole of 2010.”
The study found, however, that for most ABA companies, “direct holdings of sovereign debt issued by Portugal, Italy, Ireland, Greece and Spain were immaterial at September 30, 2011.”
It concluded that “despite the elevated level of catastrophe losses over the last two years, ABA financial strength ratings have remained broadly unchanged, reflecting continued robust capital positions.”
Source: Aon Benfield
Topics Catastrophe Reinsurance Aon
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