Total global reinsurer capital, comprising capital from both the traditional and alternative markets, stood at $565 billion at December 31, 2015 – a reduction of 2 percent relative to the end of 2014, according to a new report from Aon Benfield.
Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc, released the latest edition of its Aon Benfield Aggregate (ABA) report, which analyzes the 2015 financial results of 27 major reinsurers.
Within this figure, traditional reinsurance capital decreased by 4 percent to $493 billion, driven by the strengthening of the U.S. dollar and the impact of rising interest rates on bond valuations, while the influence of alternative capital continued to grow – increasing by 12 percent to $72 billion.
The firm’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 percent to $326 billion at December 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 relating to the listed ABA companies include:
- In original reporting currencies, two-thirds of the constituents achieved growth in property and casualty (P&C) premiums in 2015.
- The combined ratio was stable at around 90 percent for the third year running, despite another uptick in the expense ratio.
- P&C underwriting profit fell by 9 percent to $15.1 billion, of which 55 percent was derived from favorable prior year loss reserve development.
- The total investment return declined by 25 percent to $25.1 billion a yield of 2.9 percent (2014: 3.7 percent).
- Net income fell by 12 percent to USD22.1 billion; headline return on equity has eroded modestly, but remains resilient at 9.8 percent.
The ABA now comprises 25 publicly-listed holding companies (‘the listed ABA’) and two US-domiciled subsidiaries of Berkshire Hathaway, namely National Indemnity Company (NICO) and General Reinsurance Corporation (Gen Re). As standalone operating companies, the results of NICO and Gen Re tend to be impacted by intra-group transactions. To provide a more meaningful picture of the sector’s underlying performance, many of the charts and ratios used in the report focus on the listed ABA.
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