Monte Carlo 2012: Low level of insured cat losses in 2012, favorable impact on capital growth and earnings

10 September 2012 — Oleg DORONCEANU
tornada1"Global reinsurer capital totaled a record USD 480 billion at June 30, 2012, an increase of 5% (USD25 billion) relative to December 31, 2011. 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", estimates the Aon Benfield Aggregate (ABA) report, which analyses the financial position of the world's leading reinsurers for the first half of 2012. Mike Van SLOOTEN, Head of Aon Benfield's International Market Analysis team, said: "In stark contrast to the prior year, the relatively low level of insured catastrophe losses in the first half of 2012 allowed most ABA companies to report good earnings and consequent capital growth."

The firm's latest study found that capital reported by the ABA group of 31 publicly reporting reinsurers rose by 6 percent, to USD 286 billion, driven primarily by USD 14.5 billion of net income and USD 8.6 billion of unrealized capital gains. Dividends and share buybacks totaled USD 9.1 billion.

Further key findings of the ABA study include:
  • Gross property and casualty insurance and reinsurance premiums written by the ABA rose by 6% to USD 92.0 billion, principally driven by higher pricing in loss affected lines, with a number of companies deploying new sidecar capacity for catastrophe business. Net premiums written rose by 5% to USD 76.3 billion.
  • The ABA combined ratio stood at 90.1%, down from 117.8% in the first half of 2011, producing an underwriting profit of USD 6.6 billion, with all but one constituent reporting positive results.
  • The contribution to the combined ratio from natural catastrophe losses totaled 2.5 pp (USD1.6 billion), down from 31.8 pp (USD19.6 billion) in the first half of 2011.
  • The benefit to the combined ratio from prior year reserve releases was 3.2 pp (USD2.1 billion), down from 4.7 pp (USD2.9 billion) in the first half of 2011.
  • The total investment return reported by the ABA companies through their income statements fell by 4.9 %to USD 18.1 billion, representing an annualized investment yield of 3.8 %.
  • Pre-tax profits reported by the ABA companies totaled USD17.8 billion, up from only USD1.4 billion in the first half of 2011, with all 31 constituents reporting positive results.

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