Aug 28, 2013 - Best's Credit Ratings are under continuous review and subject to change and/or affirmation. For the lates
The Aon Benfield Aggregate Results for the six months ended June 30, 2013
Empower Results®
Contents Global Reinsurer Capital
3
Executive Summary
4
ABA Capital
5
Capital Development
5
Capital Management
7
Premium Income
8
Earnings 12 Underwriting Performance
13
Investment Results
15
Net Income
16
Return on Equity
17
ABA Business Model Evolution
19
Who Are The New Investors?
19
How Is New Money Being Deployed?
19
Implications for ‘Traditional’ Reinsurers
19
ABA Reaction
19
Convergence in Action
20
ABA Valuation
21
Financial Strength Ratings
23
Appendix 1: ABA Data
24
About Aon Benfield Aon Benfield, a division of Aon plc, is the world’s leading reinsurance intermediary and full-service capital advisor. We empower our clients to better understand, manage and transfer risk through innovative solutions and personalized access to all forms of global reinsurance capital across treaty, facultative and capital markets. As a trusted advocate, we deliver local reach to the world’s markets, an unparalleled investment in innovative analytics, including catastrophe management, actuarial and rating agency advisory. Through our professionals’ expertise and experience, we advise clients in making optimal capital choices that will empower results and improve operational effectiveness for their business. With more than 80 offices in 50 countries, our worldwide client base has access to the broadest portfolio of integrated capital solutions and services. To learn how Aon Benfield helps empower results, please visit aonbenfield.com.
Aon Benfield
Global Reinsurer Capital Aon Benfield estimates that global reinsurer capital totaled USD510 billion at June 30, 2013, an increase of 1% 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 reinsurer capital. Exhibit 1: Global Reinsurer Capital 600
USD (billions)
500
18% -17%
400
1%
11%
-3%
18%
300 200
410
340
400
470
455
FY 2010
FY 2011
505
510
FY 2012
1H 2013
100 0 FY 2007
FY 2008
FY 2009
Source: Company reports, Aon Benfield Analytics
Major insurers and reinsurers generally maintained their solid operating performance in the first half of 2013, aided by tentative economic recovery in the US, continued growth in emerging markets and below average insured catastrophe losses. However, the support to capital positions was muted by the unwinding of unrealized investment gains that have accumulated on bond portfolios since the onset of the financial crisis. Interest rates began to climb in May and June ahead of expected tapering of the Federal Reserve’s quantitative easing program and yields have continued to rise into the second half. The impact on reported industry capital has been mitigated by the growing involvement of capital market investors in the reinsurance sector through non-equity participations, a trend presenting a growing challenge to ‘traditional’ reinsurer business models.
A NOTE OF CAUTION ON THE VAGARIES OF INSURANCE ACCOUNTING The first half of 2013 has highlighted the extent to which accounting choices can influence reported results. There have always been inconsistencies in the methodology applied to the calculation of combined ratios and returns on equity, two of the staple metrics for analyzing company performance. However, the real issue in this period was the accounting treatment of unrealized losses on bond portfolios relating to rising interest rates in May and June. Companies that classify a high proportion of their fixed-income securities as ‘held for trading’ saw a significant impact in the investment results reported through income statements, with consequent effects upon pre- and post-tax earnings and return on equity. In cases where the majority of bonds are held as ‘available for sale’, most of the impact was recorded below the line (in other comprehensive income) and taken directly to equity. As a consequence, direct comparison of company results can be misleading.
3
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Executive Summary Overview
The first half of 2013 featured generally stable reinsurance demand and pricing, below average insured catastrophe losses, generally benign attritional loss experience and continued low interest rates. Bond yields rose in May and June ahead of expected tapering of the Federal Reserve’s quantitative easing program and, as a result, the unrealized gains that have accumulated on bond portfolios since the financial crisis have begun to unwind. This is negative for book values in the short-term, but positive for earnings in the longer-term. New income streams and operating advantages are starting to flow to leading reinsurers that have engaged with the new capital flowing mainly from pension plans, life insurers, endowments and high net worth individuals. Their roles are mainly in (a) sponsoring catastrophe bond transactions to lower their weighted average cost of underwriting capital, particularly for peak modeled perils (b) sharing quality underwriting performance and access to mature reinsurance and insurance relationships through sidecars and other managed vehicles and (c) managing bond funds where reinsurers have relationship and familiarity benefits with bond sponsors. These activities show the beginnings of a true rotation in how the reinsurance business will be capitalized. Key Findings
Aon Benfield estimates that global reinsurer capital rose by 1% to USD510 billion over the six months ending June 30, 2013, the generally solid earnings of major insurers and reinsurers and a continuing influx of new funds from capital markets investors being partially offset by unrealized losses on bond portfolios. The shareholders’ funds of the 31 companies forming the Aon Benfield Aggregate (ABA) totaled USD313 billion, a reduction of 1% or USD4 billion since the end of 2012. The primary drivers were net income of USD16 billion offset by dividends and share buybacks totaling USD15 billion and unrealized investment losses of USD4 billion. Gross property and casualty (P&C) premiums written by the ABA rose by 5% to USD109 billion, split 45% to direct insurance and 55% to reinsurance. The main engine of organic growth was the US market, driven by improving economic conditions and higher pricing in certain primary insurance lines. Relative to the prior year, the ABA reported a 26% increase in P&C underwriting profit to USD8.9 billion, higher catastrophe losses being offset by more favorable prior year reserve development. The combined ratio improved by 1.7 points to 89.0%. Annualized pre-tax operating returns (excluding all realized and unrealized gains and losses) relative to average total equity stood at 11.4%. Adjusting net income to include all unrealized movements reported through other comprehensive income, the return on average common equity stood at 7.8%. Evolution of the ABA
Aon Benfield Aggregate (ABA) reports are produced on a half-yearly basis and cover the reported results of 31 major reinsurers worldwide, with the aim of identifying trends in the non-life reinsurance marketplace. All of the constituents are publicly-listed, with the exception of two US subsidiaries of Berkshire Hathaway, namely General Reinsurance Corporation (Gen Re) and National Indemnity Company (NICO). From 2013, Markel replaces Alterra as a constituent of the ABA, following its acquisition on May 1, 2013. Markel’s published results include Alterra’s contribution from that date only, but for the purposes of the ABA capital calculation (Exhibit 2), Alterra’s reported capital has been included in previous year-end totals.
4
Aon Benfield
ABA Capital The reported shareholders’ funds of the 31 ABA companies totaled USD313 billion at June 30, 2013, a reduction of 1% since the end of 2012. Bond valuations were impacted by rising interest rates in May and June, denting reported earnings and resulting in significant unrealized losses taken directly to equity. Exhibit 2: ABA Shareholders’ Funds 350 300
-1%
12%
2% 15%
USD (billions)
250
12%
29%
-17%
200 150 100
242
226
201
278
283
FY 2010
FY 2011
317
313
FY 2012
1H 2013
187
50 0 FY 2006
FY 2007
FY 2008
FY 2009
Source: Company reports, Aon Benfield Market Analysis
Capital Development Exhibit 3 shows the principal components of the change in ABA shareholders’ funds over the six months ending June 30, 2013. Improved underwriting performance relative to the prior year drove a 6% increase in reported net income, but this was out-weighed by the effects of more active capital management, adverse exchange rate movements and higher interest rates. NICO benefitted from USD6.1 billion of unrealized gains on its large equity holdings. The remainder of the ABA reported unrealized losses of USD10.0 billion, driven by the impact of rising yields on bond valuations. Excluding NICO, the reduction in ABA capital stood at 4%. Exhibit 3: ABA Shareholders’ Funds Development 350 16.2
USD (billions)
325
-10.9 -3.2
1.5
-3.9 -4.0
317.1
-0.2
312.5
Other
1H 2013 SHF
300
275
250 FY 2012 SHF
Additional capital
Net income
Dividends
Foreign Investment exchange losses
Share buybacks
Source: Company reports, Aon Benfield Market Analysis
5
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 4 shows the reported shareholders’ funds of the ABA constituents at June 30, 2013. At USD87 billion, NICO alone represented 28% of ABA capital. The top four aggregated to USD177 billion or 57% of the total. Exhibit 4: Reported Shareholders’ Funds by ABA Constituent 90
USD (billions)
80 40 70 60 30 50 40 20 30 20 10 0 0
Source: Company reports, Aon Benfield Market Analysis
Exhibit 5 shows the movements in the reported shareholders’ funds of the ABA constituents over the six months ending June 30, 2013. Two-thirds of the companies reported reductions, driven by a combination of active capital management and unrealized losses on bond portfolios. Hiscox, Lancashire, Swiss Re and Validus all paid special dividends in the period. The effect of unrealized losses was most significant at Munich Re (USD2.8 billion), Swiss Re (USD2.7 billion), ACE (USD1.3 billion), XL (USD0.8 billion) and Hannover Re (USD0.5 billion). Markel reported a substantial increase in shareholders’ funds to USD6.3 billion, driven by the Alterra acquisition. Exhibit 5: Movements in Reported Shareholders’ Funds 70% 60% 50% 25% 40% 20% 30% 15% 20% 10% 10% 5% 0% 0% -10% -5% -20% -10% -15%
Source: Company reports, Aon Benfield Market Analysis
6
ABA
Aon Benfield
Capital Management Relative to the first half of 2012, dividends and share buybacks increased by 32% to USD14.9 billion, equivalent to 4.8% of opening shareholders’ funds. Dividend payments rose by 20% to USD10.9 billion, the most significant in capital terms being at Lancashire (16%), Hiscox (14%), Gen Re (10%), Beazley (9%) and Swiss Re (8%). Share buybacks rose by 81% to USD4.0 billion, the most active purchasers being Platinum (12%), PartnerRe (11%), Validus (9%), Axis (8%) and Montpelier Re (7%). Exhibit 6: Dividends and Share Buybacks as % of Opening Shareholders’ Funds 20%
Dividends Share buy-backs
15%
10%
5%
0%
Source: Company reports, Aon Benfield Market Analysis
7
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Premium Income Gross property and casualty (P&C) premiums written by the ABA totaled USD109 billion in the first six months of 2013, an increase of 5% relative to the same period in the prior year. This was split 45% to direct insurance and 55% to reinsurance. Exhibit 7: ABA P&C Gross Premiums Written 200
Full Year 192
181
Half Year
USD (billions)
150 5%
7% 100
103
97
109
50
0 2011
2012
2013
Source: Company reports, Aon Benfield Market Analysis
The main engine of organic growth was the US market, driven by improving economic conditions and higher pricing in certain primary insurance lines. The other main contributory factors were acquisition effects and continuing exposure growth in emerging markets. Exhibit 8: P&C Gross Premiums Written by ABA Constituent 16 14
P&C Insurance P&C Reinsurance
USD (billions)
12 10 8 6 4 2 0
Source: Company reports, Aon Benfield Market Analysis
The distribution of P&C gross premiums written across the 31 ABA constituents is shown in Exhibit 8. For the purposes of this chart only, Munich Re’s primary P&C insurance business (ERGO) is included. The splits between insurance and reinsurance are shown for illustrative purposes only, based on company disclosure that is not entirely consistent.
8
Aon Benfield
Exhibit 9: Changes in P&C Gross Premiums Written 50% ABA 40% 30% 20% 10% 0% -10% -20%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Exhibit 9 shows year-on-year movements in P&C gross premiums written across the ABA. Strong growth at Markel, Alleghany and Validus was partly acquisition-related: Alterra, Transatlantic and Flagstone were consolidated from May 1, 2013, March 6, 2012 and November 30, 2012, respectively. Excluding a large quota share contract in Florida, Everest Re reported growth of 12% (US insurance and reinsurance). At the other end of the spectrum, Lancashire reported an 18% reduction in gross premiums written, driven by its exit from property direct and facultative and most retrocession business. The 15% reduction at NICO reflected the termination of a 20% quota share across most of Swiss Re’s P&C book (which represented 50% of net premiums earned in the first half of 2012), offset by non-specified growth elsewhere. Exhibit 10: Changes in P&C Reinsurance Gross Premiums Written 50% 40% 30% 20% 10% 0% -10% -20% -30%
*On a constant currency basis Source: Company reports, Aon Benfield Market Analysis
9
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 10 shows year-on-year movements in gross P&C reinsurance premiums written across the ABA, based on segmental disclosure. Six companies reported growth in excess of 15%, the top three results being influenced by the aforementioned acquisitions. Validus reported underlying growth of 21%, driven by new proportional crop treaties and property business written through the AlphaCat division. Allied World reported growth of 28%, driven by US property cat (through its partnership with Aeolus), crop and general casualty. Exhibit 11: Ceded Reinsurance as a % of P&C Gross Premiums Written 50% ABA 40% 30% 20% 10% 0%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Net P&C insurance and reinsurance premiums written by the ABA rose by 7% to USD91.6 billion in the first half of 2013, an overall retention ratio of 84.2%, compared with 83.1% in the comparative period of the prior year. The result was skewed by the termination of the 20% quota share between Swiss Re and NICO at the end of 2012. More than half of the ABA companies actually reported increased reinsurance cession rates, contributory factors being increased use of third party capital and opportunistic purchases of additional catastrophe protection. It should be noted that Gen Re operates with an internal quota share to NICO. Exhibit 12: P&C Net Premiums Earned by ABA Constituent 12 10
USD (billions)
8 6 4 2 0
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
10
Aon Benfield
Net P&C insurance and reinsurance premiums earned by the ABA rose by 6% to USD81.1 billion in the first half of 2013, the five largest constituents representing 51% of the total. The distribution is shown in Exhibit 12. Exhibit 13: Changes in P&C Net Premiums Earned 50% ABA 40% 30% 20% 10% 0% -10% -20%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Exhibit 13 shows year-on-year movements in P&C net premiums earned across the ABA. The reported outcomes for Swiss Re, RenaissanceRe and Beazley benefitted from increased premium retention, relative to the prior year.
11
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Earnings Operating performance remained solid in the first half of 2013, driven by higher premium leverage, below average insured natural catastrophe losses and increased prior year reserve releases. Bond valuations were reduced by rising interest rates in May and June, with only part of the impact reported through income statements. Exhibit 14: ABA Pre-Tax Profit 30 18.9
18.9
USD (billions)
20 Capital gains/losses Non-life underwriting result
10 2.8
Investment income Life underwriting result
0
Other -10
-20
Pre-tax profit
1H 2011
1H 2012
1H 2013
Source: Company reports, Aon Benfield Market Analysis
Pre-tax profit reported through ABA income statements was unchanged at USD18.9 billion in the first half of 2013. P&C underwriting profit rose by 26% to USD8.9 billion, including an increased contribution of USD3.7 billion from prior year reserve releases. Ordinary investment income was stable and remained the main driver of the result. Capital gains more than halved to USD0.5 billion, but this outcome is misleading, as the majority of the unrealized losses on bond portfolios were taken directly to equity. Exhibit 15: Pre-Tax Profit by ABA Constituent 3.5 3.0
USD (billions)
2.5 2.0 1.5 1.0 0.5 0.0 -0.5
Source: Company reports, Aon Benfield Market Analysis
12
Aon Benfield
Exhibit 15 shows the distribution of reported pre-tax profits across the 31 ABA constituents. The impact of rising interest rates varied depending on investment classification choices and direct result comparison can therefore be misleading. The combined results of NICO, Swiss Re, Munich Re and ACE rose by 15% to USD10.5 billion, representing 56% of the total. Fairfax, one of the few companies taking all investment valuation changes through the income statement, reported an overall deficit, despite improved underwriting performance, driven by USD0.7 billion of unrealized losses.
Underwriting Performance The ABA combined ratio improved by 1.7 percentage points in the first half of 2013, reflecting higher premium leverage, lower attritional loss activity and increased prior year reserve releases. Worldwide insured natural catastrophe losses totaled USD20 billion, down 20% relative to both 2012 and the 10 year average (Source: Impact Forecasting). However, net catastrophe losses disclosed by the ABA rose by 55% to USD4.2 billion, reflecting higher cessions to the reinsurance market, particularly in the case of the floods in Central Europe. Exhibit 16: ABA Combined Ratio Composition 120% 100%
115.1%
29.4%
80% 60%
59.4%
90.7% 3.5%
89.0% 5.1%
59.4%
57.9%
Total catastrophe losses Attritional loss ratio Expense ratio
40%
Prior year reserve adjustment 20%
30.2%
30.8%
30.5%
-4.0%
-3.0%
-4.5%
1H 2011
1H 2012
1H 2013
0% -20%
Source: Company reports, Aon Benfield Market Analysis
Exhibit 17 shows the distribution of reported combined ratios across the 31 ABA constituents in the first half of 2013. All companies were profitable on a calendar year basis. Markel’s underwriting result includes USD62 million of expenses relating to the Alterra acquisition, which added almost 5 points to the combined ratio. Exhibit 17: Reported Combined Ratios 120%
Loss ratio
Expense ratio
ABA
100% 80% 60% 40% 20% 0%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
13
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 18 shows reported P&C underwriting results by ABA constituent. Swiss Re, NICO, Munich Re and ACE between them contributed 42% of the total profit. Exhibit 18: P&C Underwriting Results 1,200
USD (millions)
1,000
800
600
400
200
0
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Exhibit 19 shows prior year reserve releases as a percentage of net premiums earned by ABA constituent. QBE was the only company to report adverse development overall, driven by casualty lines in Argentina and Italy and program business in run-off in the US. Between them, Aspen, Lancashire, Munich Re, Swiss Re and Validus added USD181 million to Costa Concordia reserves during the period. Exhibit 19: Loss Reserve Adjustments as % of Net Premium Earned 40% ABA 35% 30% 25% 20% 15% 10% 5% 0% -5%
*P&C reinsurance segment only **No disclosure Source: Company reports, Aon Benfield Market Analysis
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Aon Benfield
Exhibit 20 shows reported accident year combined ratios by ABA constituent (i.e. discounting prior year movements). Five ABA companies were unprofitable on this basis. Exhibit 20: Accident Year Combined Ratios 140% ABA 120% 100% 80% 60% 40% 20% 0%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Investment Results Ordinary investment income was unchanged at USD18.2 billion in the first half of 2013. The consequences of the low interest rate environment of recent years can clearly be seen in the declining yields on average cash and investments displayed in Exhibit 21. Realized and unrealized gains taken through ABA income statements more than halved to USD0.5 billion. Many companies also took substantial post-tax unrealized losses directly to equity at June 30, 2013. Exhibit 21: ABA Investment Return 6%
Total Investment Return (incl. Capital Gains/Losses) Underlying Investment Return 4.0%
4% 3.8%
3.8%
3.5%
3.6%
3.4%
1H 2012
1H 2013
2%
0% 1H 2011 Source: Company reports, Aon Benfield Market Analysis
15
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Net Income The ABA companies reported net income attributable to common shareholders of USD16.0 billion for the first half of 2013, an increase of 6% relative to the same period in the prior year. Exhibit 22: ABA Net Income 20
USD (billions)
16
12
8
15.1
16.0
1H 2012
1H 2013
4 2.5 0 1H 2011 Source: Company reports, Aon Benfield Market Analysis
Exhibit 23 shows the distribution of net income attributable to common shareholders by ABA constituent. The combined results of NICO, Swiss Re, Munich Re and ACE rose by 26% to USD9.0 billion, representing 56% of the total. The impact of rising interest rates varied depending on investment classification choices and direct result comparison can therefore be misleading. Exhibit 23: Net Income by ABA Constituent 3.5 3.0
USD (billions)
2.5 2.0 1.5 1.0 0.5 0.0 -0.5
Source: Company reports, Aon Benfield Market Analysis
16
Aon Benfield
Return on Equity Analysis of returns on equity in the first half of 2013 is compromised by the partial inclusion of investment valuation movements in ABA income statements. For the sake of consistency, Exhibit 24 shows annualized pretax operating returns, excluding all realized and unrealized gains and losses, relative to average total equity. Exhibit 24: ABA Pre-Tax Operating Income as % of Average Total Equity 20%
15% 12.0%
11.4%
10%
5% 1.1% 0% 1H 2011
1H 2012
1H 2013
Source: Company reports, Aon Benfield Market Analysis
Exhibit 25 shows pre-tax operating returns by ABA constituent. Exhibit 25: Pre-Tax Operating Income as % of Average Total Equity 30% ABA 25% 20% 15% 10% 5% 0%
Source: Company reports, Aon Benfield Market Analysis
17
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
An alternative view is to look at net income adjusted to include all unrealized losses included in other comprehensive income relative to average common equity. On this basis, the ABA generated a return of 7.8% in the first half of 2013, reducing to 2.6% excluding NICO. Exhibit 26: ABA Adjusted Net Income as % of Average Common Equity 20% 16.9%
Adjusted Net Income ROE Adjusted Net Income ROE ex NICO
15% 16.0% 10% 7.8% 5% 1.9%
2.6%
0.8%
0% 1H 2011
1H 2012
1H 2013
Source: Company reports, Aon Benfield Market Analysis
Exhibit 27 shows adjusted net income returns by ABA constituent. Exhibit 27: Adjusted Net Income as % of Average Common Equity 25% ABA 20% 15% 10% 5% 0% -5% -10%
Source: Company reports, Aon Benfield Market Analysis
18
Aon Benfield
ABA Business Model Evolution A structural shift in the way capital is raised and deployed to mitigate insurance risk is in progress. The pool of potential investors is broadening and new money is flowing towards structures offering access to quality business at relatively low cost. These changes are forcing the ABA companies to re-evaluate their business models. Who Are The New Investors? Reinsurance as an asset class has performed relatively well in an environment of low interest rates and is viewed as having limited correlation with broader capital market movements. These attributes have broadened the pool of potential investors to pension funds, high net worth individuals and sovereign wealth funds, who typically will:
only enter the sector after extensive due diligence invest a small percentage of the substantial assets at their disposal as a diversifying strategy seek lower, more stable returns over longer timeframes than has historically been the case
How Is New Money Being Deployed? Much of the new capital is being channelled to specialist fund managers, who then deploy it into the insurancelinked securities (ILS) sector via products such as catastrophe bonds and industry loss warranties, or other ‘nontraditional’ structures, such as sidecars and collateralized reinsurance, on their investors’ behalf. The current focus is property catastrophe and retrocession business, particularly in the US market where exposures tend to be best understood, although diversification into other lines and territories is underway.
Implications for ‘Traditional’ Reinsurers Earnings were already under pressure from below average premium gearing and low interest rates. Now new vehicles operating at a lower cost of capital are making in-roads into higher-margin areas that remain a key driver of profits. These dynamics are forcing many ABA constituents to rethink their business models in the pursuit of differentiation and relevance in the market. In the catastrophe reinsurance space, this increasingly means being able to offer bigger line sizes, a full product suite including collateralized limits and enhanced claims service. Companies that are successful in attracting and deploying third party capital will potentially be able to advance their client offering, reduce earnings volatility through fee income, lower their own risk transfer costs and manage their capital base more effectively.
ABA Reaction Cost structures and client offerings are currently under review. Over time, it is expected that less reinsurance business will be written on rated balance sheets and more through ‘satellite’ structures backed by third party capital. RenaissanceRe has operated this model for many years and other ABA companies are now pursuing similar strategies. Capital market involvement that may previously have been limited to secondary investment in catastrophe bonds or simple quota share ‘sidecar’ structures is now morphing into full-on engagement. Several ABA companies are already involved in the management of third party funds, including Amlin (Leadenhall), Montpelier Re (Blue Water), SCOR (Atropos) and Validus (AlphaCat). New capital markets divisions were established by Aspen, Axis, Lancashire, Montpelier Re, Sirius and XL in 2013, while Hannover Re (Leine) and RenaissanceRe (Medici) recently opened existing internal funds to third parties. An alternative route, pursued by Alleghany/Transatlantic (Pillar), Allied World (Aeolus) and Hiscox (Third Point Re), is to invest in strategic partnerships with established independent specialist fund managers.
19
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Convergence in Action More than USD1 billion of capital has been injected into ABA sidecar vehicles in 2013, including eight new structures. Investors favor these reloadable joint ventures, as they have lower regulatory and operational entry barriers than new start-ups and a built-in exit strategy. These transactions included several Bermuda sponsors that have tapped the market multiple times, including Alterra (New Point V), Lancashire (Saltire I), Hiscox (Kiskadee Re), RenaissanceRe (Upsilon Re II) and Validus (AlphatCat Re). However, there were also new sponsors, such as ACE (Altair Re), Argo (Harambee Re), Everest Re (Mt. Logan Re) and PartnerRe (Lorenz Re). Many ABA constituents have been able to take advantage of the newly available capacity from the capital markets to drive down their own risk transfer costs. Retrocession costs have reduced and several companies have purchased additional protection, with consequent impact on disclosed modeled exposures. Several ABA constituents also executed on new catastrophe bond transactions, including new sponsor Axis. Exhibit 28: Recent Examples of Convergence in Action Company ACE
Altair Re formed with $95m of third party capital to provide collateralized capacity for ACE Tempest Re (Apr 2013)
Alleghany
Partnerships with Ares Management (July 2013) and Pillar Capital (Dec 2012) Partnership with Aeolus Capital (Dec 2012)
Allied World Amlin Arch Argo
Longstanding partnership with Leadenhall Capital (May 2008); Tramline Re II Ltd cat bond (Jun 2013); Tramline Re Ltd cat bond (Dec 2011); Special Purpose Syndicate 6106 (since 2009) Reported casualty reinsurance initiative with Highbridge Capital (Jul 2013); Larry Richardson (ex-RenRe) appointed SVP Capital Markets (Mar 2012) Property insurance and reinsurance sidecar Harambee Re (Jan 2013); Mark Gibson (ex-BNP) appointed Director of Alternative Risk Capital (Jun 2012); Loma Re 2 cat bond (Dec 2011); Loma Re 1 cat bond (Jun 2011)
Aspen
Aspen Capital Markets formed under Brian Tobben (Apr 2013); ILW partnership with Cartesian Capital (Jun 2009-Jul 2013)
Axis
Northshore Re cat bond (Aug 2013); Ben Rubin (ex-BoAML) appointed EVP Capital Markets (Jun 2013); Axis Re Weather & Commodity Markets initiative (Jun 2013)
Beazley Catlin
Special Purpose Syndicate 6107 (since 2010) Considering offering third party capital management (Aug 2013); Special Purpose Syndicates 2088, 6111 & 6112 (from 2012)
Endurance
Jerome Faure (ex-ILS Capital) appointed CEO Global Reinsurance (Feb 2013)
Everest Re
Sidecar Mt Logan Re launched under Rick Pagnani with $50m of seed capital to provide collateralized capacity to the worldwide property cat market (Jan 2013); purchased ILW retro to reduce Florida PML (Jun 2013)
Fairfax Hannover Re Hiscox Lancashire
No public disclosure Opened internal ILS fund to third parties via Leine Investment (Jan 2013); multiple sidecar and cat bond sponsor Michael Jedraszak appointed Director of ILS (Jul 2013); Kiskadee Re formed to write collateralized reinsurance (Apr 2013); partnership with Third Point (Oct 2012), Special Purpose Syndicate 6104 (since 2008) Darren Redhead (ex-DE Shaw) appointed to head Kinesis Capital Management (Mar 2013); collateralized worldwide aggregate cover through Saltire (Nov 2012); collateralized property retro through Accordion sidecar (Jul 2012)
Mapfre
No public disclosure
Markel
Collateralized retro via Alterra’s New Point sidecar series - $247m of capital at Dec 2012 (Markel $75m, Stone Point $75m)
Montpelier Re Munich Re PartnerRe Platinum
Launched Blue Capital with $50m of seed capital (Oct 2012); total partnership capital exceeded $200m at June 30; writes collateralized reinsurance via Blue Water Re Has operated an internal ILS fund for 6+ years; openly discussed establishing a third party fund (Sep 2012); multiple structurer and sponsor of cat bonds Lorenz Re formed with $75m of third party capital to provide additional capacity to PartnerRe on a diversified portfolio of cat treaties over a multi-year period (Mar 2013); has operated an internal ILS fund for several years Purchased $50m of non-traditional cat cover in 2Q; has ceded $75m of premium and reserves to Third Point Re since Oct 2012
QBE RenaissanceRe SCOR Swiss Re Validus White Mountains XL
No public disclosure Mona Lisa Re cat bond (Jul 2013); internal ILS fund Medici opened to third parties (Jun 2013); multiple sidecar sponsor (Top Layer/DaVinci/Upsilon/Timicuan) Launched ILS fund Atropos with $100m of seed capital (Aug 2011); multiple cat bond sponsor (Atlas Re series) No immediate plans to open internal ILS fund to third parties (Nov 2012); Sector Re sidecar series; multiple cat bond structurer and sponsor ILS activities are coordinated by AlphaCat Managers; collateralized property cat and retro is written via the AlphaCat Re sidecar series; provided $50m of seed capital to PaCRe, a joint venture with Paulson & Co writing top layer cat business (Apr 2012) Sirius Capital Markets headed by Michael Halsband (ex-Deutsche Bank) and Deanne Nixon (May 2013) XL and Stone Point will commit $135m of seed capital to establish a Bermuda-based ILS manager (Jul 2013); Craig Wenzel (exDeutsche Bank) appointed SVP Capital Markets (Dec 2012)
Source: Company reports, Aon Benfield Market Analysis
20
Aon Benfield
ABA Valuation The overall market capitalization of the ABA companies has increased by 10% since the beginning 2013. The trailing price-to-book ratio has improved from 0.9x to 1.0x over the same period. Exhibit 29: ABA Market Capitalization (indexed to January 1, 2008) 120 110 100 90 80 70 60 50 40 Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Note: Excluding Berkshire Hathaway Source: Bloomberg, Aon Benfield Market Analysis
Most ABA constituents have experienced rising share prices in 2013. Movements since the beginning of the year are shown in Exhibit 30. Exhibit 30: Share Price Development (January 1, 2013 – August 28, 2013) 50% 40% 30% 20% 10% 0% -10%
Source: Bloomberg, Aon Benfield Market Analysis
21
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
The trailing price-to-book ratio of the ABA as a whole improved from 0.9x at December 31, 2012 to 1.0x at June 30, 2013. Development since the onset of the financial crisis is shown in Exhibit 30. Exhibit 31: ABA Trailing Price-to-Book Ratio (January 1, 2008 – August 28, 2013) 1.3 1.2 1.1 1.0 0.9 0.8 0.7 0.6 Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Note: Excluding Berkshire Hathaway Source: Bloomberg, Aon Benfield Market Analysis
Changes in the trailing price-to-book ratios of the individual ABA constituents since the beginning of 2013 are shown in Exhibit 32. Exhibit 32: Trailing Price-to-Book Ratios by ABA Constituent 2.0
1.0
0.0
Source: Bloomberg, Aon Benfield Market Analysis
22
August 28, 2013
January 1, 2013
Average
Average
Aon Benfield
Financial Strength Ratings Exhibit 33: Financial Strength Ratings Main Operating Company
A.M. Best
Standard & Poor’s
ACE Tempest Reinsurance Ltd
A+
Positive
AA-
Positive
Allied World Assurance Company Ltd
A
Stable
A
Stable
Alterra Bermuda Ltd
A
Stable
A
Stable
Amlin AG
A
Stable
A
Stable
Arch Reinsurance Ltd
A+
Stable
A+
Stable
Argo Re Ltd
A
Stable
Not Rated
-
Aspen Bermuda Ltd
A
Stable
A
Stable
AXIS Specialty Ltd
A
Positive
A+
Stable
Beazley Insurance Company, Inc
A
Stable
Not Rated
-
Catlin Insurance Company Ltd
A
Stable
A
Stable
Endurance Specialty Insurance Ltd
A
Stable
A
Stable
Everest Reinsurance (Bermuda) Ltd
A+
Stable
A+
Stable
General Reinsurance Corporation
A++
Stable
AA+
Negative
Hannover Rückversicherungs SE
A+
Stable
AA-
Stable
Hiscox Insurance Company (Bermuda) Ltd
A
Stable
Not Rated
-
Lancashire Insurance Company Ltd
A
Stable
A-
Stable
MAPFRE Re, Compania de Reaseguros SA
A
Negative
BBB+
Negative
Montpelier Reinsurance Ltd
A
Stable
A-
Stable
Munich Reinsurance Company
A+
Stable
AA-
Stable
National Indemnity Company
A++
Stable
AA+
Negative
Odyssey Reinsurance Company
A
Stable
A-
Stable
Partner Reinsurance Company Ltd
A+
Stable
A+
Stable
Platinum Underwriters Bermuda Ltd
A
Stable
A-
Stable
QBE Re (Europe) Ltd
A
Stable
A+
Stable
Renaissance Reinsurance Ltd
A+
Stable
AA-
Stable
SCOR Global P&C SE
A
Stable
A+
Stable
Sirius International Insurance Corporation
A
Stable
A-
Stable
Swiss Reinsurance Company
A+
Stable
AA-
Stable
Transatlantic Reinsurance Company
A
Stable
A+
Stable
Validus Reinsurance Ltd
A
Stable
A
Stable
A
Stable
A
Positive
XL Re Ltd Ratings at August 2013
Source: A.M. Best, Standard & Poor’s
Best's Credit Ratings are under continuous review and subject to change and/or affirmation. For the latest Best’s Credit Ratings and Best’s Credit Reports (which include Best’s Credit Ratings), visit the A.M. Best website at http://www.ambest.com. See Guide to Best’s Credit Ratings for explanation of use and charges. Best's Credit Ratings reproduced herein appear under license from A.M. Best and do not constitute, either expressly or impliedly, an endorsement of (Licensee's publication or service) or its recommendations, formulas, criteria or comparisons to any other ratings, rating scales or rating organizations which are published or referenced herein. A.M. Best is not responsible for transcription errors made in presenting Best's Credit Ratings. Best’s Credit Ratings are proprietary and may not be reproduced or distributed without the express written permission of A.M. Best Company. A Best’s Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. It is not a warranty of a company’s financial strength and ability to meet its obligations to policyholders. View our Important Notice: Best's Credit Ratings for a disclaimer notice and complete details at http://www.ambest.com/ratings/notice.
23
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Appendix 1: ABA Data Exhibit 34: Results for the six months ended June 30, 2013
Reporting Company
P&C Gross
P&C Gross
P&C Net
P&C Net
Premiums
Premiums
Premiums
Premiums
Currency
Written
Written
Written
Written
(millions)
1H 2012
1H 2013
Change
1H 2012
1H 2013
Change
ACE
USD
9,415
9,953
6%
6,728
7,200
7%
Alleghany
USD
1,909
2,589
36%
1,658
2,253
36%
Allied World
USD
1,328
1,602
21%
1,084
1,276
18%
Amlin
GBP
1,815
1,839
1%
1,489
1,525
2%
Arch
USD
2,118
2,204
4%
1,684
1,763
5%
Argo
USD
871
980
13%
603
669
11%
Aspen
USD
1,449
1,461
1%
1,215
1,210
0%
Axis
USD
2,540
2,966
17%
2,169
2,564
18%
Beazley
USD
1,013
1,067
5%
651
758
16%
Catlin
USD
3,010
3,299
10%
2,258
2,437
8%
Endurance
USD
1,666
1,750
5%
1,327
1,374
3%
Everest Re
USD
1,956
2,441
25%
1,872
2,362
26%
Fairfax
USD
3,647
3,597
-1%
3,087
3,036
-2%
Gen Re
USD
511
485
-5%
259
244
-6%
Hannover Re
EUR
4,080
4,097
0%
3,680
3,696
0%
Hiscox
GBP
906
1,018
12%
702
770
10%
Lancashire
USD
515
424
-18%
366
308
-16%
Mapfre
EUR
8,192
8,665
6%
6,586
6,568
0%
Markel
USD
1,296
1,844
42%
1,148
1,590
39%
Montpelier Re
USD
513
504
-2%
431
424
-2%
Munich Re*
EUR
8,397
8,533
2%
7,989
8,107
1%
NICO
USD
4,180
3,572
-15%
4,166
3,358
-19%
PartnerRe
USD
2,308
2,607
13%
2,189
2,463
13%
Platinum
USD
285
283
-1%
285
281
-1%
QBE
USD
9,223
9,446
2%
7,509
7,767
3%
RenaissanceRe
USD
1,331
1,339
1%
920
996
8%
SCOR
EUR
2,255
2,378
5%
2,004
2,069
3%
Swiss Re
USD
11,421
11,538
1%
8,879
10,847
22%
Validus
USD
1,464
1,807
23%
1,238
1,498
21%
White Mountains
USD
1,369
1,261
-8%
1,171
1,057
-10%
XL
USD
4,080
4,349
7%
3,311
3,502
6%
ABA
USD
103,455
108,871
5%
85,947
91,624
7%
*P&C reinsurance segment only Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
24
Aon Benfield
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d) Calendar Year Loss
Loss
Expense
Expense
Combined
Ratio
Ratio
Ratio
Ratio
Ratio
Ratio
1H 2012
1H 2013
1H 2012
1H 2013
1H 2012
1H 2013
Change
ACE
58.3%
58.0%
30.6%
30.1%
88.9%
88.1%
-0.9pp
Alleghany
59.8%
56.8%
22.2%
31.0%
82.0%
87.9%
5.9pp
Allied World
56.0%
54.6%
29.2%
29.3%
85.2%
84.0%
-1.2pp
Amlin
52.8%
53.1%
31.2%
31.9%
84.0%
85.0%
1.0pp
Arch
56.5%
54.1%
32.2%
31.9%
88.7%
86.0%
-2.6pp
Argo
61.7%
58.4%
41.2%
40.4%
102.9%
98.8%
-4.0pp
Aspen
54.1%
57.1%
36.3%
36.6%
90.4%
93.7%
3.3pp
Axis
57.7%
59.4%
35.9%
33.3%
93.6%
92.7%
-0.9pp
Beazley
54.0%
52.0%
37.0%
37.0%
91.0%
89.0%
-2.0pp
Catlin
51.5%
54.6%
34.7%
34.3%
86.3%
88.9%
2.7pp
Endurance
65.4%
60.0%
28.9%
30.2%
94.3%
90.2%
-4.1pp
Everest Re
59.5%
58.2%
29.5%
26.0%
89.0%
84.2%
-4.8pp
Fairfax
66.6%
62.3%
31.6%
31.8%
98.2%
94.1%
-4.1pp
Gen Re
38.3%
53.9%
30.3%
41.0%
68.5%
94.9%
26.3pp
Hannover Re
71.1%
68.6%
25.8%
25.8%
96.8%
94.4%
-2.4pp
Hiscox
41.0%
37.5%
40.7%
37.2%
81.7%
74.7%
-6.9pp
Lancashire
31.7%
23.5%
35.5%
35.3%
67.2%
58.8%
-8.3pp
Mapfre
67.4%
67.2%
28.2%
27.9%
95.6%
95.1%
-0.5pp
Markel
48.9%
54.1%
44.5%
43.9%
93.3%
98.0%
4.6pp
Montpelier Re
32.9%
32.6%
34.2%
32.9%
67.2%
65.5%
-1.6pp
Munich Re*
66.0%
62.8%
29.8%
29.6%
95.8%
92.4%
-3.4pp
NICO
52.4%
42.9%
32.3%
25.4%
84.7%
68.3%
-16.4pp
PartnerRe
57.0%
61.4%
30.7%
28.6%
87.8%
90.0%
2.2pp
Platinum
51.6%
28.4%
30.5%
32.2%
82.1%
60.6%
-21.5pp
QBE
61.5%
59.4%
31.4%
33.3%
92.9%
92.8%
-0.1pp
RenaissanceRe
12.4%
23.3%
25.5%
25.9%
38.0%
49.2%
11.2pp
SCOR
64.9%
64.5%
28.9%
29.8%
93.8%
94.3%
0.5pp
Swiss Re
54.9%
55.8%
30.4%
29.9%
85.3%
85.7%
0.4pp
Validus
42.9%
38.0%
32.8%
31.7%
75.7%
69.7%
-6.0pp
White Mountains
50.9%
52.3%
36.7%
34.0%
87.7%
86.3%
-1.4pp
XL
60.9%
60.3%
32.1%
30.5%
93.0%
90.8%
-2.3pp
ABA
60.0%
58.5%
30.8%
30.5%
90.7%
89.0%
-1.7pp
Company
Combined
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
25
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d) Accident Year Prior Year
Accident
Prior Year
Prior Year
Reserve
Reserve
Year
Year
Reserve
Reserve
Adjustment
Adjustment
Combined
Combined
Adjustment
Adjustment
as % of NPE
as % of NPE
Ratio
Ratio
1H 2012
1H 2013
1H 2012
1H 2013
1H 2012
1H 2013
Change
-206
-198
3.3%
3.0%
92.2%
91.0%
-1.2pp
-1
-134
0.0%
6.2%
82.0%
94.1%
12.1pp
Allied World
-81
-92
9.8%
9.5%
95.0%
93.5%
-1.5pp
Amlin
-53
-61
5.4%
5.8%
89.4%
90.8%
1.4pp
Arch
-117
-124
8.3%
8.2%
97.0%
94.2%
-2.7pp
Argo
-7
-17
1.3%
2.7%
104.2%
101.6%
-2.6pp
Aspen
-66
-54
6.5%
5.1%
96.9%
98.8%
1.8pp
-120
-97
7.1%
5.3%
100.6%
98.0%
-2.6pp
Beazley
-48
-61
6.8%
8.0%
97.8%
97.0%
-0.8pp
Catlin
-30
-56
1.8%
2.9%
88.0%
91.8%
3.8pp
Endurance
-37
-114
3.9%
11.8%
98.2%
102.0%
3.8pp
Everest Re
0
-1
0.0%
0.0%
89.0%
84.3%
-4.7pp
Fairfax
-50
-142
1.9%
4.9%
100.1%
99.0%
-1.0pp
Gen Re
-94
-70
35.3%
25.5%
103.9%
120.3%
16.5pp
Hannover Re
n.d.
n.d.
n.d.
n.d.
n.d.
n.d.
n.d.
-116
-74
20.5%
11.7%
102.1%
86.4%
-15.7pp
Lancashire
-44
-7
14.9%
2.8%
82.1%
61.7%
-20.4pp
Mapfre
n.d.
n.d.
n.d.
n.d.
n.d.
n.d.
n.d.
Markel
-191
-204
18.3%
15.1%
111.6%
113.1%
1.5pp
-45
-66
14.8%
22.1%
82.0%
87.7%
5.7pp
0
-250
0.0%
3.1%
95.8%
95.5%
-0.3pp
-48
-652
1.5%
20.8%
86.2%
89.1%
2.9pp
PartnerRe
-279
-310
16.5%
16.3%
104.3%
106.3%
2.0pp
Platinum
-51
-99
18.0%
36.6%
100.1%
97.2%
-2.9pp
QBE
117
178
-1.6%
-2.4%
91.3%
90.3%
-1.0pp
-101
-64
19.4%
11.4%
57.3%
60.6%
3.3pp
28
-31
-1.4%
1.5%
92.4%
95.7%
3.4pp
Swiss Re
-302
-445
4.3%
5.6%
89.6%
91.3%
1.6pp
Validus
-68
-107
7.6%
9.9%
83.2%
79.6%
-3.6pp
White Mountains
-11
-14
1.1%
1.4%
88.8%
87.7%
-1.1pp
-182
-150
6.6%
5.1%
99.6%
95.8%
-3.8pp
-2,292
-3,677
3.0%
4.5%
93.7%
93.5%
-0.2pp
Company ACE Alleghany
Axis
Hiscox
Montpelier Re Munich Re* NICO
RenaissanceRe SCOR
XL ABA
Prior Year
*P&C reinsurance segment only Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
26
Accident
Aon Benfield
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d) Net
Net
Capital
Capital
Total
Total
Investment
Investment
Gains/
Gains/
Investment
Investment
Income
Income
Losses
Losses
Return
Return
1H 2012
1H 2013
1H 2012
1H 2013
1H 2012
1H 2013
Change
1,081
1,065
-134
310
947
1,375
45%
144
219
105
37
249
256
3%
Allied World
90
71
142
-36
232
35
-85%
Amlin
25
24
57
41
82
65
-21%
Arch
181
159
76
68
257
227
-12%
Argo
61
53
10
21
72
74
3%
Aspen
105
94
10
9
116
103
-11%
Axis
190
192
45
61
235
253
7%
Beazley
28
29
8
-29
36
0
-99%
Catlin
59
54
24
-45
83
9
-89%
Endurance
89
82
20
15
108
97
-11%
Everest Re
302
295
82
161
384
455
19%
Fairfax
236
258
76
-476
312
-218
n.m.
Gen Re
386
512
11
40
396
552
39%
Hannover Re
651
650
59
39
709
689
-3%
Hiscox
21
21
21
1
43
22
-49%
Lancashire
19
23
5
12
24
35
45%
Mapfre
780
768
33
41
812
809
0%
Markel
143
143
20
29
164
172
5%
35
33
46
-62
81
-29
n.m.
Munich Re
3,825
3,545
225
18
4,050
3,563
-12%
NICO
2,899
2,967
-448
-20
2,451
2,946
20%
PartnerRe
300
248
231
-276
531
-28
n.m.
Platinum
55
36
45
23
100
59
-40%
394
330
292
29
686
359
-48%
95
80
75
-55
171
25
-85%
248
216
34
-7
282
209
-26%
3,427
3,733
-173
516
3,254
4,249
31%
Validus
53
55
-19
-143
34
-88
n.m.
White Mountains
82
57
51
38
133
95
-28%
550
558
8
77
559
635
14%
18,219
18,215
1,186
487
19,404
18,702
-4%
Company ACE Alleghany
Montpelier Re
QBE RenaissanceRe SCOR Swiss Re
XL ABA
Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
27
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d) Pre-tax
Pre-tax
Pre-tax
Pre-tax
Profit/Loss
Profit/Loss
Operating ROE*
Operating ROE*
1H 2012
1H 2013
Change
1H 2012
1H 2013
Change
1,559
2,081
33%
13.5%
12.9%
-0.6pp
Alleghany
756
400
-47%
28.3%
11.3%
-17.0pp
Allied World
327
158
-52%
11.5%
11.6%
0.1pp
Amlin
184
160
-13%
17.4%
15.2%
-2.2pp
Arch
387
443
15%
12.9%
14.4%
1.5pp
Argo
53
80
51%
5.8%
8.0%
2.2pp
Aspen
175
139
-21%
10.0%
7.7%
-2.2pp
Axis
330
401
21%
10.2%
12.0%
1.8pp
Beazley
113
82
-27%
19.2%
18.8%
-0.4pp
Catlin
231
145
-37%
12.4%
10.9%
-1.5pp
Endurance
156
165
6%
10.2%
11.0%
0.8pp
Everest Re
582
792
36%
16.0%
18.9%
2.9pp
Fairfax
108
-195
n.m.
0.7%
6.4%
5.7pp
Gen Re
479
568
19%
9.9%
10.2%
0.2pp
Hannover Re
547
608
11%
16.7%
17.6%
0.9pp
Hiscox
126
181
44%
16.2%
26.1%
9.9pp
Lancashire
107
137
28%
14.9%
18.9%
4.0pp
Mapfre
824
866
5%
16.2%
16.2%
0.0pp
Markel
194
163
-16%
9.6%
5.2%
-4.5pp
Montpelier Re
176
73
-58%
16.4%
16.4%
0.0pp
Munich Re
1,917
1,808
-6%
13.9%
13.5%
-0.4pp
NICO
3,025
3,445
14%
9.5%
8.3%
-1.2pp
PartnerRe
649
23
-96%
12.7%
9.0%
-3.7pp
Platinum
129
146
13%
9.8%
13.5%
3.6pp
QBE
914
585
-36%
11.3%
9.8%
-1.5pp
RenaissanceRe
448
284
-37%
16.5%
15.2%
-1.4pp
SCOR
260
237
-9%
10.0%
10.2%
0.2pp
2,065
2,600
26%
13.9%
13.0%
-0.9pp
Validus
240
183
-24%
14.1%
15.2%
1.1pp
White Mountains
178
155
-13%
5.7%
5.6%
-0.1pp
XL
452
671
48%
8.1%
10.3%
2.2pp
18,925
18,875
0%
12.0%
11.4%
-0.6pp
Company ACE
Swiss Re
ABA
*Calculated by excluding the impact of net realized and unrealized investment gains/losses reported through income statements Figures in reporting currencies, but converted to USD (millions) for ABA line n.m. = not meaningful Source: Company reports, Aon Benfield Market Analysis
28
Aon Benfield
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d) Common
Common
Return on
Net Income
Net Income
Equity*
Equity*
1H 2012
1H 2013
Change
1H 2012
1H 2013
Change
1,301
1,844
42%
10.4%
13.5%
3.1pp
Alleghany
669
310
-54%
29.1%
9.6%
-19.5pp
Allied World
315
157
-50%
19.6%
9.4%
-10.2pp
Amlin
169
140
-17%
23.2%
17.8%
-5.4pp
Arch
360
422
17%
16.1%
17.3%
1.3pp
Argo
44
64
48%
5.9%
8.6%
2.7pp
Aspen
149
115
-23%
10.4%
8.1%
-2.3pp
Axis
290
375
29%
11.4%
14.7%
3.3pp
Beazley
100
72
-28%
18.2%
12.2%
-6.0pp
Catlin
184
118
-36%
13.3%
8.1%
-5.2pp
Endurance
139
145
5%
11.3%
12.6%
1.3pp
Everest Re
519
660
27%
16.6%
19.8%
3.1pp
Fairfax
63
-27
n.m.
1.7%
-0.7%
-2.4pp
Gen Re
397
539
36%
8.4%
10.4%
1.9pp
Hannover Re
405
408
1%
15.5%
14.0%
-1.5pp
Hiscox
125
158
27%
19.4%
23.0%
3.6pp
Lancashire
104
134
29%
15.1%
20.2%
5.1pp
Mapfre
434
456
5%
12.2%
11.6%
-0.6pp
Markel
147
117
-21%
8.3%
4.6%
-3.8pp
Montpelier Re
169
65
-62%
23.5%
8.9%
-14.6pp
Munich Re
1,588
1,501
-5%
13.2%
11.4%
-1.8pp
NICO
2,545
3,029
19%
7.0%
7.3%
0.3pp
PartnerRe
505
20
-96%
17.8%
0.7%
-17.1pp
Platinum
121
136
13%
14.2%
15.0%
0.8pp
QBE
760
477
-37%
13.9%
8.5%
-5.4pp
RenaissanceRe
344
217
-37%
21.7%
13.9%
-7.8pp
SCOR
206
189
-8%
9.2%
8.0%
-1.2pp
1,224
2,166
77%
8.1%
13.5%
5.4pp
Validus
292
254
-13%
16.9%
13.3%
-3.6pp
White Mountains
120
147
22%
6.1%
7.9%
1.8pp
XL
398
623
57%
8.3%
12.2%
4.0pp
15,138
15,996
6%
10.8%
10.4%
-0.4pp
Company ACE
Swiss Re
ABA
Return on
*Common net income as a percentage of average common equity Figures in reporting currencies, but converted to USD (millions) for ABA line n.m. = not meaningful Source: Company reports, Aon Benfield Market Analysis
29
The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d) Cash and
Cash and
Shareholders’
Investments
Investments
Funds
Funds
FY 2012
1H 2013
Change
FY 2012
1H 2013
Change
ACE
61,333
60,821
-1%
27,531
27,295
-1%
Alleghany
18,976
18,783
-1%
6,404
6,498
1%
Allied World
8,799
9,032
3%
3,326
3,373
1%
Amlin
4,396
4,462
1%
1,497
1,650
10%
Arch
13,127
13,427
2%
5,169
5,234
1%
Argo
4,297
4,087
-5%
1,514
1,491
-2%
Aspen
8,240
8,017
-3%
3,488
3,235
-7%
14,397
14,388
0%
5,780
5,562
-4%
Beazley
4,330
4,202
-3%
1,205
1,158
-4%
Catlin
8,774
8,529
-3%
3,512
3,491
-1%
Endurance
6,639
6,515
-2%
2,711
2,736
1%
Everest Re
16,805
16,267
-3%
6,733
6,623
-2%
Fairfax
26,125
24,883
-5%
8,821
8,486
-4%
Gen Re
15,119
14,439
-4%
10,693
10,115
-5%
Hannover Re
46,565
46,391
0%
6,032
5,595
-7%
Hiscox
3,073
3,183
4%
1,365
1,390
2%
Lancashire
2,253
2,090
-7%
1,387
1,266
-9%
Mapfre
39,402
40,530
3%
7,810
7,868
1%
Markel
9,333
16,584
78%
3,889
6,321
63%
Montpelier Re
3,320
3,248
-2%
1,629
1,570
-4%
Munich Re
208,614
204,198
-2%
27,181
25,405
-7%
NICO
124,064
136,233
10%
79,409
86,604
9%
PartnerRe
18,831
17,856
-5%
6,933
6,367
-8%
Platinum
4,062
3,727
-8%
1,895
1,747
-8%
31,587
29,969
-5%
11,358
11,163
-2%
6,595
6,374
-3%
3,503
3,568
2%
22,552
21,985
-3%
4,800
4,696
-2%
176,894
168,667
-5%
34,002
30,110
-11%
Validus
8,156
7,871
-3%
4,021
3,618
-10%
White Mountains
8,256
7,724
-6%
3,732
3,689
-1%
36,599
35,216
-4%
10,510
9,893
-6%
1,067,444
1,057,928
-1%
314,264*
312,514
-1%
Company
Axis
QBE RenaissanceRe SCOR Swiss Re
XL ABA
Shareholders’
*To allow more consistent comparison, Transatlantic and Alterra’s reported capital is included in the year-end capital figures shown in Exhibit 2 and 3 Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
30
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[email protected] Eleanore Obst
[email protected]
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