There's at least a modicum of good news breaking for reinsurers: Despite the catastrophic beginning to 2011 due to earthquakes, tsunamis and other storms, a report released today from
The latest edition of the Aon Benfield Aggregate (ABA) report, which analyzed the year-end 2010 financial position of the world’s leading reinsurers and examined how 2011 catastrophe losses may affect their capital positions, estimates that total Global Reinsurer Capital reached an all-time high of $470 billion as of Dec. 31, 2010—a 17% increase from 2009 period.
The study, compiled by the firm’s market analysis unit, found that the ABA group of 28 leading reinsurers reported capital totaling $248 billion at year-end 2010—an increase of 18% or $38 billion from the end of 2009.
The main contributors to growth were $22.5 billion of new capital raised by National Indemnity (to part-fund Berkshire Hathaway’s railroad acquisition), $23.8 billion of net income, and $10 billion of unrealized investment gains. Increased dividends of $7.4 billion and share buy-backs of $10.2 billion provided a partial offset.
Across the ABA as a whole, return on equity declined from 11.7% in 2009 to 10.4% in 2010. Catastrophe losses and reduced investment income were countered by sharply increased capital gains and higher prior year reserve releases.
Further key findings of the ABA include:
1. Gross property/casualty premiums written were flat at $124 billion, with the impact of weakening pricing offset by positive effects related to reinstatements and acquisitions
2. The combined ratio rose by 5.7 percentage points to 95.3%, driven by disclosed catastrophe losses equivalent to 9.1% of net premium earned
3. Non-life underwriting profit fell by $6 billion to $4.8 billion, including a contribution of $5.1 billion from prior year reserves.
But as noted before, catastrophic loss activity, was the story of the first quarter of 2011. Reported loss estimates issued by ABA companies currently total $12.1 billion, and are shown relative to constituent capital in the chart below. Aon Benfield believes the losses to date fall within expected annual income and represent an earnings event rather than a capital event for the reinsurance industry.
“The ABA companies performed well in 2010 despite a number of catastrophe losses," says Mike Van Slooten, head of Aon Benfield’s International Market Analysis team. "Aggregate capital was at record levels at year-end, leaving the sector well-positioned to manage the events that have taken place in the first quarter of 2011.”
To read the full report, click
