The Aon Benfield Aggregate (ABA) report, which analyzes the financial results of 30 leading traditional global reinsurers at year end 2009, reveals that for the ABA group of reinsurers, shareholders’ funds surpassed their pre-credit crisis level of 2007, reaching $210 billion – a rise of 28% on full year 2008.
The recovery in shareholders’ funds during 2009 was as a result of relatively low catastrophe losses and higher investment returns as financial markets rebounded. With potential excess capital in 2010 and a softening price environment, reinsurers face the dilemma of whether to return capital to shareholders or to retain it in anticipation of the next major catastrophe, said Aon Benfield.
In 2009, $2.4 billion was returned to shareholders, a trend which has continued into 2010.
The growth in shareholders’ funds is a reversal of the results of 2008 when the major reinsurers experienced a 19% reduction in capital with large claims from catastrophes and heavy investment losses during the global financial crisis.
Pre-tax profit of the ABA group trebled from $9 billion to $27 billion in 2009, while gross premiums written eased 1% to $133 billion.
The aggregate combined ratio improved by 4.8 percentage points to 90.9% and the contribution to the underwriting result from previous year reserve releases was 3.3 percentage points, compared with 4.2 percentage points in 2008.
The ABA group account for more than 50% of estimated global reinsurer capital.