Aon Benfield Study Finds Reinsurer’s Capital Recovers in Q2 from Q1 Losses

September 9, 2011

Aon Benfield, the global reinsurance intermediary and capital advisor of Aon Corp. has released the latest edition of its Aon Benfield Aggregate (ABA) report, which analyses the financial position of the world’s 28 leading reinsurers as of June 30, 2011, and examines how the year’s major natural catastrophe events have impacted their first half earnings and capital.

Aon Benfield Analytics estimates that “total global reinsurer capital reached $445 billion at June 30, 2011. This figure is a broad measure of the combined traditional and non-traditional reinsurance capital available worldwide.”

Aon also said that the group of 28 leading reinsurers that comprise the ABA reported capital totaling $242.4 billion as of June 30, 2011 – “a decline of 1.7 percent or $4.2 billion since the end of 2010. The main contributors to this change in capital position were $1.2 billion of net income, $0.8 billion of new capital and $2.4 billion of foreign exchange gains, offset by $7.1 billion of dividend payments and $2.5 billion of share buybacks. ”

Other key findings within the Aon Benfield report include the following:
• The first half combined ratio for the 28 ABA companies rose by 20.9 percentage points to 120.6 percent, with $18.2 billion of catastrophe losses representing 34.1 percent of net premiums earned. This translated into a property and casualty underwriting loss of $11.0 billion.
• The total investment return reported by the ABA reinsurers fell by 12 percent to $18.5 billion, driven by a much lower level of capital gains.
• The overall net income of $1.2 billion reported by the ABA companies for the first half of 2011 represented a return on average common equity of 0.5 percent. This followed a return of $23.8 billion, or 10.4 percent, for the whole of 2010.

Mike Van Slooten, International head of Aon Benfield Analytics’ International Market Analysis team, commented: ‘Despite the elevated level of catastrophe losses over the past 18 months, financial strength ratings have remained broadly unchanged, reflecting continued robust capital positions.’

Source: Aon Benfield

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