Reinsurers pre-tax profit in 2020 strongly affected by the combined impact of the pandemic and NatCat

29 April 2021 — Daniela GHETU
The 23 global reinsurers included in the Aon's Reinsurance Aggregate (ARA) reported a pre-tax profit of USD 6.9 billion in 2020, around a third of the level seen in 2019, driven by a P&C underwriting loss of USD 5.9 billion and a 23% reduction in the overall investment result to USD 27.6 billion.

The ARA underwrites just over 50% of the world's life and non-life reinsurance premiums and is therefore a reasonable proxy for the sector as a whole, the study authors specified.

The key highlights of the ARA's financial performance in 2020 were as follows:

  • Total gross premiums written (GPW) rose by 6% to USD 294 billion.
  • Property and casualty (P&C) premiums rose by 7% to USD 223 billion, split primary insurance USD 107 billion (+6%) and assumed reinsurance USD 116 billion (+7%).
  • The net P&C combined ratio stood at 103.4%, with COVID-19 losses of USD 14.0 billion contributing 8.0 percentage points (pp) and natural catastrophe losses of USD 8.7 billion adding another 5.0pp.
  • Life and health reinsurance GPW stood at USD 54 billion. This segment generated additional COVID-19 related losses of USD 2.4 billion.
  • The ordinary investment yield fell to a new low of 2.3%, driven by the capital market volatility associated with COVID-19 and the impact of emergency cuts in interest rates.
  • The capital market recovery subsequent to the first quarter was nevertheless sufficient to drive the ARA to an overall net profit of USD 5.4 billion, representing a return on equity of 2.3%.
  • Total capital rose by 6% to USD 270 billion, split equity USD 211 billion (+4%) and debt USD 59 billion (+16%).
  • The stock market value of the listed ARA companies at April 16, 2021 remained 6% below the level seen at the beginning of 2020.

The full Aon's Reinsurance Aggregate report for 2020 is available here.

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