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Empower Results™
The Aon Benfield Aggregate Results for the six months ended June 30, 2012
ContentsGlobal Reinsurer Capital 3
Executive Summary 4
Evolution of the ABA 4
Aon Benfield Aggregate Capital 5
Capital Development 5
Capital Management 7
Premium Income 8
Premium Distribution 9
Earnings 10
Underwriting Performance 10
Investment Results 13
Net Income 14
Return on Equity 14
Sector Valuation 15
Investment Allocation 17
Peripheral European Union (EU) Sovereign Debt 17
Financial Strength Ratings 18
Appendix 1: Aon Benfield Aggregate Data 20
About Aon BenfieldAon 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
3
Global Reinsurer Capital Aon Benfield estimates that global reinsurer capital totaled USD480 billion at June
30, 2012, an increase of 5% relative to December 31, 2011. This calculation is a
broad measure of capital available for reinsurance and includes both traditional and
non-traditional forms of reinsurer capital.
Exhibit 1: Global Reinsurer Capital
Source: Company reports, Aon Benfield Analytics
The relatively low level of insured catastrophe losses in the first half of 2012 allowed most mainstream insurance and reinsurance companies to report good earnings and consequent capital growth. Also noteworthy were the launch of two new rated Bermudian reinsurers (Third Point Re and PAC Re) and an increased level of investment in sidecars and catastrophe bonds. The new capital flowing into the sector is estimated at USD5 billion.
410340
400470 455 480
-17% 18%
18%-3% 5%
0
100
200
300
400
500
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 1H 2012
USD
(bi
llion
s)
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
4
Executive Summary Global reinsurer capital reached a record level of USD480 billion at June 30, 2012, an increase of 5% or USD25 billion since the end of 2011. New capital entering the sector is estimated at USD5 billion.
The reported capital of the 31 companies forming the ABA rose by 6% or USD15 billion to USD286 billion, driven primarily by USD14.5 billion of common net income and USD8.6 billion of unrealized capital gains. Dividends and share buybacks totaled USD9.1 billion.
Gross property and casualty insurance and reinsurance premiums written by the ABA rose by 6% to USD92.0 billion, principally driven by higher pricing in loss affected lines, with a number of companies deploying new sidecar capacity for catastrophe business. Net premiums written rose by 5% to USD76.3 billion.
The ABA combined ratio stood at 90.1%, down from 117.8% in the first half of 2011, producing an underwriting profit of USD6.6 billion, with all but one constituent reporting positive results.
The contribution to the combined ratio from natural catastrophe losses stood at 2.5 percentage points (USD1.6 billion), down from 31.8 percentage points (USD19.6 billion) in the first half of 2011.
The benefit to the combined ratio from prior year reserve releases stood at 3.2 percentage points (USD2.1 billion), down from 4.7 percentage points (USD2.9 billion) in the first half of 2011.
The total investment return reported by the ABA companies through their income statements fell by 4.9% to USD18.1 billion, equating to an annualized investment yield of 3.8%.
Direct exposure to sovereign debt issued by Greece, Ireland, Italy, Portugal and Spain remains low and is restricted to a handful of ABA companies.
Pre-tax profits reported by the ABA totaled USD17.8 billion, up from only USD1.4 billion in the first half of 2011, with all 31 constituents reporting positive results.
The ABA earned an annualized return on equity of 10.7% for the first half of 2012, calculated as common net income divided by average common equity.
Evolution of the ABA Going forward, the Aon Benfield Aggregate (ABA) report will be produced on a half-yearly basis, to allow the inclusion of certain companies that do not report quarterly. The aim is to provide a more representative view of the global property and casualty reinsurance marketplace. The new constituents are Amlin, Beazley, Catlin, Hiscox, Lancashire and QBE, while American Agricultural, Ariel and Maiden are no longer included. A full list of the 31 ABA companies can be found in Appendix 1. All are publicly-listed, with the exception of two US subsidiaries of Berkshire Hathaway, namely General Reinsurance Corporation (Gen Re) and National Indemnity Company (NICO). Prior year comparisons have been restated to reflect these changes.
Alleghany Corporation has replaced Transatlantic Holdings, Inc. as a constituent of the ABA, as a result of the acquisition that became effective on March 6, 2012. Alleghany’s published results only include the contribution of Transatlantic from that date. For the purposes of the ABA capital calculation, Transatlantic’s reported capital has been included in previous year-end totals.
Aon Benfield
5
Aon Benfield Aggregate Capital Reported capital is currently at a record level. The shareholders’ funds of the 31 ABA
companies totaled USD286 billion at June 30, 2012, an increase of 6% or USD15
billion since the end of 2011.
Exhibit 2: ABA Shareholders’ Funds
Source: Company reports, Aon Benfield Market Analysis
Capital Development The main drivers of the growth in capital were net income of USD14.7 billion and unrealized capital gains of USD8.6 billion (including a contribution of USD4.6 billion from NICO). Additional capital of USD2.7 billion included a contingent issuance of USD1.1 billion at Swiss Re and a USD635 million share placement at QBE. The principal offsetting factors were dividends of USD6.8 billion, share buybacks of USD2.3 billion and adverse foreign exchange movements of USD0.5 billion.
Exhibit 3: ABA Shareholders’ Funds Development
Source: Company reports, Aon Benfield Market Analysis
218180
229267 271 286
-18% 27%
17%1% 6%
0
100
200
300
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 1H 2012
USD
(bi
llion
s)
271.22.7
14.7 -6.8
-0.5
8.6 -2.3-1.3 286.4
250
260
270
280
290
300
FY 2011SHF
Additionalcapital
Netincome
Dividends FX Investmentgains
Sharebuybacks
Other 1H 2012SHF
USD
(bill
ions
)
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
6
Alleghany’s shareholders’ funds more than doubled to USD6.3 billion in the period, as a result of the acquisition of Transatlantic. The only ABA constituent to report a reduction in shareholders’ funds was White Mountains - share buybacks totaling USD490 million in the wake of recent divestments out-weighed net income of USD120 million, resulting in a decline of 8%.
Exhibit 4: Movement in Reported Shareholders’ Funds
Source: Company reports, Aon Benfield Market Analysis
-20%
0%
20%
40%
60%
80%
100%
120% ABA
-10%
0%
10%
20%
Aon Benfield
7
Capital Management The ABA companies returned USD9.1 billion of capital, or 3.4% of opening shareholders’ funds, to investors during the first half of 2012, a reduction of USD1.0 billion relative to the prior year. Dividend payments and share buybacks were cut by 9% and 12% respectively.
Exhibit 5: Capital Management
Company
Reporting
Currency
(millions)
Opening
SHF
(FY 2011)
1H 2012
Buybacks
Buybacks
as % of
Opening
SHF
Dividends
paid
1H 2012
Dividends
as % of
Opening
SHF
Total
Capital
Returned
ACE USD 24,332 -7 0% -368 -2% -375
Alleghany USD 2,926 0 0% 0 0% 0
Allied World USD 3,149 -159 -5% -14 0% -173
Alterra USD 2,809 -137 -5% -28 -1% -165
Amlin GBP 1,420 0 0% -78 -6% -78
Arch USD 4,592 -7 0% -14 0% -21
Argo USD 1,463 -28 -2% -6 0% -34
Aspen USD 3,156 -27 -1% -37 -1% -64
Axis USD 5,444 -138 -3% -83 -2% -221
Beazley USD 1,071 -4 0% -43 -4% -48
Catlin USD 3,298 0 0% -127 -4% -127
Endurance USD 2,611 0 0% -43 -2% -43
Everest Re USD 6,071 -225 -4% -51 -1% -276
Fairfax USD 8,363 -34 0% -234 -3% -268
Flagstone USD 789 0 0% -6 -1% -6
Gen Re USD 9,160 0 0% 0 0% 0
Hannover Re EUR 4,971 0 0% -253 -5% -253
Hiscox GBP 1,256 0 0% -47 -4% -47
Lancashire USD 1,327 0 0% -19 -1% -19
Montpelier Re USD 1,549 -86 -6% -19 -1% -104
Munich Re EUR 23,062 0 0% -1,110 -5% -1,110
NICO USD 70,155 0 0% -1,750 -2% -1,750
PartnerRe USD 6,468 -222 -3% -111 -2% -333
Platinum USD 1,691 -90 -5% -6 0% -95
QBE USD 10,386 -24 0% -288 -3% -312
RenaissanceRe USD 3,605 -92 -3% -45 -1% -137
SCOR EUR 4,403 0 0% -203 -5% -203
Swiss Re USD 29,590 -113 0% -1,134 -4% -1,247
Validus USD 3,448 -221 -6% -53 -2% -274
White Mountains USD 4,088 -490 -12% -7 0% -498
XL USD 9,412 -226 -2% -69 -1% -295
ABA USD 267,152* -2,330 -1% -6,783 -3% -9,113
*Transatlantic’s reported capital has been included in the year-end ABA capital figures shown in Exhibit 2
Source: Company reports, Aon Benfield Market Analysis
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
8
Premium Income The ABA wrote gross property and casualty (P&C) insurance and reinsurance
premiums totaling USD92.0 billion in the first half of 2012, an increase of 6.0%
relative to the prior year. Net premiums written rose by 5.3% to USD76.3 billion,
representing a retention rate of 82.9%.
Exhibit 6: ABA Gross Premiums Written
Source: Company reports, Aon Benfield Market Analysis
The main driver of premium growth in the first half of 2012 was increased pricing, particularly in loss-affected lines, with a number of companies deploying new sidecar capacity for catastrophe business. The sharp increase at Alleghany reflected a contribution of USD1.2 billion from newly-acquired Transatlantic. The premium reductions at Flagstone and Platinum were primarily driven by the desire to reduce catastrophe exposure.
Exhibit 7: P&C Gross Premiums Written, Percentage Change
*P&C reinsurance segment only
Source: Company reports, Aon Benfield Market Analysis
79
87
92
10%
6%
70
75
80
85
90
95
1H 2010 1H 2011 1H 2012
USD
(bi
llion
s)
-50%-25%
0%25%50%75%
100%125%150%175%200%225%
ABA
-50%
-25%
0%
25%
50%
Aon Benfield
9
Premium Distribution Net P&C insurance and reinsurance premiums written by the ABA totaled USD76.3 billion in the first half of 2012, an increase of 5% relative to the prior year. The top five represented almost 50% of the total and the top ten 69%. This study excludes P&C business written via Munich Re’s primary insurance operations (principally ERGO), to allow more consistent comparison with European peers.
Exhibit 8: Distribution of 1H 2012 P&C Net Premiums Written (USD76.3 billion)
Source: Company reports, Aon Benfield Market Analysis
Munich Re13.6%
Swiss Re10.3%
QBE9.8%
ACE8.8%
Hannover Re6.3%
NICO5.5%
XL4.3%
Fairfax4.0%
SCOR3.4%
Amlin3.1%
Remainder 30.9%
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
10
Earnings The ABA reported pre-tax profit of USD17.8 billion for the first half of 2012, a
significant improvement on the near breakeven result seen in the prior year. The key
driver was the relative absence of natural catastrophe losses. The total investment
return fell by 5% to USD18.1 billion.
Exhibit 9: ABA Pre-Tax Result
Source: Company reports, Aon Benfield Market Analysis
All of the ABA companies reported pre-tax profits in the first half of 2012, a strong contrast to the comparative prior year period, when natural catastrophe losses drove over half of the constituents to pre-tax losses. Between them, NICO, Munich Re, Swiss Re and ACE represented 51% of the total.
Exhibit 10: Pre-Tax Profit/Loss (USD millions)
Source: Company reports, Aon Benfield Market Analysis
Underwriting Performance The ABA reported a P&C combined ratio of 90.1% for the first half of 2012, which equated to an underwriting profit of USD6.6 billion. Natural catastrophe losses totaled USD1.6 billion, down from USD19.6 billion in the prior year comparative period. Prior year reserve releases fell by 27% to USD2.1 billion.
1.4
17.8
-20
-15
-10
-5
0
5
10
15
20
25
30
1H 2011 1H 2012
USD
(bi
llion
s) Capital gains/losses
Non-life underwriting result
Investment income
Life underwriting result
Other
Pre-tax profit
0
500
1,000
1,500
2,000
2,500
3,000
Aon Benfield
11
Exhibit 11: ABA Combined Ratio Composition
Source: Company reports, Aon Benfield Market Analysis
All but one of the ABA companies reported P&C underwriting profits in the first half of 2012. Underwriters of material volumes of property catastrophe business were obvious beneficiaries of the relatively benign period for major losses. Expense ratios display significant variance, as shown in Exhibit 12.
Exhibit 12: Reported Combined Ratios
Source: Company reports, Aon Benfield Market Analysis
Between them, Swiss Re, ACE, QBE and Munich Re generated 41% of the ABA’s total P&C underwriting profit.
Exhibit 13: P&C Underwriting Results (USD millions)
Source: Company reports, Aon Benfield Market Analysis
-4.7% -3.2%
30.6% 31.0%
60.1% 59.9%
31.8%
2.5%
117.8%
90.1%
-10%
10%
30%
50%
70%
90%
110%
130%
1H 2011 1H 2012
Natural catastrophe losses
Attritional loss ratio
Expense ratio
Prior year reserve adjustment
0%
20%
40%
60%
80%
100%
120% Loss ratio Expense ratio ABA combined ratio
-1000
100200300400500600700800900
1,000
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
12
A number of more short-tail focused ABA companies continue to derive significant benefit from positive prior year reserve development. White Mountains, QBE and Flagstone added to prior year reserves in the period.
Exhibit 14: Loss Reserve Adjustment as % of Net Premium Earned
Source: Company reports, Aon Benfield Market Analysis
On an accident year basis, the ABA companies reported an underwriting profit of USD4.5 billion in the first half of 2012, with six constituents reporting combined ratios in excess of 100%.
Exhibit 15: Accident Year Combined Ratios
Source: Company reports, Aon Benfield Market Analysis
-10%
0%
10%
20%
30%
40%ABA
50%
60%
70%
80%
90%
100%
110%ABA
Aon Benfield
13
Investment Results The total investment return reported by the ABA companies through their income statements in the first half of 2012 fell by 4.9% to USD18.1 billion, representing an annualized yield of 3.8%. The contributions from net investment income and capital gains declined by 4.8% and 5.7% to USD17.0 billion and USD1.1 billion respectively.
Exhibit 16: ABA Investment Return (Annualized)
Source: Company reports, Aon Benfield Market Analysis
Three ABA constituents, Munich Re, Swiss Re and NICO, dominate the ABA investment result by virtue of the size of their balance sheets. Together, these three companies generated 60% of the total return reported in the first half of 2012.
Exhibit 17: Total Investment Return (USD millions)
Source: Company reports, Aon Benfield Market Analysis
5.1%
1.7%
4.2%4.5%
3.6% 3.8%
0%
2%
4%
6%
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 1H 2012
0
1,000
2,000
3,000
4,000
5,000
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
14
Net Income The ABA companies reported common net income of USD14.5 billion for the first half of 2012, the best result for the last five interim periods, as shown in Exhibit 18.
Exhibit 18: ABA Common Net Income
Source: Company reports, Aon Benfield Market Analysis
Between them, NICO, Munich Re, ACE and Swiss Re generated 48% of total ABA common net income.
Exhibit 19: Common Net Income/Loss (USD millions)
Source: Company reports, Aon Benfield Market Analysis
Return on Equity The ABA earned an annualized return on equity of 10.7% for the first half of 2012, calculated as common net income divided by average common equity.
12.9 12.7
1.5
11.0
14.5
0
5
10
15
1H 2010 2H 2010 1H 2011 2H 2011 1H 2012
USD
(bill
ions
)
0
500
1,000
1,500
2,000
2,500
Aon Benfield
15
Exhibit 20: ABA Return on Equity (Annualized)
Source: Company reports, Aon Benfield Market Analysis
The return on equity of individual ABA constituents in the first half of 2012 is shown in Exhibit 21. Alleghany’s performance benefitted from a one-off gain of USD495 million on the purchase of Transatlantic.
Exhibit 21: Common Net Income as % of Average Common Equity (Annualized)
Source: Company reports, Aon Benfield Market Analysis
Sector Valuation The overall market capitalization of the ABA has increased by 11% since the beginning of 2012, but remains below pre-financial crisis levels, as shown in Exhibit 22.
Exhibit 22: ABA Market Capitalization (indexed to January 1, 2008)
Source: Bloomberg, Aon Benfield Market Analysis
15.2%
2.9%
12.3%10.7%
4.8%
10.7%
0%
5%
10%
15%
20%
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 1H 2012
0%
5%
10%
15%
20%
25%
30% ABA
40
50
60
70
80
90
100
110
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
16
Year-to-date movements in the share prices of individual ABA constituents are shown in Exhibit 23.
Exhibit 23: Year to Date Share Price Development
Source: Bloomberg, Aon Benfield Market Analysis
The development of the ABA’s price-to-book ratio since the onset of the financial crisis is shown in Exhibit 24.
Exhibit 24: ABA Price to Book Development
Source: Bloomberg, Aon Benfield Market Analysis
The recent development of individual ABA constituent’s price-to-book ratios is shown in Exhibit 25.
Exhibit 25: Year to Date Price to Book Development
Source: Bloomberg, Aon Benfield Market Analysis
11%
-20%
-10%
0%
10%
20%
30%
0.6
0.7
0.8
0.9
1.0
1.1
1.2
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
0.0
1.0
2.0August 29, 2012 January 1, 2012Average Average
Aon Benfield
17
Investment Allocation The ABA held cash and investments totaling USD984 billion at June 30, 2012, an
increase of 4.0% over the six months. Asset allocation was little changed.
Exhibit 26: Invested Assets Portfolio
Source: Company reports, Aon Benfield Market Analysis
Peripheral European Union (EU) Sovereign Debt Most ABA companies have eliminated any holdings of peripheral EU sovereign debt. Any declared exposures at June 30, 2012 are captured in Exhibit 27.
Exhibit 27: ABA Peripheral EU Sovereign Debt Exposures at June 30, 2012
Company
Reporting
Currency
(millions) Greece Ireland Italy Portugal Spain Total
As % of
Shareholders’
Funds
Amlin GBP 1 0 20 0 18 39 2.6%
Arch USD 0 0 6 0 0 6 0.1%
Berkshire USD nd nd nd nd nd nd nd
Fairfax* USD 244 0 0 0 0 244 2.9%
Hannover Re EUR 0 27 17 17 85 147 2.4%
Munich Re^ EUR 0 1,000 2,400 0 1,200 4,600 18.1%
Platinum USD 0 5 0 0 0 5 0.3%
Swiss Re^ USD 0 0 0 31 0 31 0.1%
XL USD 0 0 17 0 0 17 0.2%
^ Potential (disclosed or inferred) participation by life insurance companies
* Sovereign debt exposure as of December 31, 2011
Source: Company reports, Aon Benfield Market Analysis
nd = not disclosed
63%12%
9%
5%
11%
December 31, 2011: USD946 billion
Fixed interest investments
Equity investments
Cash and cash equivalents
Funds held by cedants
Other investments
62%12%
9%
6%
11%
June 30, 2012: USD984 billion
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
18
Financial Strength Ratings Exhibit 28: Financial Strength Ratings
A.M. Best Standard & Poor’s
Main Operating Company Current June 30, 2011 Current June 30, 2011
ACE Tempest Reinsurance Ltd A+ Stable A+ Stable AA- Stable AA- Stable
Allied World Assurance Co Ltd A Stable A Stable A Stable A Watch Pos
Alterra Bermuda Ltd A Stable A Stable A Stable A- Positive
Amlin AG A Stable A Stable A Stable A Stable
Arch Reinsurance Ltd A+ Stable A Positive A+ Stable A+ Stable
Argo Re Ltd A Stable A Stable NR - NR -
Aspen Bermuda Ltd A Stable A Stable A Stable A Stable
AXIS Specialty Ltd A Positive A Stable A+ Stable A+ Stable
Beazley Insurance Company, Inc A Stable A Stable NR - NR -
Catlin Insurance Company Ltd A Stable A Stable A Stable A Stable
Endurance Specialty Insurance Ltd A Stable A Stable A Stable A Stable
Everest Reinsurance (Bermuda) Ltd A+ Stable A+ Stable A+ Stable A+ Stable
Flagstone Reassurance Suisse SA A- Negative A- Negative NR - NR -
General Reinsurance Corporation A++ Stable A++ Stable AA+ Negative AA+ Stable
Hannover Rückversicherungs AG A Positive A Positive AA- Stable AA- Stable
Hiscox Insurance Company (Bermuda) Ltd A Stable A Stable NR - NR -
Lancashire Insurance Company Ltd A Stable A Stable A- Stable A- Stable
Montpelier Reinsurance Ltd A Stable A- Positive A- Stable A- Stable
Munich Reinsurance Co A+ Stable A+ Stable AA- Stable AA- Stable
National Indemnity Company A++ Stable A++ Stable AA+ Negative AA+ Stable
Odyssey Reinsurance Company A Stable A Stable A- Positive A- Stable
Partner Reinsurance Co Ltd A+ Negative A+ Stable A+ Stable AA- Negative
Platinum Underwriters Bermuda Ltd A Stable A Stable A- Stable A Stable
QBE Insurance (Europe) Ltd A Stable A Stable A+ Stable A+ Stable
Renaissance Reinsurance Ltd A+ Stable A+ Stable AA- Stable AA- Stable
SCOR Global P&C SE A Stable A Stable A+ Stable A Positive
Sirius International Insurance Corp A Stable A Stable A- Stable A- Stable
Swiss Reinsurance Co A+ Stable A Positive AA- Stable A+ Positive
Transatlantic Reinsurance Co A Stable A Stable A+ Stable A+ Stable
Validus Reinsurance Ltd A Stable A- Positive A Stable A- Stable
XL Re Ltd A Stable A Stable A Stable A Stable
Ratings as at August 2012 Bold indicates change since June 30, 2011
Source: A.M. Best, Standard & Poor’s
Aon Benfield
19
Exhibits 29 and 30 show the changes in A.M. Best and Standard & Poor’s rating distribution since June 30, 2011, based on gross P&C insurance and reinsurance premiums written. In each case, upgrades assigned to Swiss Re were a significant factor behind the shift towards higher rated security.
Exhibit 29: Change in ABA Ratings Distribution – A.M. Best
Source: A.M. Best, Company reports, Aon Benfield Market Analysis
Exhibit 30: Change in ABA Ratings Distribution – Standard & Poor’s
Source: Standard & Poor’s, Company reports, Aon Benfield Market Analysis
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.
3% 1%
62%52%
30%42%
5% 5%
June 30, 2011 Current
A++
A+
A
A-
10% 7%
19% 19%
31%26%
35%42%
5% 5%
June 30, 2011 Current
AA+
AA-
A+
A
A-
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
20
Appendix 1: Aon Benfield Aggregate Data Exhibit 31: Results for the Six Months Ended June 30, 2012
Company
Reporting
Currency
(millions)
P&C Gross
Premiums
Written
1H 2011
P&C Gross
Premiums
Written
1H 2012 Change
P&C Net
Premiums
Written
1H 2011
P&C Net
Premiums
Written
1H 2012 Change
ACE USD 9,106 9,415 3% 6,470 6,728 4%
Alleghany USD 610 1,902 212% 411 1,658 303%
Allied World USD 1,080 1,328 23% 877 1,084 24%
Alterra USD 1,190 1,227 3% 917 813 -11%
Amlin GBP 1,515 1,815 20% 1,315 1,489 13%
Arch USD 1,877 2,118 13% 1,471 1,684 14%
Argo USD 755 871 15% 528 603 14%
Aspen USD 1,254 1,449 16% 1,035 1,215 17%
Axis USD 2,595 2,540 -2% 2,251 2,169 -4%
Beazley USD 925 1,013 10% 636 651 2%
Catlin USD 2,683 3,010 12% 2,269 2,258 0%
Endurance USD 1,503 1,666 11% 1,241 1,327 7%
Everest Re USD 2,053 1,956 -5% 1,975 1,872 -5%
Fairfax USD 3,427 3,653 7% 2,889 3,088 7%
Flagstone USD 617 341 -45% 454 250 -45%
Gen Re USD 519 511 -1% 262 259 -1%
Hannover Re EUR 3,544 4,080 15% 3,190 3,680 15%
Hiscox GBP 847 906 7% 668 702 5%
Lancashire USD 380 515 36% 329 366 11%
Montpelier Re USD 471 513 9% 421 431 2%
Munich Re* EUR 8,281 8,397 1% 8,007 7,989 0%
NICO USD 3,686 4,180 13% 3,351 4,166 24%
PartnerRe USD 2,231 2,308 3% 2,119 2,189 3%
Platinum USD 355 285 -20% 321 285 -11%
QBE USD 8,942 9,223 3% 7,222 7,509 4%
RenaissanceRe USD 1,252 1,331 6% 881 920 5%
SCOR EUR 1,944 2,255 16% 1,743 2,004 15%
Swiss Re USD 9,539 10,280 8% 7,401 7,826 6%
Validus USD 1,455 1,464 1% 1,213 1,238 2%
White Mountains USD 1,254 1,371 9% 1,079 1,173 9%
XL USD 3,862 4,080 6% 3,020 3,311 10%
ABA USD 86,780 91,958 6% 72,423 76,267 5%
*P&C reinsurance segment only
Figures in reporting currencies, but converted to USD (millions) for ABA line
Source: Company reports, Aon Benfield Market Analysis
Aon Benfield
21
Exhibit 31: Results for the Six Months Ended June 30, 2012 (cont’d)
Calendar Year
Company
Loss
Ratio
1H 2011
Loss
Ratio
1H 2012
Expense
Ratio
1H 2011
Expense
Ratio
1H 2012
Combined
Ratio
1H 2011
Combined
Ratio
1H 2012 Change
ACE 68.1% 58.3% 30.5% 30.6% 98.5% 88.9% -9.6pp
Alleghany 53.1% 59.8% 35.8% 22.2% 88.9% 82.0% -6.9pp
Allied World 78.3% 56.0% 31.3% 29.2% 109.6% 85.2% -24.4pp
Alterra 70.9% 58.6% 32.7% 30.9% 103.5% 89.5% -14.0pp
Amlin 92.3% 52.8% 29.9% 31.4% 122.2% 84.2% -38.0pp
Arch 72.5% 56.5% 32.6% 32.1% 105.1% 88.6% -16.6pp
Argo 87.3% 61.7% 39.5% 41.2% 126.8% 102.9% -23.9pp
Aspen 93.8% 54.1% 33.0% 36.3% 126.8% 90.4% -36.4pp
Axis 97.3% 57.7% 31.8% 35.9% 129.1% 93.6% -35.6pp
Beazley 71.2% 53.6% 37.2% 37.7% 108.4% 91.3% -17.0pp
Catlin 85.0% 51.5% 31.5% 34.7% 116.5% 86.3% -30.2pp
Endurance 87.9% 65.4% 30.5% 28.9% 118.4% 94.3% -24.1pp
Everest Re 96.8% 59.5% 27.5% 29.5% 124.3% 89.0% -35.3pp
Fairfax 81.8% 66.6% 32.4% 31.5% 114.2% 98.1% -16.1pp
Flagstone 125.0% 56.4% 31.1% 39.5% 156.1% 95.9% -60.2pp
Gen Re 100.3% 38.3% 18.8% 30.7% 119.1% 69.0% -50.1pp
Hannover Re 85.4% 71.1% 24.9% 25.8% 110.3% 96.8% -13.5pp
Hiscox 79.0% 41.0% 40.0% 43.5% 119.0% 84.5% -34.5pp
Lancashire 38.2% 31.7% 31.3% 35.5% 69.5% 67.2% -2.3pp
Montpelier Re 110.7% 32.9% 31.6% 34.2% 142.3% 67.2% -75.1pp
Munich Re* 104.2% 66.0% 30.0% 29.7% 134.2% 95.7% -38.4pp
NICO 108.7% 53.8% 32.7% 33.8% 141.4% 87.6% -53.8pp
PartnerRe 118.0% 57.0% 29.1% 30.7% 147.1% 87.8% -59.3pp
Platinum 134.8% 51.6% 26.3% 30.5% 161.1% 82.1% -79.0pp
QBE 65.9% 61.5% 29.8% 31.4% 95.7% 92.9% -2.8pp
RenaissanceRe 149.2% 12.4% 24.9% 25.5% 174.1% 38.0% -136.1pp
SCOR 84.4% 64.9% 28.7% 28.9% 113.1% 93.8% -19.3pp
Swiss Re 90.8% 53.0% 32.0% 30.1% 122.8% 83.1% -39.7pp
Validus 79.9% 42.9% 33.3% 32.8% 113.2% 75.7% -37.5pp
White Mountains 67.3% 52.2% 35.3% 36.7% 102.6% 88.9% -13.7pp
XL 78.8% 60.9% 31.3% 32.1% 110.1% 93.0% -17.1pp
ABA 87.3% 59.2% 30.6% 31.0% 117.8% 90.1% -27.7pp
*P&C reinsurance segment only
Source: Company reports, Aon Benfield Market Analysis
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
22
Exhibit 31: Results for the Six Months Ended June 30, 2012 (cont’d)
Accident Year
Company
Prior Year
Reserve
Adjustment
1H 2011
Prior Year
Reserve
Adjustment
1H 2012
Prior Year
Reserve
Adjustment
as % of NPE
1H 2011
Prior Year
Reserve
Adjustment
as % of NPE
1H 2012
Accident
Year
Combined
Ratio
1H 2011
Accident
Year
Combined
Ratio
1H 2012 Change
ACE -239 -206 3.9% 3.3% 102.4% 92.2% -10.2pp
Alleghany -15 -1 4.0% 0.0% 92.9% 82.0% -10.9pp
Allied World -100 -81 14.4% 9.8% 124.0% 95.0% -29.0pp
Alterra -79 -31 10.8% 4.5% 114.4% 94.1% -20.3pp
Amlin -37 -53 4.0% 5.4% 126.2% 89.6% -36.6pp
Arch -117 -117 9.2% 8.3% 114.3% 96.9% -17.4pp
Argo 4 -7 -0.7% 1.3% 126.1% 104.2% -21.9pp
Aspen -55 -66 6.0% 6.5% 132.8% 96.9% -35.9pp
Axis -101 -120 6.2% 7.1% 135.4% 100.6% -34.7pp
Beazley -89 -48 13.2% 6.8% 121.6% 98.1% -23.5pp
Catlin 0 -30 0.0% 1.8% 116.5% 88.0% -28.5pp
Endurance -93 -37 10.8% 3.9% 129.1% 98.2% -30.9pp
Everest Re -3 0 0.1% 0.0% 124.5% 89.0% -35.5pp
Fairfax -64 -50 2.4% 1.9% 116.6% 100.0% -16.7pp
Flagstone -4 13 1.1% -6.1% 157.2% 89.8% -67.3pp
Gen Re -78 -95 28.3% 35.5% 147.4% 104.5% -42.9pp
Hannover Re -150 0 5.3% 0.0% 115.6% 96.8% -18.8pp
Hiscox -95 -116 17.1% 20.4% 136.1% 104.9% -31.2pp
Lancashire -97 -44 33.7% 14.9% 103.2% 82.1% -21.1pp
Montpelier Re -53 -45 16.7% 14.8% 159.0% 82.0% -77.0pp
Munich Re* 0 0 0.0% 0.0% 134.2% 95.7% -38.4pp
NICO -39 -48 1.6% 1.5% 142.9% 89.1% -53.8pp
PartnerRe -303 -279 17.0% 16.5% 164.0% 104.3% -59.7pp
Platinum -49 -51 13.9% 18.0% 175.0% 100.1% -74.9pp
QBE -9 117 0.1% -1.6% 95.8% 91.3% -4.5pp
RenaissanceRe -89 -101 17.0% 19.4% 191.1% 57.3% -133.8pp
SCOR -23 0 1.4% 0.0% 114.4% 93.8% -20.6pp
Swiss Re -492 -269 10.7% 4.6% 133.5% 87.6% -45.8pp
Validus -52 -68 6.1% 7.6% 119.3% 83.2% -36.1pp
White Mountains -28 1 2.9% -0.1% 105.5% 88.7% -16.8pp
XL -199 -182 7.7% 6.6% 117.8% 99.6% -18.2pp
ABA -2,898 -2,110 4.7% 3.2% 122.5% 93.3% -29.2pp
*P&C reinsurance segment only
Figures in reporting currencies, but converted to USD (millions) for ABA line
Source: Company reports, Aon Benfield Market Analysis
Aon Benfield
23
Exhibit 31: Results for the Six Months Ended June 30, 2012 (cont’d)
Company
Net
Investment
Income
1H 2011
Net
Investment
Income
1H 2012
Capital
Gains/
Losses
1H 2011
Capital
Gains/
Losses
1H 2012
Total
Investment
Return
1H 2011
Total
Investment
Return
1H 2012 Change
ACE 1,113 1,081 -118 -134 995 947 -5%
Alleghany 60 144 41 105 101 249 145%
Allied World 103 90 109 142 212 232 9%
Alterra 117 113 -26 33 91 146 60%
Amlin 26 22 21 63 47 85 79%
Arch 175 148 97 109 272 257 -6%
Argo 66 61 34 10 100 72 -28%
Aspen 114 105 18 10 132 116 -13%
Axis 211 190 68 45 278 235 -15%
Beazley 23 28 -1 8 23 36 60%
Catlin 73 59 42 24 115 83 -28%
Endurance 92 89 23 20 115 108 -6%
Everest Re 337 302 7 82 345 384 11%
Fairfax 378 235 18 31 396 265 -33%
Flagstone 21 9 3 23 24 32 33%
Gen Re 767 386 5 11 772 396 -49%
Hannover Re 577 651 96 59 673 709 5%
Hiscox 26 21 0 21 26 43 64%
Lancashire 24 19 5 5 29 24 -17%
Montpelier Re 35 35 26 46 61 81 33%
Munich Re 3,634 3,825 -166 225 3,468 4,050 17%
NICO 3,136 2,874 230 -448 3,365 2,426 -28%
PartnerRe 310 300 -34 231 276 531 92%
Platinum 66 55 -8 45 58 100 72%
QBE 381 394 126 292 507 686 35%
RenaissanceRe 94 82 30 77 123 158 28%
SCOR 259 248 86 34 345 282 -18%
Swiss Re 3,147 3,427 415 -270 3,562 3,157 -11%
Validus 56 54 24 -20 80 34 -58%
White Mountains 95 82 34 51 129 133 3%
XL 551 485 -83 5 468 489 5%
ABA 17,909 17,044 1,141 1,076 19,050 18,119 -5%
Figures in reporting currencies, but converted to USD (millions) for ABA line
Source: Company reports, Aon Benfield Market Analysis
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
24
Exhibit 31: Results for the Six Months Ended June 30, 2012 (cont’d)
Company
Pre-tax
Profit/Loss
1H 2011
Pre-tax
Profit/Loss
1H 2012 Change
Pre-tax
Operating ROE*
1H 2011
Pre-tax
Operating ROE*
1H 2012 Change
ACE 1,061 1,559 47% 10.0% 13.5% 3.5pp
Alleghany 104 756 627% 4.2% 28.3% 24.1pp
Allied World 116 327 182% 0.4% 11.5% 11.1pp
Alterra -21 154 n.m. 0.3% 8.6% 8.2pp
Amlin -192 185 n.m. -26.7% 16.8% 43.4pp
Arch 119 387 225% 1.0% 11.6% 10.6pp
Argo -66 53 n.m. -12.6% 5.8% 18.4pp
Aspen -159 175 n.m. -11.2% 10.0% 21.2pp
Axis -260 330 n.m. -12.0% 10.2% 22.2pp
Beazley -24 113 n.m. -4.5% 19.2% 23.7pp
Catlin -201 231 n.m. -14.8% 12.4% 27.2pp
Endurance -65 156 n.m. -6.4% 10.2% 16.5pp
Everest Re -201 582 n.m. -6.7% 16.0% 22.7pp
Fairfax -328 112 n.m. -8.2% 1.9% 10.1pp
Flagstone -182 40 n.m. -34.2% 4.1% 38.3pp
Gen Re 715 479 -33% 15.4% 9.9% -5.4pp
Hannover Re 197 547 177% 4.0% 16.7% 12.6pp
Hiscox -86 126 n.m. -14.2% 16.2% 30.4pp
Lancashire 99 107 8% 14.2% 14.8% 0.7pp
Montpelier Re -81 176 n.m. -13.2% 16.4% 29.6pp
Munich Re -680 1,917 n.m. -4.7% 13.9% 18.6pp
NICO 1,630 2,909 79% 4.1% 9.2% 5.1pp
PartnerRe -659 649 n.m. -18.1% 12.7% 30.8pp
Platinum -177 129 n.m. -18.8% 9.8% 28.6pp
QBE 776 914 18% 12.0% 11.3% -0.7pp
RenaissanceRe -260 448 n.m. -13.1% 16.5% 29.6pp
SCOR 15 260 1657% -3.4% 10.0% 13.5pp
Swiss Re 556 2,065 271% 1.1% 14.5% 13.5pp
Validus -63 240 n.m. -4.9% 14.2% 19.1pp
White Mountains 2 167 6842% -1.5% 5.2% 6.6pp
XL 26 489 1758% 2.1% 8.8% 6.8pp
ABA 1,351 17,771 1215% 0.2% 11.8% 11.7pp
*Calculated by excluding the impact of net realized and unrealized investment gains/losses; annualized
Figures in reporting currencies, but converted to USD (millions) for ABA line
n.m. = not meaningful
Source: Company reports, Aon Benfield Market Analysis
Aon Benfield
25
Exhibit 31: Results for the Six Months Ended June 30, 2012 (cont’d)
Company
Common
Net Income
1H 2011
Common
Net Income
1H 2012 Change
Return on
Equity*
1H 2011
Return on
Equity*
1H 2012 Change
ACE 844 1,301 54% 7.2% 10.4% 3.2pp
Alleghany 86 669 675% 5.8% 29.1% 23.3pp
Allied World 102 315 207% 6.7% 19.6% 12.9pp
Alterra -14 158 n.m. -1.0% 11.2% 12.1pp
Amlin -152 169 n.m. -19.0% 23.2% 42.2pp
Arch 109 370 239% 5.3% 16.5% 11.2pp
Argo -73 44 n.m. -9.1% 5.9% 15.0pp
Aspen -155 149 n.m. -11.0% 10.4% 21.4pp
Axis -283 290 n.m. -11.4% 11.4% 22.8pp
Beazley -14 100 n.m. -2.7% 18.2% 20.9pp
Catlin -220 184 n.m. -16.3% 13.3% 29.7pp
Endurance -54 139 n.m. -3.9% 10.4% 14.4pp
Everest Re -185 519 n.m. -5.9% 16.6% 22.6pp
Fairfax -183 65 n.m. -4.9% 1.8% 6.7pp
Flagstone -181 53 n.m. -34.9% 13.0% 47.8pp
Gen Re 664 397 -40% 14.3% 8.4% -5.9pp
Hannover Re 218 405 86% 9.9% 15.5% 5.6pp
Hiscox -87 125 n.m. -14.4% 19.3% 33.7pp
Lancashire 98 104 6% 14.6% 15.1% 0.4pp
Montpelier Re -83 169 n.m. -10.7% 23.5% 34.3pp
Munich Re -211 1,588 n.m. -2.0% 13.2% 15.1pp
NICO 1,554 2,440 57% 4.5% 6.7% 2.1pp
PartnerRe -700 505 n.m. -20.3% 15.4% 35.8pp
Platinum -178 121 n.m. -19.8% 14.2% 33.9pp
QBE 673 760 13% 12.5% 13.9% 1.4pp
RenaissanceRe -223 344 n.m. -14.1% 21.7% 35.7pp
SCOR 40 206 418% 1.9% 9.2% 7.3pp
Swiss Re 295 1,224 315% 2.4% 8.1% 5.7pp
Validus -62 292 n.m. -3.6% 16.9% 20.5pp
White Mountains -16 120 n.m. -0.9% 6.1% 7.0pp
XL -2 398 n.m. 0.0% 8.3% 8.3pp
ABA 1,478 14,546 884% 1.1% 10.7% 9.5pp
*Common net income as a percentage of average common equity; annualized
Figures in reporting currencies, but converted to USD (millions) for ABA line
n.m. = not meaningful
Source: Company reports, Aon Benfield Market Analysis
The Aon Benfield Aggregate – Results for the Six Months Ended June 30, 2012
26
Exhibit 31: Results for the Six Months Ended June 30, 2012 (cont’d)
Company
Cash and
Investments
FY 2011
Cash and
Investments
1H 2012 Change
Shareholders’
Funds
FY 2011
Shareholders’
Funds
1H 2012 Change
ACE 56,670 58,637 3% 24,332 25,762 6%
Alleghany 4,912 18,506 277% 2,926 6,280 115%
Allied World 8,123 8,905 10% 3,149 3,284 4%
Alterra 7,815 7,886 1% 2,809 2,852 2%
Amlin 4,321 4,333 0% 1,420 1,489 5%
Arch 12,024 12,580 5% 4,592 5,020 9%
Argo 4,248 4,202 -1% 1,463 1,493 2%
Aspen 7,665 7,915 3% 3,156 3,435 9%
Axis 13,550 13,878 2% 5,444 5,698 5%
Beazley 4,011 4,027 0% 1,071 1,129 5%
Catlin 8,378 8,465 1% 3,298 3,397 3%
Endurance 6,283 6,514 4% 2,611 2,747 5%
Everest Re 16,065 16,289 1% 6,071 6,417 6%
Fairfax 24,038 24,036 0% 8,363 8,430 1%
Flagstone 1,567 1,403 -10% 789 837 6%
Gen Re 13,495 14,005 4% 9,160 9,701 6%
Hannover Re 41,683 44,388 6% 4,971 5,472 10%
Hiscox 2,880 2,995 4% 1,256 1,332 6%
Lancashire 2,076 2,138 3% 1,327 1,422 7%
Montpelier Re 3,057 3,225 5% 1,549 1,625 5%
Munich Re 197,332 206,473 5% 23,062 25,138 9%
NICO 112,551 119,593 6% 70,155 75,940 8%
PartnerRe 18,694 18,561 -1% 6,468 6,698 4%
Platinum 4,265 4,169 -2% 1,691 1,722 2%
QBE 28,204 28,837 2% 10,386 11,546 11%
RenaissanceRe 6,426 6,855 7% 3,605 3,843 7%
SCOR 21,354 21,909 3% 4,403 4,581 4%
Swiss Re 182,695 186,341 2% 29,590 31,016 5%
Validus 6,077 6,543 8% 3,448 3,478 1%
White Mountains 9,355 8,481 -9% 4,088 3,743 -8%
XL 35,549 35,259 -1% 9,412 9,868 5%
ABA 946,449 984,278 4% 267,152* 286,389 7%
*Transatlantic’s reported capital has been included in the year-end ABA capital figures shown in Exhibit 2
Figures in reporting currencies, but converted to USD (millions) for ABA line
Source: Company reports, Aon Benfield Market Analysis
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