Aon Benfield Estimates Reinsurers’ Capital at $470 Billion

April 21, 2011

The latest edition of the Aon Benfield Aggregate (ABA) report, which analyses the year end 2010 financial position of the world’s leading reinsurers and examines how 2011 catastrophe losses may affect their capital positions, estimates that “total Global Reinsurer Capital reached an all-time high of $470 billion at December 31, 2010 – a 17 percent increase over the 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 percent or $38 billion from the end of 2009.”

The report said that 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 $10.0 billion of unrealized investment gains.” However it added that “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 percent in 2009 to 10.4 percent 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 report included the following:
1. Gross property and 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 percent, driven by disclosed catastrophe losses equivalent to 9.1 percent of net premium earned;
3. Non-life underwriting profit fell by $6.0 billion to $4.8 billion, including a contribution of $5.1 billion from prior year reserves.

In addition the ABA report noted that “catastrophic loss activity continued to make the news during 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.”

Mike Van Slooten, head of Aon Benfield’s International Market Analysis team, commented: “The ABA companies performed well in 2010 despite a number of catastrophe losses. 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.”

Source: Aon Benfield

Topics Profit Loss Reinsurance Aon

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