These companies represent around half of the world’s non-life reinsurance premiums and a large majority of the life reinsurance premiums. Their aggregated results are therefore regarded as a reasonable proxy for the sector as a whole.
The firm's latest study found that total capital deployed by the ARA stood at USD233 billion at 31 December 2018, a reduction of USD13 billion, or 5%, relative to a year earlier. Operating performance improved in 2018, aided by a reduced, though still high, burden of natural catastrophe losses. However, the investment result was materially weaker than in 2017 and, as a result, earnings remained well below the cost of capital.
Further key findings include:
Gross property and casualty (P&C) premiums written by the ARA rose by 11% to USD194 billion, split primary insurance USD108 billion (up 9%) and assumed reinsurance USD86 billion (up 13%).
P&C underwriting profit of USD1.3 billion was a significant improvement on the loss of USD9.3 billion reported in 2017, aided by approximate halving of natural catastrophe losses to USD11.3 billion.
The total investment return fell by 29% to USD21.3 billion, driven by unrealized losses on bonds (rising US interest rates) and equities (stock market correction in the fourth quarter).
Pre-tax profit and net income both rose by 53% to USD11.0 billion and USD8.7 billion, respectively, with only a handful of ARA constituents reporting overall losses.
Despite positive earnings overall, ARA total equity fell by 8% USD184 billion, driven by the return of capital to investors, unrealized losses on bonds taken directly to equity and strengthening of the US dollar.
The return on common equity stood at 4.2% in 2018, up from 2.7% in 2017.
Mike Van Slooten, Head of Business Intelligence for Aon’s Reinsurance Solutions business, said: “The natural catastrophe losses absorbed by the private market in 2017 and 2018 are estimated at USD220 billion – an unprecedented total for any two-year period. The impact to the ARA exceeded USD32 billion and yet overall earnings have remained positive in both years. We believe this is testament to the resilience of the sector.”
Aon’s Reinsurance Aggregate (ARA) report
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