Aon Benfield Analytics | Market Analysis
The Aon Benfield Aggregate Results for the year ended December 31, 2014
Risk. Reinsurance. Human Resources.
Table of Contents Global Reinsurer Capital ...................................................................................................3 Executive Summary ..........................................................................................................4 ABA Capital ......................................................................................................................5 Capital Development ......................................................................................................... 5 Capital Management .......................................................................................................... 6 Premium Income ..............................................................................................................8 Earnings .........................................................................................................................12 Underwriting Performance ............................................................................................... 13 Investment Results ........................................................................................................... 15 Net Income ...................................................................................................................... 16 Return on Equity .............................................................................................................. 17 ABA Business Model Evolution ........................................................................................19 Who Are The New Investors? ........................................................................................... 19 How Is New Money Being Deployed? .............................................................................. 19 Implications for ‘Traditional’ Reinsurers ............................................................................ 19 How Are The ABA Companies Responding? ..................................................................... 19 Mergers & Acquisitions...................................................................................................21 ABA Valuation ................................................................................................................22 Financial Strength Ratings ..............................................................................................23 Appendix 1: ABA Data ....................................................................................................24
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The Aon Benfield Aggregate – Results for the year ended December 31, 2014
Global Reinsurer Capital Aon Benfield estimates that global reinsurer capital totaled USD575 billion at the end of 2014, an increase of 6% over the course of the year. This calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and alternative forms of reinsurer capital. Exhibit 1: Global Reinsurer Capital 700
Traditional Capital Alternative Capital Global Reinsurer Capital
600
USD (billions)
500 400
385
400 340
6%
-17%
300 200
470
410
455
6% 7%
11%
-3%
575
540
505
18%
18%
447
428
466
490
511
368
388
17
22
19
22
24
28
39
50
64
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
321
378
100 0
Source: Company reports, Aon Benfield Analytics
Traditional capital rose by 4% to USD511 billion. Major insurers and reinsurers generally maintained their solid operating performance during 2014, aided by below average insured catastrophe losses, economic recovery in the United States, exposure growth in emerging markets and relatively stable capital market conditions. Retained earnings were bolstered by unrealized gains on bond portfolios, driven in particular by lower yields in the eurozone, providing a boost to reported capital positions. Alternative capital continued its strong growth, rising by 28% to USD64 billion in 2014. This was reflected in record levels of catastrophe bond issuance, expansion of fully collateralized placements, the establishment of new sidecar vehicles and the exploration of alternative business models by hedge fund managers.
Evolution of the ABA Aon Benfield Aggregate (ABA) reports are produced on a half-yearly basis and cover the reported results of 31 major reinsurers worldwide, with the aim of identifying current trends in the P&C reinsurance marketplace. The study comprises 29 publicly-listed holding companies (‘the listed ABA’) and two US-domiciled subsidiaries of Berkshire Hathaway, namely National Indemnity Company (NICO) and General Reinsurance Corporation (Gen Re). NICO’s 2014 results were significanty impacted by intra-group transactions involving GEICO. To provide a more meaningful picture of the sector’s underlying performance, many of the charts and ratios used in this report focus on the listed ABA. Platinum was acquired by RenaissanceRe effective March 2, 2015 and therefore will not feature in future editions.
Aon Benfield Analytics | Market Analysis
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Executive Summary Reinsurance industry capital continues to build, with material alternative capital growth.
Underwriting performance remains strong, given low global catastrophe losses.
Aon Benfield estimates that global reinsurer capital rose by 6% to USD575 billion in 2014, including a 28% increase in alternative capital to USD64 billion.
The combined ratio of the listed ABA improved by 0.3 percentage points to 89.9% in 2014. P&C underwriting profit rose by 6% to USD16.8 billion.
The shareholders' funds of the 31 ABA companies rose by 2% to USD346 billion, driven by net income of USD38.5 billion and unrealized gains of USD8.1 billion.
The attritional loss and expense ratios were impacted by weakening pricing and increased volumes of longer tail proportional business.
Alternative capital has driven catastrophe risk transfer costs down.
Investment returns have been resilient, despite the impact of low interest rates.
Reinsurers are incorporating material alternative capital (through ILS, sidecars, and asset management mandates) to lower their cost of underwriting capital.
The listed ABA reported a 2% increase in ordinary investment income to USD26.5 billion in 2014, driven by underlying asset growth and portfolio repositioning.
Dividends and share buybacks rose by 18% to USD18.3 billion in 2014. This was equivalent to 8.0% of opening capital, up from 6.4% in 2013.
Headline return on equity has been stable at around 11% for the last three years.
Premium growth is being achieved, despite difficult market conditions. Property and casualty (P&C) premiums written by the 29 listed ABA companies rose by 2% to USD198 billion in 2014. Reinsurance volume was unchanged at USD89 billion, despite the industry’s pricing pressure.
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The Aon Benfield Aggregate – Results for the year ended December 31, 2014
Across the listed ABA, net income attributable to common shareholders rose by 4% to USD25.5 billion in 2014. Sector consolidation is underway as companies look to achieve the advantages of scale and diversification. Three recently announced M&A transactions between ABA companies will reduce the number of entities in the study.
ABA Capital The reported shareholders’ funds of the 31 ABA companies stood at USD346 billion at December 31, 2014, an increase of 2% or USD9 billion over the course of the year. The total for the listed ABA was USD240 billion, an increase of 5% or USD11 billion. Exhibit 2: ABA Shareholders’ Funds 400
USD (billions)
NICO & Gen Re
Listed ABA
300
100
44
242
226
201 200
12%
157
45
Total ABA 283 278
187 -17% 37
180
48
15%
78
2%
79
12%
90
346
337
317 6%
109
2%
106
29%
151
193
200
204
227
229
240
FY 2009
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
0 FY 2006
FY 2007
FY 2008
Source: Company reports, Aon Benfield Market Analysis
Capital Development The drivers of ABA capital growth were net income of USD38.5 billion and unrealized investment gains of USD8.1 billion. These positive factors were partly offset by dividends of USD13.8 billion, share buybacks of USD8.5 billion, foreign exchange losses of USD8.2 billion and a net reduction in issued capital of USD5.2 billion. The latter was driven by a USD7.1 billion transfer of subsidiary interests from NICO to Berkshire Hathaway.
Exhibit 3: ABA Shareholders’ Funds Development 375
38.5
-8.2
8.1
-8.5
USD (billions)
-13.8 -2.8
350 337.4
345.5
-5.2
325
300 FY 2013 Additional Net SHF capital income
FX
Investment Share Dividends gains buybacks
Other
FY 2014 SHF
Source: Company reports, Aon Benfield Market Analysis
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Between them, NICO and Gen Re reported USD106 billion of shareholders’ funds at December 31, 2014, representing 31% of the ABA total. On a combined basis, Munich Re, Swiss Re and ACE contributed USD102 billion or 30%. More than half of the ABA companies reported shareholders’ funds in excess of USD5 billion, while five remained below USD2 billion.
Exhibit 4: Shareholders’ Funds at December 31, 2014
USD (billions)
100 90 80 40 70 60 30 50 40 20 30 20 10 10 00
Source: Company reports, Aon Benfield Market Analysis
All but five ABA companies reported capital growth in 2014, mainly driven by retained earnings. Unrealized gains taken directly to equity impacted outcomes at Hannover Re (USD0.8 billion), Mapfre (USD0.9 billion), Munich Re (USD3.5 billion), Swiss Re (USD3.8 billion) and XL (USD1.2 billion). NICO’s capital fell by 3% to USD94 billion, driven by a USD7.1 billion upstreaming of subsidiary interests and USD3.9 billion of unrealized losses on equities. Reductions in shareholders’ funds at Lancashire, Validus, RenaissanceRe and Platinum were driven by active capital management.
Exhibit 5: Growth in Shareholders’ Funds 30% 20% 10% 0% -10%
Source: Company reports, Aon Benfield Market Analysis
Capital Management Surplus equity is being returned to investors in growing amounts, partly reflecting increased interaction with third party capital structures. Capital repatriation by the listed ABA rose by 28% to USD18.3 billion in 2014. This was equivalent to 8.0% of opening shareholders’ funds, up from 6.4% in the prior year period. Public dividends rose by 6% to USD9.9 billion, while share buybacks climbed by 68% to USD8.5 billion.
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The Aon Benfield Aggregate – Results for the year ended December 31, 2014
Exhibit 6: Dividends & Share Buybacks as a Percentage of Opening Capital 25% 20%
Dividends Share buybacks
15% 10% 5% 0%
Source: Company reports, Aon Benfield Market Analysis
The first few months of 2015 have provided further evidence of the quickening pace of capital repatriation. Most ABA companies increased their final dividends alongside the release of their full-year results. In addition, Amlin, Beazley, Catlin, Hannover Re, Hiscox, Lancashire, Platinum and Swiss Re announced special dividends. New share buyback authorizations were announced at ACE (USD1.5 billion), Aspen (USD0.5 billion), Munich Re (EUR1.5 billion), Swiss Re (CHF1.0 billion) and Validus (USD0.75 billion).
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Premium Income Total premiums written by the ABA rose by 9% to USD311 billion in 2014. The portion related to P&C business rose by 12% to USD226 billion, but was up by only 2% to USD198 billion excluding NICO and Gen Re. Exhibit 7: ABA Total Premiums Written 350
Other GPW
P&C GPW
Total GPW
300
261
USD (billions)
250 200 150
191 9%
50
58
6%
62
100 50
222
221
207
229
1%
67
3%
14% 80
5%
311
285
274 4% 82
9%
84
84
70
142
149
158
156
159
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
181
192
202
FY 2011
FY 2012
FY 2013
226
0 FY 2014
Source: Company reports, Aon Benfield Market Analysis
Gross P&C premiums written by NICO more than tripled to USD27.0 billion in 2014, driven by a new 50% intra-group quota share reinsurance agreement with GEICO Group. Non-affiliated premiums at NICO rose by 8% to USD4.6 billion. The listed ABA reported 3% growth in P&C insurance premiums to USD109 billion in 2014, while P&C reinsurance premiums were flat at USD89 billion. Exhibit 8 shows total P&C volumes for years prior to 2013, as consistent segmental splits are not available.
Exhibit 8: ABA P&C Gross Premiums Written 250
NICO & Gen Re
Insurance
181
USD (billions)
200 150
Reinsurance
142 7
149
156
159
7
7
6
151
149
153
158
6
100 50
135
143
8
174
Total 192 9
226 202 7
28
106
109
89
89
FY 2013
FY 2014
183
0 FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
Source: Company reports, Aon Benfield Market Analysis
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The Aon Benfield Aggregate – Results for the year ended December 31, 2014
FY 2011
FY 2012
Strong P&C premium growth of 34% at Lancashire and 23% at Markel was driven by the acquisitions of Cathedral and Alterra, effective November 7, 2013 and May 1, 2013 respectively. Arch reported an increase of 15%, driven by acquisitions in the mortage segment and USD80 million of non-affiliated business written by Watford Re (which is fully consolidated). At the other end of the spectrum, Platinum’s P&C book showed a broad-based contraction of 12%, while QBE reported a reduction of 6% on a constant currency basis, mainly due to reduced volumes in North America and Europe.
Exhibit 9: Growth in P&C Gross Premiums Written 380% 340% 300% 40% 260% 30% 220% 180% 20% 140% 10% 100% 60% 0% 20% -10% -20% -20%
Source: Company reports, Aon Benfield Market Analysis
*P&C reinsurance segment only (as disclosed)
Exhibit 10 shows the split of P&C premiums between primary insurance and assumed reinsurance across all of the ABA companies in 2014, based on our best interpretation of sometimes inconsistent company disclosure.
Exhibit 10: 2014 P&C Segmental Splits 30 25
P&C Insurance P&C Reinsurance
USD (billions)
20 15 10 5 0
Source: Company reports, Aon Benfield Market Analysis
*Of which only USD4.6 billion was non-affiliated ** P&C insurance relates to Risk Solutions (ERGO excluded)
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Exhibit 11 shows the growth of the primary insurance and assumed reinsurance books of the ABA companies in 2014, based on our best interpretation of sometimes inconsistent company disclosure. Absent acquisition effects at Markel and Lancashire, the most significant growth in reinsurance was seen at Everest Re (mainly property treaty and Mt Logan Re), Amlin (Zurich office and multi-year contracts) and Catlin (international diversification and multi-year contracts). Hiscox, Beazley and Validus reported reductions of 14%, 9% and 8% in their reinsurance books, driven predominantly by lower volumes of property catastrophe business.
Exhibit 11: 2014 P&C Segmental Growth 100% 90% 80% 40% 70% 30% 60% 20% 50% 40% 10% 30% 0% 20% -10% 10% 0% -20%
Source: Company reports, Aon Benfield Market Analysis
Reinsurance GPW
Insurance GPW
* P&C insurance relates to Risk Solutions (ERGO excluded)
Total P&C premiums ceded to third parties by the listed ABA rose by 5% to USD29.2 billion in 2014, a cession ratio of 14.7% (2013: 14.3%). Retained premiums rose by 1% to USD169 billion. Reinsurance utilisation rose most significantly at Endurance, RenaissanceRe, XL, Everest Re and Hiscox. The biggest reductions were at Amlin, Swiss Re, Montpelier Re, Validus and ACE.
Exhibit 12: Reinsurance Cession Ratios 35% 30%
FY 2014
FY 2013
25% 20% 15% 10% 5% 0%
Source: Company reports, Aon Benfield Market Analysis
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The Aon Benfield Aggregate – Results for the year ended December 31, 2014
*P&C reinsurance segment only (as disclosed)
Total P&C net premiums earned by the ABA rose by 13% to USD190 billion in 2014. The listed ABA reported a 2% increase to USD166 billion, with the five largest constituents contributing USD87.6 billion, or 53% of the total.
Exhibit 13: 2014 P&C Net Premiums Earned 25
USD (billions)
20
15
10
5
0
Source: Company reports, Aon Benfield Market Analysis
*P&C reinsurance segment only (as disclosed)
Exhibit 14 shows the year-on-year movements in P&C net premiums earned across the ABA in 2014. The strong growth at Lancashire, Markel and Arch was influenced by acquisitions, while the 11% increase at Aspen was driven by the continued build-out of the group’s US insurance operations. Seven companies reported reduced volumes on this basis.
Exhibit 14: Growth in P&C Net Premiums Earned 310% 300% 290% 30% 280% 25% 270% 20% 260% 15% 250% 10% 240% 230% 5% 220% 0% 210% -5% 200% -10% 190% 180% 170%
Source: Company reports, Aon Benfield Market Analysis
*P&C reinsurance segment only (as disclosed)
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Earnings Profitability in 2014 was in line with the two prior years, but earnings are becoming increasingly reliant on unsustainable factors such as benign catastrophe experience, material reserve releases and capital gains. Increasing competition and low interest rates continue to pressure underlying returns on equity.
USD (billions)
Exhibit 15: Listed ABA Pre-Tax Profit
60 50 40 30 20 10 0 -10 -20 -30
Other Investment income
31.3
35.4
Pure life technical result Capital gains/losses
29.2
25.8
11.6
FY 2006
FY 2007
FY 2008
P&C underwriting result Pre-tax profit
29.2
28.0
31.2
FY 2012
FY 2013
FY 2014
9.3
FY 2009
FY 2010
FY 2011
Source: Company reports, Aon Benfield Market Analysis
The listed ABA reported pre-tax profit of USD31.2 billion in 2014, an increase of 11% relative to the prior year. P&C underwriting profit rose by 6% to USD16.8 billion, with favourable prior year reserve development of USD8.0 billion contributing 48% of the total. Ordinary investment income rose by 2% to USD26.5 billion, driven by underlying asset growth and portfolio repositioning. Capital gains rose by 41% to USD7.1 billion, as declining interest rates impacted bond values. Exhibit 16 shows the distribution of reported pre-tax profits across the 31 ABA companies. NICO’s result was heavily influenced by a USD7.1 billion intra-group dividend from GEICO.
Exhibit 16: 2014 Pre-Tax Results 12.0
USD (billions)
USD (billions)
5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Source: Company reports, Aon Benfield Market Analysis
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The Aon Benfield Aggregate – Results for the year ended December 31, 2014
Underwriting Performance The combined ratio of the listed ABA improved by 0.3 percentage points to 89.9% in 2014. Reported catastrophe losses were significantly reduced relative to the prior year and well below the long-term average. Support from favourable development of prior year reserves increased for the second year in a row, notwithstanding deterioration of the New Zealand earthquake and Costa Concordia losses. Underlying trends were negative, as weakening pricing and business mix changes, particularly a shift towards longer-tail proportional contracts, impacted attritional loss and expense ratios.
Exhibit 17: Listed ABA Combined Ratio Composition
94.5% 89.9% 94.2% 89.2% 89.5% 2.8%
3.7%
59.4%
59.7%
8.4%
62.0%
3.2%
9.8%
60.9%
58.7%
104.9% 20.3%
59.8%
92.6% 90.2% 89.9% 8.2%
58.7%
5.6%
3.8%
58.5%
59.5%
Total catastrophe losses Attritional loss ratio Expense ratio
27.7%
28.8%
28.7%
29.3%
29.9%
29.9%
30.2%
30.8%
31.4%
-0.7%
-2.7%
-4.6%
-3.4%
-4.2%
-5.1%
-4.4%
-4.6%
-4.8%
Prior year reserve adjustment
FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Source: Company reports, Aon Benfield Market Analysis
Exhibit 18 shows the distribution of reported combined ratios across the listed ABA for 2014. All of the constituents were profitable on a calendar year basis, although half of them reported weaker results relative to the prior year. On a non-weighted basis, the average result was 85.6%.
Exhibit 18: 2014 Calendar Year Combined Ratios 120%
Loss ratio
Expense ratio
Listed ABA combined ratio
100% 80%
89.9%
60% 40% 20% 0%
Source: Company reports, Aon Benfield Market Analysis
*P&C reinsurance segment only (as disclosed) **Excluding funds withheld
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Exhibit 19 shows the P&C underwriting results reported by the listed ABA companies. On a combined basis, Swiss Re, ACE and Munich Re contributed USD6.2 billion, or 37% of the total.
Exhibit 19: 2014 P&C Underwriting Results 3.0 2.5
USD (billions)
2.0 1.5 1.0 0.5 0.0
Source: Company reports, Aon Benfield Market Analysis
*P&C reinsurance segment only (as disclosed) **Excluding funds withheld
Exhibit 20 shows prior year reserve development as a percentage of P&C net premiums earned by the listed ABA constituents in the last two years. Half of the companies reported lower releases in 2014.
Exhibit 20: Prior Year Loss Reserve Adjustments 30%
FY 2014
FY 2013
25% 20% 15% 10% 5% 0% -5%
Source: Company reports, Aon Benfield Market Analysis
14
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
*P&C reinsurance segment only (as disclosed)
Exhibit 21 shows the reported accident year combined ratios (excluding prior year reserve movements) of the listed ABA companies. Only Markel and PartnerRe were unprofitable on this basis.
Exhibit 21: 2014 Accident Year Combined Ratios 120%
Listed ABA
100% 94.7%
80% 60% 40% 20% 0%
Source: Company reports, Aon Benfield Market Analysis
*P&C reinsurance segment only (as disclosed) **Excluding funds withheld
Investment Results The listed ABA reported cash and investments of USD899 billion at December 31, 2014, split fixedincome 66%, cash/short-term 9%, loans 8%, deposits with cedants 6%, equities 5% and other 6%. The underlying and total investment yields reported through income statements since 2006 are captured in Exhibit 22. The former has fallen by a third since 2007, reflecting the impact of the low interest rate environment.
Exhibit 22: Listed ABA Investment Yield 6% 5%
4.9%
Total investment yield (incl. capital gains/losses)* Ordinary investment yield*
4.8%
4.2%
3.9%
4% 4.1%
4.3%
3%
3.9%
3.7%
3.7%
3.3%
3.4%
3.9% 3.4%
3.0%
2%
3.7%
2.9%
2.9%
FY 2013
FY 2014
1.9% 1% FY 2006
FY 2007
FY 2008
Source: Company reports, Aon Benfield Market Analysis
FY 2009
FY 2010
FY 2011
FY 2012
*Reported through income statements, excluding unit-linked and with-profit business
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Exhibit 23 shows the underlying and total investment yields reported by the ABA companies through their income statements in 2014 (excluding the impact of derivatives where separately disclosed). Investment classification varies and result comparison can therefore be misleading. Unrealized gains and losses are recognized in the income statements of some companies (e.g. PartnerRe, Fairfax and White Mountains), but in other cases are taken directly to equity.
Exhibit 23: 2014 Investment Yields 10%
Ordinary investment yield*
9%
Total investment yield*
8% 7% 6% 5% 4% 3% 2% 1% 0%
Source: Company reports, Aon Benfield Market Analysis
*Reported through income statements, excluding unit-linked and with-profit business
Net Income The ABA reported net income attributable to common shareholders of USD38.1 billion in 2014, an increase of 12% relative to 2013. Net income across the listed ABA rose by 4% to USD25.5 billion.
Exhibit 24: ABA Net Income Attributable to Common Shareholders 45 40 USD (billions)
35 30 25
NICO & Gen Re 31.2 7.4
Listed ABA
38.1 34.0
31.3 4.8
25.8
26.8
2.8
6.6
20 15 10
5.9
9.3
12.5
14.7 23.8
26.6
7.1
23.0
20.2
1.4 5.7
5 0 FY 2006
FY 2007
FY 2008
6.2
23.4
24.7
25.5
FY 2012
FY 2013
FY 2014
8.5
FY 2009
FY 2010
Source: Company reports, Aon Benfield Market Analysis
16
29.3
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
FY 2011
Exhibit 25 shows the distribution of net income by ABA constituent. The combined results of NICO, Munich Re, Swiss Re and ACE rose by 7% to USD22.5 billion, representing 59% of the total.
Exhibit 25: 2014 Net Income Attributable to Common Shareholders 12
USD (billions) USD (billions)
10 5 8 4 6 3 4 2 2 1 0 0
Source: Company reports, Aon Benfield Market Analysis
Return on Equity Exhibit 26 shows the development of net income attributable to common shareholders relative to average common shareholders’ funds across the ABA since 2006. Return on equity over this period (which encompasses both the financial crisis and the record year for insured catastrophe losses) averaged 11.2% for the listed ABA and 10.8% for the ABA as a whole.
Exhibit 26: ABA Common Net Income ROE 20% 15%
17.7%
Listed ABA
16.6%
ABA
14.1%
17.6% 15.3%
10.8%
10%
12.5% 3.7%
10.7%
5.4%
11.4%
11.1%
10.1%
10.6%
FY 2012
FY 2013
11.3% 11.1%
5% 4.4%
3.6%
0% FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY 2014
Source: Company reports, Aon Benfield Market Analysis
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Exhibit 27 shows return on equity by ABA constituent, based on reported net income in 2014. Only 12 companies reported improved performance on this measure in 2014 (see data in Appendix 1). The result at XL was impacted by a one-off charge associated with the sale of the group’s discontinued life reinsurance operations.
Exhibit 27: 2014 Common Net Income ROE 25% Listed ABA 20% 15% 11.1% 10% 5% 0%
Source: Company reports, Aon Benfield Market Analysis
18
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
ABA Business Model Evolution A structural shift in the way capital is raised and
Implications For ‘Traditional’ Reinsurers
deployed to mitigate insurance risk is underway. The
New vehicles operating at a lower cost of capital are making inroads into higher-margin areas that remain a key driver of profits for ‘traditional’ reinsurers. These dynamics are forcing many ABA constituents to rethink their business models in the pursuit of differentiation and relevance in the market. In the catastrophe reinsurance space, this increasingly means being able to offer larger line sizes, a full product suite including collateralized limits and enhanced claims service. Companies that are successful in attracting and deploying third party capital will potentially be able to advance their client offering, reduce earnings volatility through fee income, lower their own risk transfer costs and manage their capital bases more effectively.
pool of potential investors is broadening and new money is flowing towards structures offering access to quality business at relatively low cost. These changes have forced the ABA companies to re-evaluate their business models. Who Are The New Investors? Reinsurance as an asset class has performed relatively well in an environment of low interest rates and is viewed as having limited correlation with broader capital market movements. These attributes have attracted new investors such as pension funds, high net worth individuals and sovereign wealth funds, who typically: •
only enter the sector after extensive due diligence;
•
invest a small percentage of the substantial assets at their disposal as a diversifying strategy;
•
seek lower, more stable returns over longer timeframes than has historically been the case.
How Is New Money Being Deployed? Much of the new capital is being channelled to specialist fund managers, who then deploy it into the insurance-linked securities (ILS) sector via catastrophe bonds or other ‘alternative’ structures such as industry loss warranties, sidecars and collateralized reinsurance. The current focus is property catastrophe and retrocession business, particularly in the US market where exposures tend to be best understood, although diversification into other lines and territories is underway.
How Are The ABA Companies Responding? Most ABA constituents are now moving strongly to incorporate alternative capital into their business models (see Exhibit 28 for a summary of recent activity). Many are now actively involved in raising and managing third party capital. Others have invested in strategic partnerships with established independent specialist fund managers. Sidecar structures that allow sponsors to grow their footprint in the market without assuming additional balance sheet risk continue to be in vogue. The availability of lower cost capital has allowed most ABA companies to drive down their own risk transfer costs. Retrocession pricing has reduced and in some cases additional protection has been purchased, with consequent impact on disclosed modeled exposures. In addition, a number of catastrophe bond transactions have recently been brought to the market by ABA sponsors.
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Exhibit 28: Recent Incorporation of Alternative Capital Company
Cat Bonds
Third Party Capital Vehicles The Altair Re reinsurance sidecar series provides collateralized support for ACE Tempest Re. Committed capital stood at $95m in 2013 and 2014. ACE is currently working with BlackRock to form Bermuda-based reinsurer ABR Re.
Other A new global cat program at Jul 1, 2014 reduced the modelled peak 1-in250-year PML from 10.3% to 8.1% of shareholders’ equity. Approximately 20% of the coverage was placed on a fully collateralized basis.
Alleghany
TransRe ownership of Pillar Capital increased to 50% in Jun 2014. TransRe operates the Pangaea Re reinsurance sidecar series and is reported to be working in partnership with Providence on a reinsurance captive.
Ongoing investment partnership with Ares Management. Investments in Pillar Capital and its managed funds contributed a return of $22m in 2014 and totaled $235m at the year-end.
Allied World
Allied World has a minority interest in Aeolus Capital and contributed $350m of funds for investment during 2014. Reported to have worked with Pine River Capital in trying to establish a new hedge fund reinsurer in 2H 2014.
Retro programs were purchased on a fully collateralized basis in 2013 and 2014. A collateralized property cat quota share reinsurance contract with Aeolus Re generated $87m of assumed premium in 2014.
Tramline Re (Dec 2011, Jun 2013, Dec 2014)
Amlin raised its ownership of Leadenhall Capital from 40% to 75% in Oct 2014. AuM totalled $1.9bn at year-end, including £64m from Amlin. SPS 6106 (20092013). Arch co-sponsored Watford Re with Highbridge Capital, investing $100m for an 11% interest (Mar 2014). Watford Re takes 10% of Arch’s property cat book and wrote $80m of open market business in 2014.
Syndicate 2001 and Amlin AG fronted £25m of business for Leadenhall in 2014. From 2015, Amlin purchased a single retro program and cut its tolerance for RDSs by £50m to £300m net. Increased retro purchases reduced Arch's largest 250-year PML for a single event (North-East US wind) to a record low of 9% of common shareholders' equity at Jan 1, 2015.
Loma Re (Jun 2011, Dec 2011, Dec 2013)
The Harambee Re sidecar series provides Argo with fully collateralised reinsurance support.
Formed ILS fronting partnership with Horseshoe Re (Mar 2014).
The Silverton Re sidecar series writes a collateralized quota share of Aspen Bermuda's property cat book. Committed capital rose from $65m in 2014 to $85m in 2015.
Aspen Capital Markets (est Mar 2013) now has $185m of third party AuM and is being used to help manage net cat exposure. ACM contributed $13m to Aspen's results in 2014.
Formed AXIS Ventures with $50m of third party capital (Nov 2013). Class 3A insurer AXIS Ventures Reinsurance Ltd provides AXIS with fully collateralized reinsurance support.
AXIS Ventures completed 8 transactions and contributed $3m towards group earnings in 2014. AXIS Ventures Re had total assets of $97m at the end of 2014.
ACE
Amlin
Arch Argo Aspen
Axis
Northshore Re (Aug 2013)
Beazley
SPS 6107 (since 2010). Galileo Re (Oct 2013, Feb 2015)
Catlin has operated SPSs since 2012, providing whole account quota share support to Syndicate 2003. From 2014, a ‘Portfolio Participation Vehicle’ provides similar collateralised protection to Catlin’s non-Lloyd’s entities.
Everest Re
Kilimanjaro Re (Apr 2014, Nov 2014)
The Mt. Logan Re sidecar series writes worldwide cat on a fully collateralized basis. Third party AuM totalled $690m at the end of 2014, all of which was deployed in the January renewals. Mt. Logan Re generated $28m of fees for Everest Re in 2014.
Hannover Re
Eurus (Sep 2012)
The K-Cessions sidecar series provides fully collateralized quota share retro support. Capacity rose by 25% to $400m for 2015.
Catlin
Endurance
Everest Re is growing its property cat book, but has kept its net risk appetite stable by transferring risk to Mt.Logan Re, sourcing $950m of retro capacity from cat bonds and purchasing ILWs to hold its Florida PML steady. Hannover Re is active as a rated fronting market for collateralized reinsurance vehicles and opened its internal ILS fund to third parties via Leine Investment from Jan 2013. Kiskadee Investment Managers (est Jun 2013) expects to have $500m of committed capital by mid-2015. Hiscox currently manages $4bn of cat quota share capacity for investors.
Hiscox
The Kiskadee Re sidecar series has provided collateralized reinsurance support since Jun 2013. SPS 6104 (since 2008).
Lancashire
Kinesis Re I Ltd (est. Jun 2013) writes multi-class reinsurance business on a fullycollateralized basis, deploying around $340m of limit in 2014. Previous vehicles include Saltire Re (aggregate covers) and the Accordian Re series (property retro).
Bermuda-based third party capital manager Kinesis Capital Management was formed in Jun 2013. Lancashire's peak 1-in-250 year PMLs have been reduced via the purchase of additional retro. Most of the cover is reinstateable in 2015.
Markel
The New Point Re sidecar series underwrites property retro business on a fully collateralized basis.
Erik Manning joined as Managing Director of Alternative Solutions at Markel Re in Jun 2014.
Montpelier Re
Collateralized property cat reinsurance is written via Blue Water Re and Blue Capital Re.
Blue Capital Management was launched in Dec 2012 to offer a range of property cat-linked investment products to institutional and retail investors. AuM totalled $790m in Jan 2015.
Reinsurance sidecars Eden Re I and Eden Re II provide a combined $365m of property cat XL capacity in 2015.
Munich Re has operated an internal ILS fund for 6+ years. Increased retro purchases have reduced peak PMLs.
Sidecar Lorenz Re formed with $75m of third party capital to provide additional capacity for a diversified portfolio of cat reinsurance treaties over a multi-year period on a fully collateralized basis (Mar 2013).
Lorenz Re had total assets of $101m at the end of 2014.
Munich Re
Multiple sponsor
PartnerRe
PMLs have been reduced through the purchase of additional retro protection.
Platinum QBE
VenTerra Re (Dec 2013)
RenRe
Mona Lisa Re (Jul 2013)
RenRe operated Upsilon Re (Jan 2013, Jan 2014) and Timicuan Re (Jun 2009, Jun 2012) sidecars. In Nov 2014, the Upsilon platform was converted into perpetual funds, writing fully collateralized reinsurance and retro and investing in ILS.
Managed property cat-oriented joint ventures include DaVinci, Top Layer Re, Medici, Upsilon RFO and Upsilon Fund. Third-party capital spread across these vehicles totalled $1.1bn at the end of 2014.
SCOR
Multiple sponsor
Sidecar Atlas X ($55m of capital) provides 3 years of collateralized quota share capacity to SCOR Global P&C’s property cat book (Jan 2014).
SCOR Global Investments has operated the Atropos ILS funds since Aug 2011. AuM totalled $460m in mid 2014.
Swiss Re
Multiple sponsor
Sector Re sidecar series.
No plans to open internal ILS fund to third parties.
Validus
The AlphaCat sidecar series writes collateralized property cat and retro. Top layer cat is written via PaCRe (owned 10% by Validus).
At the end of 2014, AlphaCat had $1.5bn of third party AuM ($289m in the AlphaCat sidecars, $786m in the AlphaCat ILS funds and $459m in PaCRe).
White Mountains
Class 3 Bermudian insurer Alstead Re was formed to write collateralized reinsurance and retro business from Jan 2014.
During 4Q, the strategic direction of Sirius Capital Markets (launched in May 2013) was reviewed and entities that were formed for this initiative are being dissolved or redeployed.
XL
Vector Re writes global property cat business on a collateralized basis from Jan 2014.
XL and Stone Point established New Ocean Capital Management in Nov 2013. The net assets of the New Ocean Cat Fund and Vector Re were $94m and $47m at Dec 31.
Source: Company reports, Aon Benfield Market Analysis
20
Commissions and fees recognised by Catlin from third-party capital providers totalled $66m in 2014. The group is writing ~15% of its business against almost $350m of third party capital in 2015. Additional retro was purchased in 2014 and at Jan 1, 2015. The peak 1-in100 year PML reduced to 10.3% of shareholders' equity at Dec 31, 2014, from 11.0% a year earlier.
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
SPS = Special Purpose Syndicate; AuM = assets under management
Mergers & Acquisitions Four high profile M&A deals involving ABA companies have been announced in recent months. RenaissanceRe’s acquisition of Platinum completed on March 2, 2015. Proposed transactions between XL and Catlin, Axis and PartnerRe and Fairfax and Brit remain subject to regulatory and/or shareholder approvals. Exhibit 29 provides an indication of the scale the combined entities would achieve in capital terms, were all of the transactions to complete, albeit based only on the aggregation of reported figures at the end of 2014.
USDUSDbn (billions)
Exhibit 29: Shareholders’ Funds at December 31, 2014 95 90 40 85 35 80 30 75 25 70 20 65 15 60 10 55 5 50 0
Combined entities on a pro forma basis
Source: Company reports, Aon Benfield Market Analysis
Exhibit 30 provides an indication of the scale the combined entities would achieve in terms of P&C gross premiums written, were all of the transactions to complete, albeit based only on the aggregation of 2014 volumes.
Exhibit 30: 2014 P&C Gross Premiums Written 30
USD (billions)
25
Combined entities on a pro forma basis
20 15 10 5 0
Source: Company reports, Aon Benfield Market Analysis
*P&C reinsurance segment only (as disclosed)
Aon Benfield Analytics | Market Analysis
21
ABA Valuation The overall market capitalization of the ABA companies was relatively stable during 2014, but has increased by 6% since the beginning of 2015. The trailing price-to-book ratio began 2014 at 1.14x and dipped briefly below 1.0x in October, but has since rebounded to 1.16x. Exhibit 31: ABA Market Capitalization
Exhibit 33: ABA Trailing Price-to-Book Ratio 1.3
140
1.2
120
1.1
100
1.0 80
0.9
60 40 Jan-08
0.8 Jan-09
Jan-10
Source: Bloomberg
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Note: As of March 27, 2015, excluding Berkshire Hathaway
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: Bloomberg
Note: As of March 27, 2015, excluding Berkshire Hathaway
Exhibit 32 shows the share price development of individual ABA companies since the beginning of 2014.
Exhibit 34 shows the evolution of the trailing price-to-book values of individual ABA companies since the beginning of 2014.
Exhibit 32: Share Price Development Since Jan 1, 2014
Exhibit 34: Trailing Price-to-Book Ratios
Fairfax Hannover Re Markel Montpelier Re Swiss Re Platinum Munich Re Catlin Alleghany Beazley SCOR Argo XL White Mountains Aspen Amlin QBE Everest Re Hiscox Endurance PartnerRe Axis Allied World ACE Mapfre Arch Validus RenaissanceRe Lancashire -20% Source: Bloomberg
22
0.7
Hiscox Beazley Amlin Hannover Re Fairfax Markel Arch Lancashire ACE QBE Mapfre Munich Re Catlin RenaissanceRe Montpelier Re SCOR Everest Re Alleghany Endurance Allied World White Mountains Aspen Axis Validus Platinum XL Swiss Re PartnerRe Argo 0%
20%
40%
60%
80%
Note: As of March 27, 2015
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
March 27, 2015 January 1, 2014 0.0
Source: Bloomberg
0.5
1.0
1.5
2.0
Financial Strength Ratings Several ABA companies have benefited from positive rating actions since the beginning of 2014, as shown in Exhibit 35. Recently announced M&A transactions have provoked a cautious response, pending further discussion with senior management teams. Exhibit 35: Financial Strength Ratings Main Operating Company
A.M. Best
Standard & Poor’s
ACE Tempest Reinsurance Ltd
A++
Stable
AA
Stable
Allied World Assurance Co Ltd
A
Stable
A
Stable
Amlin AG
A
Stable
A
Stable
Arch Reinsurance Ltd
A+
Stable
A+
Stable
Argo Re Ltd
A
Stable
-
-
Aspen Bermuda Ltd
A
Stable
A
Stable
AXIS Specialty Ltd
A+
Review Negative
A+
Stable
Beazley Insurance Company, Inc
A
Stable
-
-
Catlin Insurance Company Ltd
A
Review Positive
A
Stable
Endurance Specialty Insurance Ltd
A
Stable
A
Stable
Everest Reinsurance (Bermuda) Ltd
A+
Stable
A+
Stable
General Reinsurance Corporation
A++
Stable
AA+
Stable
Hannover Rück SE
A+
Stable
AA-
Stable
Hiscox Insurance Company (Bermuda) Ltd
A
Stable
-
-
Lancashire Insurance Company Ltd
A
Stable
A-
Stable
MAPFRE Re, Compania de Reaseguros SA
A
Stable
A
Stable
Markel Bermuda Ltd
A
Stable
A
Stable
Montpelier Reinsurance Ltd
A
Stable
A-
Stable
Munich Reinsurance Co
A+
Stable
AA-
Stable
National Indemnity Company
A++
Stable
AA+
Stable
Odyssey Reinsurance Company
A
Stable
A-
Negative
Partner Reinsurance Co Ltd
A+
Review Negative
A+
Stable
Platinum Underwriters Bermuda Ltd
A
Review Developing
A-
CreditWatch Positive
QBE Re (Europe) Ltd
A
Stable
A+
Negative
Renaissance Reinsurance Ltd
A+
Review Negative
AA-
Stable
SCOR Global P&C SE
A
Stable
A+
Positive
Sirius International Insurance Corp
A
Stable
A-
Stable
Swiss Reinsurance Co
A+
Stable
AA-
Stable
Transatlantic Reinsurance Co
A
Positive
A+
Stable
Validus Reinsurance Ltd
A
Stable
A
Stable
XL Re Ltd
A
Review Negative
A+
Stable
Source: A.M. Best, Standard & Poor’s
Upgrade / outlook raised since January 1, 2014
Downgrade / outlook lowered since January 1, 2014
Ratings as at March 2015
Aon Benfield Analytics | Market Analysis
23
Appendix 1: ABA Data Exhibit 36: Results for the year ended December 31, 2014
Reporting Currency (millions)
Company
P&C Gross Premiums Written FY 2013
P&C Gross Premiums Written FY 2014
Change
P&C Net Premiums Earned FY 2013
P&C Net Premiums Earned FY 2014
Change
Listed Groups ACE
USD
20,752
21,261
2%
14,708
15,464
5%
Alleghany
USD
4,886
5,097
4%
4,239
4,411
4%
Allied World
USD
2,739
2,935
7%
2,006
2,183
9%
Amlin
GBP
2,467
2,564
4%
2,095
2,201
5%
Arch
USD
4,197
4,841
15%
3,146
3,594
14%
Argo
USD
1,888
1,905
1%
1,304
1,338
3%
Aspen
USD
2,647
2,903
10%
2,172
2,405
11%
Axis
USD
4,697
4,712
0%
3,707
3,871
4%
Beazley
USD
1,970
2,022
3%
1,591
1,659
4%
Catlin
USD
5,309
5,966
12%
3,948
4,160
5%
Endurance
USD
2,665
2,894
9%
2,016
1,864
-8%
Everest Re
USD
5,219
5,749
10%
4,754
5,169
9%
Fairfax
USD
7,227
7,460
3%
5,994
5,985
0%
Hannover Re
EUR
7,818
7,903
1%
6,866
7,011
2%
Hiscox
GBP
1,699
1,756
3%
1,283
1,316
3%
Lancashire
USD
680
908
34%
568
716
26%
Mapfre
EUR
16,278
16,409
1%
13,229
13,227
0%
Markel
USD
3,920
4,806
23%
3,232
3,841
19%
USD
706
740
5%
600
645
8%
Munich Re
EUR
17,013
16,730
-2%
16,237
16,150
-1%
PartnerRe
USD
4,590
4,667
2%
4,235
4,387
4%
Platinum
USD
580
509
-12%
553
507
-8%
QBE
USD
17,975
16,332
-9%
15,396
14,084
-9%
RenaissanceRe
USD
1,605
1,551
-3%
1,115
1,062
-5%
SCOR
EUR
4,848
4,935
2%
4,256
4,287
1%
Swiss Re
USD
20,670
20,288
-2%
17,464
19,042
9%
Validus
USD
2,401
2,363
-2%
2,102
2,002
-5%
White Mountains
USD
2,297
2,499
9%
1,987
2,059
4%
XL
USD
7,417
7,761
5%
6,014
5,717
-5%
ABA (Listed Sector)
USD
194,606
198,367
2%
162,054
165,997
2%
Gen Re
USD
1,073
1,165
9%
554
564
2%
NICO
USD
5,964
26,957
352%
5,884
23,680
302%
ABA (Total)
USD
201,643
226,490
12%
168,492
190,240
13%
Montpelier Re 1
Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines
24
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
1
P&C reinsurance segment only (as disclosed)
Exhibit 36: Results for the year ended December 31, 2014 (cont’d) Calendar Year Loss Ratio FY 2013
Loss Ratio FY 2014
Expense Ratio FY 2013
ACE
59.6%
58.3%
28.3%
29.5%
88.0%
87.7%
-0.2pp
Alleghany
58.5%
56.6%
31.6%
32.2%
90.1%
88.8%
-1.3pp
Allied World
56.0%
54.9%
30.2%
30.3%
86.2%
85.2%
-0.9pp
Amlin
52.2%
55.6%
33.5%
33.0%
85.7%
88.5%
2.9pp
Arch
53.4%
53.4%
32.5%
33.8%
85.9%
87.2%
1.3pp
Argo
57.8%
55.9%
39.7%
40.3%
97.5%
96.2%
-1.3pp
Aspen
56.3%
54.4%
36.3%
37.3%
92.6%
91.7%
-0.9pp
Axis
57.6%
56.5%
33.4%
35.1%
91.0%
91.6%
0.6pp
Beazley
45.0%
49.0%
39.0%
40.0%
84.0%
89.0%
5.0pp
Catlin
52.3%
52.5%
33.3%
34.3%
85.6%
86.8%
1.3pp
Endurance
60.5%
52.1%
29.7%
33.9%
90.2%
86.0%
-4.2pp
Everest Re
58.9%
56.2%
25.6%
26.6%
84.5%
82.8%
-1.6pp
Fairfax
61.6%
59.0%
31.1%
31.8%
92.7%
90.8%
-1.9pp
Hannover Re1
70.2%
68.9%
24.9%
26.1%
95.1%
95.0%
-0.1pp
Hiscox3
40.5%
40.4%
42.6%
43.5%
83.0%
83.9%
0.9pp
Lancashire
33.1%
31.7%
37.1%
37.0%
70.2%
68.6%
-1.6pp
Mapfre
67.0%
68.0%
29.1%
27.7%
96.1%
95.7%
-0.4pp
Markel
56.2%
57.3%
40.6%
38.0%
96.8%
95.4%
-1.4pp
Montpelier Re
21.1%
29.4%
35.0%
36.3%
56.1%
65.6%
9.6pp
Munich Re2
61.7%
60.2%
30.4%
32.5%
92.1%
92.7%
0.6pp
PartnerRe
56.7%
56.1%
28.6%
30.0%
85.3%
86.2%
0.9pp
Platinum
30.3%
36.2%
32.4%
33.2%
62.7%
69.4%
6.7pp
QBE
64.5%
63.2%
33.3%
32.9%
97.8%
96.1%
-1.7pp
RenaissanceRe
15.4%
18.6%
28.4%
31.5%
43.8%
50.2%
6.4pp
SCOR
64.1%
61.1%
29.7%
30.3%
93.9%
91.4%
-2.5pp
Swiss Re
55.3%
55.4%
30.0%
30.0%
85.3%
85.4%
0.1pp
Validus
37.8%
38.6%
33.5%
35.1%
71.2%
73.7%
2.5pp
White Mountains
52.4%
56.8%
35.6%
34.4%
88.0%
91.2%
3.2pp
XL
62.0%
57.0%
30.5%
31.2%
92.5%
88.2%
-4.3pp
ABA (Listed Sector)
59.4%
58.5%
30.8%
31.4%
90.2%
89.9%
-0.4pp
Gen Re3
30.7%
41.7%
44.2%
47.1%
75.0%
88.9%
13.9pp
NICO3
49.2%
79.3%
25.3%
14.8%
74.5%
94.1%
19.7pp
ABA (Total)
59.0%
61.0%
30.7%
29.4%
89.6%
90.4%
0.7pp
Company
Expense Ratio FY 2014
Combined Ratio FY 2013
Combined Ratio FY 2014
Change
Listed Groups
Source: Company reports, Aon Benfield Market Analysis
1
Excluding funds withheld P&C reinsurance segment only (as disclosed) As calculated by Aon Benfield Market Analysis
2 3
Aon Benfield Analytics | Market Analysis
25
Exhibit 36: Results for the year ended December 31, 2014 (cont’d) Accident Year
Company
Prior Year Reserve Adjustment FY 2013
Prior Year Reserve Adjustment FY 2014
Prior Year Reserve Adjustment as % of NPE FY 2013
Prior Year Reserve Accident Year Accident Year Adjustment as Combined Combined % of NPE Ratio Ratio FY 2014 FY 2013 FY 2014
Change
Listed Groups ACE
-530
-527
3.6%
3.4%
91.6%
91.1%
-0.4pp
Alleghany
-203
-215
4.8%
4.9%
94.9%
93.7%
-1.2pp
Allied World
-180
-213
9.0%
9.7%
95.1%
95.0%
-0.2pp
Amlin
-134
-90
6.4%
4.1%
92.0%
92.6%
0.6pp
Arch
-264
-327
8.4%
9.1%
94.3%
96.3%
2.0pp
Argo
-34
-38
2.6%
2.8%
100.0%
99.0%
-1.1pp
Aspen
-108
-104
5.0%
4.3%
97.6%
96.0%
-1.6pp
Axis
-219
-259
5.9%
6.7%
96.9%
98.3%
1.4pp
Beazley
-218
-158
13.7%
9.5%
97.8%
98.6%
0.8pp
Catlin
-167
-120
4.2%
2.9%
89.8%
89.7%
-0.1pp
Endurance
-222
-234
11.0%
12.5%
101.2%
98.6%
-2.7pp
Everest Re
-18
-40
0.4%
0.8%
84.8%
83.6%
-1.2pp
Fairfax
-440
-446
7.3%
7.4%
100.0%
98.2%
-1.8pp
Hannover Re1
-424
-276
6.2%
3.9%
101.3%
98.9%
-2.4pp
Hiscox
-140
-172
10.9%
13.1%
94.0%
97.0%
3.0pp
Lancashire
-16
-34
2.8%
4.8%
73.0%
73.4%
0.4pp
Mapfre
-87
-443
0.7%
3.3%
96.8%
99.1%
2.3pp
Markel
-411
-436
12.7%
11.3%
109.5%
106.7%
-2.8pp
Montpelier Re
-144
-152
24.1%
23.5%
80.2%
89.2%
9.0pp
Munich Re2
-759
-900
4.7%
5.6%
96.8%
98.3%
1.5pp
PartnerRe
-721
-660
17.0%
15.1%
102.3%
101.2%
-1.1pp
Platinum
-161
-128
29.0%
25.3%
91.7%
94.7%
3.0pp
QBE
552
-1
-3.6%
0.0%
94.2%
96.1%
1.9pp
RenaissanceRe
-144
-144
12.9%
13.5%
56.7%
63.7%
7.0pp
SCOR Swiss Re Validus White Mountains XL ABA (Listed Sector)
-31
0
0.7%
0.0%
94.6%
91.4%
-3.2pp
-1,137
-673
6.5%
3.5%
91.8%
88.9%
-2.9pp
-205
-252
9.8%
12.6%
81.0%
86.3%
5.3pp
-48
-6
2.4%
0.3%
90.4%
91.5%
1.1pp
-290
-255
4.8%
4.5%
97.3%
92.6%
-4.7pp
-7,486
-8,003
4.6%
4.8%
94.9%
94.7%
-0.2pp
Gen Re3
-248
-170
44.7%
30.2%
119.7%
119.1%
-0.6pp
NICO3
-968
-896
16.5%
3.8%
90.9%
97.9%
7.0pp
-8,702
-9,069
5.2%
4.8%
94.8%
95.2%
0.3pp
ABA (Total)
Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.d. = not disclosed
26
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
1 Excluding funds withheld P&C reinsurance segment only (as disclosed) 3 As calculated by Aon Benfield Market Analysis 2
Exhibit 36: Results for the year ended December 31, 2014 (cont’d)
Company
Net Investment Income FY 2013
Net Investment Income FY 2014
Capital Gains / Losses FY 2013
Capital Gains / Losses FY 2014
Total Investment Return FY 2013
Total Investment Return FY 2014
Change
Listed Groups ACE
2,144
2,252
504
-507
2,648
1,745
-34%
Alleghany
466
460
188
211
654
671
3%
Allied World
158
177
50
128
208
305
47%
Amlin
33
36
101
101
134
137
2%
Arch
267
303
85
49
352
351
0%
Argo
100
87
71
94
171
181
5%
Aspen
186
190
36
32
223
222
0%
Axis
409
343
68
142
477
484
2%
-15
26
43
83
92%
Beazley
58
57
Catlin
116
119
8
107
124
226
82%
Endurance
166
132
13
13
179
145
-19%
Everest Re
549
531
300
84
849
615
-28%
Fairfax
474
510
178
1,667
652
2,177
234%
1,314
1,350
98
122
1,412
1,472
4%
38
42
16
11
55
53
-2%
Hannover Re Hiscox Lancashire
36
36
13
-6
49
30
-38%
Mapfre
1,660
2,146
297
0
1,956
2,146
10%
Markel
317
363
63
46
381
409
8%
64
47
-49
5
15
52
253%
6,907
6,675
1,323
2,395
8,230
9,070
10%
498
495
-161
372
337
867
157%
Montpelier Re Munich Re1 PartnerRe Platinum
72
69
22
2
94
71
-24%
QBE
665
678
112
103
777
781
1%
RenaissanceRe
231
150
35
41
266
192
-28%
SCOR
443
474
48
112
491
586
19%
3,947
4,103
741
393
4,688
4,496
-4%
101
108
-55
-35
46
74
61%
Swiss Re1 Validus White Mountains XL ABA (Listed Sector) Gen Re NICO ABA (Total)
111
105
162
284
273
389
43%
1,096
885
88
123
1,184
1,008
-15%
26,057
26,470
4,985
7,050
31,042
33,520
8%
706
642
191
-19
897
623
-31%
6,109
12,567
2,163
2,241
8,272
14,808
79%
32,872
39,679
7,339
9,271
40,210
48,950
22%
Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful
1
Reported through income statements, excluding unit-linked and with-profit business
Aon Benfield Analytics | Market Analysis
27
Exhibit 36: Results for the year ended December 31, 2014 (cont’d)
Company
Pre-Tax Result FY 2013
Pre-Tax Result FY 2014
Change
Pre-Tax Return on Equity FY 2013
Pre-Tax Return on Equity FY 2014
Change
-18%
15.0%
11.9%
-3.1pp
Listed Groups ACE
4,238
3,487
Alleghany
855
932
9%
12.8%
12.9%
0.1pp
Allied World
428
521
22%
12.5%
14.3%
1.8pp
Amlin
326
259
-21%
20.5%
14.9%
-5.6pp
Arch
743
844
14%
13.7%
13.2%
-0.5pp
Argo
180
216
20%
11.7%
13.5%
1.8pp
Aspen
343
368
7%
10.1%
11.0%
0.9pp
Axis
734
830
13%
12.6%
14.1%
1.5pp
Beazley
313
262
-16%
24.6%
19.5%
-5.1pp
Catlin
432
488
13%
11.8%
12.6%
0.7pp
Endurance
318
349
10%
11.4%
11.5%
0.1pp
Everest Re
1,555
1,446
-7%
22.5%
19.4%
-3.2pp
-1,001
2,338
n.m.
-11.5%
25.7%
37.2pp
Fairfax Hannover Re
1,102
1,371
24%
16.6%
18.5%
1.9pp
Hiscox
245
231
-6%
17.6%
16.1%
-1.5pp
Lancashire
218
227
4%
15.3%
16.1%
0.8pp
Mapfre
1,564
1,824
17%
15.6%
17.1%
1.5pp
Markel
362
440
22%
6.7%
6.1%
-0.6pp
Montpelier Re
211
245
17%
12.0%
12.9%
0.9pp
Munich Re
3,441
2,859
-17%
12.8%
10.1%
-2.7pp
PartnerRe
722
1,308
81%
10.5%
18.9%
8.3pp
Platinum
258
182
-29%
14.2%
10.4%
-3.7pp
QBE
-448
931
n.m.
-4.1%
8.7%
12.8pp
RenaissanceRe
841
687
-18%
17.7%
13.7%
-4.0pp
SCOR
640
675
5%
13.1%
12.6%
-0.5pp
Swiss Re
4,825
4,227
-12%
14.4%
12.2%
-2.2pp
Validus
597
538
-10%
13.7%
12.8%
-0.9pp
White Mountains
345
302
-13%
8.0%
6.8%
-1.2pp
1,094
259
-76%
9.4%
2.3%
-7.2pp
28,017
31,172
11%
11.9%
12.8%
0.9pp
1,040
689
-34%
9.3%
5.9%
-3.4pp
9,041
11,867
31%
10.2%
12.4%
2.2pp
38,098
43,727
15%
11.4%
12.5%
1.1pp
XL ABA (Listed Sector) Gen Re NICO ABA (Total)
Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful
28
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
*Calculated by excluding the impact of net realized and unrealized investment gains/losses reported through income statements
Exhibit 36: Results for the year ended December 31, 2014 (cont’d)
Company
Common Net Income FY 2013
Common Net Income FY 2014
Change
Return on Equity* FY 2013
Return on Equity* FY 2014
Change
-24%
13.3%
9.8%
-3.6pp
Listed Groups ACE
3,758
2,853
Alleghany
628
679
8%
9.4%
9.4%
0.0pp
Allied World
418
490
17%
12.2%
13.4%
1.2pp
Amlin
299
237
-21%
18.8%
13.7%
-5.1pp
Arch
688
812
18%
13.5%
14.6%
1.1pp
Argo
143
183
28%
9.3%
11.4%
2.1pp
Aspen
294
317
8%
10.2%
11.3%
1.1pp
Axis
684
771
13%
13.1%
14.8%
1.8pp
Beazley
264
218
-18%
20.8%
16.2%
-4.5pp
Catlin
392
418
7%
12.8%
12.7%
-0.1pp
Endurance
279
316
13%
11.8%
12.1%
0.3pp
Everest Re
1,259
1,199
-5%
18.4%
16.6%
-1.8pp
Fairfax
-634
1,576
n.m.
-8.5%
20.3%
28.8pp
Hannover Re
895
986
10%
15.0%
14.7%
-0.4pp
Hiscox
238
216
-9%
17.1%
15.1%
-2.0pp
Lancashire
223
229
3%
15.6%
16.3%
0.7pp
Mapfre
790
845
7%
10.1%
10.0%
-0.2pp
Markel
281
321
14%
5.3%
4.5%
-0.8pp
Montpelier Re
191
211
10%
12.9%
14.1%
1.2pp
Munich Re
3,304
3,153
-5%
12.4%
11.3%
-1.2pp
PartnerRe
597
998
67%
10.0%
16.6%
6.5pp
Platinum
223
165
-26%
12.3%
9.5%
-2.8pp
QBE
-254
742
n.m.
-2.3%
6.9%
9.3pp
RenaissanceRe
666
510
-23%
20.1%
14.6%
-5.5pp
SCOR
549
512
-7%
11.3%
9.6%
-1.6pp
Swiss Re
4,444
3,500
-21%
13.3%
10.2%
-3.1pp
Validus
533
481
-10%
13.8%
13.2%
-0.6pp
White Mountains
322
313
-3%
8.4%
7.9%
-0.5pp
1,060
188
-82%
10.3%
1.9%
-8.5pp
24,656
25,539
3.6%
11.1%
11.1%
0.0pp
931
538
-42%
8.4%
4.6%
-3.7pp
8,391
12,007
43%
9.5%
12.6%
3.1pp
33,978
38,084
12%
10.6%
11.3%
0.7pp
XL ABA (Listed Sector) Gen Re NICO ABA (Total)
Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines n.m. = not meaningful
*Common net income as a percentage of average common equity
Aon Benfield Analytics | Market Analysis
29
Exhibit 36: Results for the year ended December 31, 2014 (cont’d) Cash and Investments FY 2013
Cash and Investments FY 2014
ACE
61,977
Alleghany
Company
Change
Shareholders’ Funds FY 2013
Shareholders’ Funds FY 2014
Change
64,063
3%
28,825
29,587
3%
Listed Groups
19,490
19,441
0%
6,924
7,473
8%
Allied World
9,026
9,263
3%
3,520
3,778
7%
Amlin
4,510
4,564
1%
1,678
1,783
6%
Arch
14,037
15,842
13%
5,647
6,130
9%
Argo
4,237
4,179
-1%
1,563
1,647
5%
Aspen
8,300
8,654
4%
3,300
3,419
4%
Axis
14,768
14,980
1%
5,818
5,821
0%
Beazley
4,430
4,451
0%
1,339
1,343
0%
Catlin
9,209
9,276
1%
3,783
3,992
6%
Endurance
6,575
6,720
2%
2,887
3,185
10%
Everest Re
16,824
17,664
5%
6,968
7,451
7%
Fairfax
24,893
25,803
4%
8,353
9,526
14%
Hannover Re
46,149
52,080
13%
5,888
7,551
28%
Hiscox
3,157
3,490
11%
1,409
1,453
3%
Lancashire
2,484
2,343
-6%
1,460
1,357
-7%
Mapfre
40,133
48,673
21%
7,834
9,153
17%
Markel
17,612
18,638
6%
6,674
7,595
14%
3,306
3,190
-3%
1,642
1,648
0%
Montpelier Re Munich Re1
203,535
219,965
8%
25,945
30,033
16%
PartnerRe
18,274
17,988
-2%
6,710
7,049
5%
Platinum
3,612
3,398
-6%
1,747
1,738
0%
30,632
28,597
-7%
10,356
11,030
7%
7,230
7,269
1%
3,904
3,866
-1%
23,755
25,894
9%
4,940
5,694
15%
QBE RenaissanceRe SCOR Swiss Re1
143,332
137,355
-4%
32,952
35,930
9%
Validus
8,110
8,409
4%
3,704
3,588
-3%
White Mountains
8,003
7,803
-3%
3,906
3,997
2%
36,192
30,712
-15%
9,998
10,034
0%
917,805
898,912
-2%
228,620
239,804
5%
15,810
15,672
-1%
11,562
11,707
1%
XL ABA (Listed Sector) Gen Re NICO ABA (Total)
148,939
162,422
9%
97,226
93,998
-3%
1,082,554
1,077,006
-1%
337,408
345,508
2%
Source: Company reports, Aon Benfield Market Analysis Figures in reporting currencies, but converted to USD (millions) for ABA lines
30
The Aon Benfield Aggregate – Results for the year ended December 31, 2014
1
Excluding unit-linked and with-profit business
Contacts Mike Van Slooten
Jonny Eggins
Head of Market Analysis - International Aon Benfield Analytics +44.207.7522.8106 mike.vanslooten@aonbenfield.com
Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3898 jonathan.eggins@aonbenfield.com
Mike McClane Head of Market Analysis - Americas Aon Benfield Analytics +1.215.751.1596 michael.mcclane@aonbenfield.com
Marie Teissier Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3951 marie.teissier@aonbenfield.com
Eleanore Obst Analyst Market Analysis - International Aon Benfield Analytics +44.207.7522.3823 eleanore.obst@aonbenfield.com
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Aon Benfield Analytics | Market Analysis
31
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