Canadian Underwriter

Global reinsurer capital down 2% in 2015 relative to 2014: Aon Benfield

April 4, 2016   by Canadian Underwriter

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Global reinsurer capital stood at US$565 billion at Dec. 31, 2015, a reduction of 2% relative to the end of 2014, according to the latest edition of the Aon Benfield Aggregate (ABA) report.

Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc, released the report, which analyzes the 2015 financial results of 27 major reinsurers, on Monday. [click image below to enlarge]

aon benfield

Within the capital figure, traditional reinsurance capital decreased by 4% to US$493 billion, driven by the strengthening of the U.S. dollar and the impact of rising interest rates on bond valuations, Aon Benfield said in a statement, noting that the influence of alternative capital continued to grow – increasing by 12% to US$72 billion.

Aon Benfield’s latest ABA study, which now covers a decade of data, found that the shareholders’ funds reported by the 27 ABA companies fell by 4% to US$326 billion at Dec. 31, 2015. However, when calculated at constant exchange rates, the total was shown to have increased slightly, as solid earnings were generated in the absence of major insured catastrophe losses.

Further key findings include:

  • In original reporting currencies, two-thirds of the constituents achieved growth in property and casualty premiums in 2015;
  • The combined ratio was stable at around 90% for the third year running, despite another uptick in the expense ratio;
  • P&C underwriting profit fell by 9% to US$15.1 billion, of which 55% was derived from favourable prior year loss reserve development;
  • The total investment return declined by 25% to US$25.1 billion a yield of 2.9% (2014: 3.7%); and
  • Net income fell by 12% to US$22.1 billion; headline return on equity has eroded modestly, but remains resilient at 9.8%.

“Ten years have now elapsed since the last major land-falling hurricanes in the U.S.,” Mike Van Slooten, co-Head of Aon Benfield’s Market Analysis team, said in the statement. “This has been a decade of unprecedented profitability for global reinsurers, as seen in the average combined ratio of 92.5% and average return on equity of 11.1% reported by the listed ABA companies over this period. The growing pressure on underlying earnings should be viewed against this backdrop, but in reality is likely to drive further M&A activity in the short to medium term.”

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