The Aon Benfield Aggregate Results for the six months ended June 30, 2013
Contents Global Reinsurer Capital
Earnings 12 Underwriting Performance
Return on Equity
ABA Business Model Evolution
Who Are The New Investors?
How Is New Money Being Deployed?
Implications for ‘Traditional’ Reinsurers
Convergence in Action
Financial Strength Ratings
Appendix 1: ABA Data
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.
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
100 0 FY 2007
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