Global reinsurer capital declined 4% from $470bn at 31 December 2010, to $450bn at 30 September 2011, according to an Aon Benfield report...
A reduction of 6% in the first quarter was offset by growth of 1% in both the second and third quarters, the report said.
This calculation is a broad measure of capital available for reinsurance and includes both traditional and non-traditional forms of reinsurance capital.
Aon Benfield's Aggregate report assesses the financial performance of 28 of the world's reinsurers in the first nine months of 2011 and examines how the year's major natural catastrophe events have impacted their earnings and capital positions.
The latest study found that the 28 ABA companies reported capital totaling $245.1bn at September 30, 2011, a decline of 0.6% or $1.5bn since the end of 2010.
ABA capital has thus rebounded to near peak levels since the 3.4% reduction reported in the first quarter. The main contributory factors were $7.0bn of net income, $1.8bn of new capital and $1.3bn of unrealized investment gains, offset by $8.4bn of dividend payments and $3.2bn of share buybacks.
The first half combined ratio for the ABA companies rose by 14.3 percentage points to 110.5%, with $20.7bn of pre-tax natural catastrophe losses representing 25.0% of net premiums earned.
This translated into a property and casualty underwriting loss of $8.7bn. The total investment return reported by the ABA fell by 24% to $24.4bn, driven by a swing from realized and unrealized capital gains of $9.4bn to losses of $0.4bn.
Overall, the ABA reported a pre-tax profit of $8.2bn for the first nine months of 2011, a 64% reduction relative to the prior year period.
Net income stood at $7.0bn, representing a return on average common equity of 2.8% (non-annualized). This followed a return of 23.8bn, or 10.4%, for the whole of 2010.
For most ABA companies, direct holdings of sovereign debt issued by Portugal, Italy, Ireland, Greece and Spain were immaterial at September 30, 2011, according to the report.
"On the whole, ABA companies have very little direct exposure to sovereign debt issued by Portugal, Italy, Ireland, Greece and Spain. However 'contagion' is beginning to spread to other countries within the EU and wider indirect exposures (e.g. to the EU banking sector) are more difficult to assess," the report said.
Despite the elevated level of catastrophe losses over the last two years, ABA financial strength ratings have remained broadly unchanged, reflecting continued robust capital positions.
Source: Insurance Insight
