Aon Benfield, the reinsurance intermediary and capital advisor, reveals today that following the mild capital erosion in 2008, reinsurers’ capital base rebounded well in 1H 2009, primarily due to improved investment returns.
The findings are contained in the latest Aon Benfield Aggregate (ABA) report, a quarterly publication which tracks the financial results of 24 leading global reinsurance entities (the “Aggregate”).
The report, 1H 2009 Glass Half Full, highlights that ABA shareholders’ funds grew 7% during the first half of the year, benefitting from strong profits and an upturn of the capital markets. Meanwhile, realized and unrealized losses for the ABA group reduced dramatically, falling from USD16.7bn in 1H 2008 to USD1.5bn by 1H 2009.
In the same period, gross premiums written by the ABA contracted 5%. A better expense performance drove the combined ratio for the group down by 0.9 percentage points to 91.9%. However, an improved underwriting performance and lower above-the-line investment losses were not sufficient to offset the decline in ordinary recurring investment income, leading to a 15% fall in pre-tax profits, which totalled USD9.3bn.
Bryon Ehrhart, Chief Executive Officer of Aon Benfield Analytics, said: “Our research reveals that reinsurer capital has rebounded well in the first half of 2009, driven primarily by good underwriting performance and a recovery in the value of investment portfolios. The group has retained sufficient capital to meet the needs of cedents, and continues to be well positioned to withstand the current hurricane season and other significant catastrophes occurring through the remainder of 2009.”
Michael O’Halleran, Executive Chairman of Aon Benfield, said: “Despite the global economic turmoil, the reinsurance industry has retained its position of strength, with sufficient capital to fulfil all client placements at the key renewals periods in 2009. Throughout this period, and moving towards 2010 and beyond, we will continue to help our clients to access the highest quality reinsurance capacity; using our extensive global network of offices and experts and industry-leading analytics and benchmarking capabilities, we can identify the most appropriate sources of reinsurance capital to suit their unique placements.“
