A continuing influx of new funds from capital markets investors offsets the unwinding of unrealized investment gains
Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON), today launches the latest edition of its Aon Benfield Aggregate (ABA) report, which analyses the financial results of the world’s leading reinsurers in the first half of 2013.
Aon Benfield Analytics estimates that global reinsurer capital totaled USD510 billion at June 30, 2013, an increase of 1% (USD5 billion) relative to December 31, 2012. This calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and non-traditional forms of reinsurance capital.
The firm’s latest study found that capital reported by the ABA group of 31 leading reinsurers fell by 1% (USD4 billion) to USD313 billion; solid earnings being offset by more active capital management, adverse foreign exchange movements and unrealized losses on bond portfolios.
Further key findings of the ABA study include:
Gross property and casualty (P&C) insurance and reinsurance premiums written by the ABA rose by 5% to USD109 billion. The main engine of organic growth was the US market, driven by improving economic conditions and higher pricing in certain primary insurance lines
The ABA combined ratio improved by 1.7 points to 89.0%, driven by improved attritional loss experience and more favorable prior year reserve development
P&C underwriting profit rose by 26% to USD8.9 billion, with all constituents reporting positive results.
Annualized pre-tax operating returns (excluding all realized and unrealized gains and losses) relative to total equity stood at 11.4%, down from 12.0% in the first half of 2012
New sidecar sponsorship and the formation of in-house fund management operations are testament to the ABA’s increasing level of engagement with third party capital.
Mike Van Slooten, Head of Aon Benfield’s International Market Analysis team, said: “The ABA companies reported strong underwriting results in the first half of 2013. Interest rates have begun to rise ahead of expected tapering of the Federal Reserve’s quantitative easing program, which is negative for book values in the short-term but positive for earnings in the longer-term. We continue to see evidence of operational restructuring and strategic repositioning, as established reinsurers react to the threats and opportunities posed by the deployment of new funds from capital markets investors.”