Aon’s Reinsurance Aggregate (ARA) report analyses the financial results of 19 companies that together underwrite more than 50 percent of the world’s life and non-life reinsurance premiums. The outcomes are therefore viewed as a reasonable proxy for the sector as a whole. The detailed information contained in the ARA report is highly relevant, given that financial performance drives investor commitment and ultimately the delivery of capacity.
Recent renewals have highlighted constraints in reinsurer underwriting appetites, particularly for property catastrophe business. The report reveals that the ARA group posted resilient underwriting results in 2022, despite the impact of Hurricane Ian. However, asset values were eroded by sharply rising interest rates and falling stock markets, resulting in weak overall earnings and reductions in reported equity.
Key highlights of the ARA’s results in 2022 include:
• Property & Casualty gross premiums written rose by 9 percent to $272 billion.
• Underwriting profit of $8.0 billion represented a net combined ratio of 96.2 percent.
• The total investment return fell by 61 percent to $12.3 billion.
• Net income fell by 56 percent to $9.6 billion, representing a return on equity of 5.2 percent.
• Total shareholders’ equity fell by 21 percent to $157 billion at year end.
“Reinsurers’ underlying underwriting results were generally strong in 2022 despite the unusual amount of volatility in the capital markets. Significant unrealized investment losses on bond portfolios weighed heavily on overall earnings and reported capital positions,” Mike Van Slooten, Aon’s head of business intelligence, said. “However, these losses are viewed as temporary and largely non-economic in nature. Looking ahead, renewal outcomes in 2023 and the tailwind of higher interest rates have improved the outlook for reinsurers and we expect new capital inflows to begin relieving current capacity constraints when earnings delivery is confirmed in reported results.”
Sherif Zakhary, CEO, Aon’s Strategy and Technology Group, added: “While capital is a complex issue and businesses are not affected equally, it is more about how you tell your risk/reward story and focusing your access to capital on delivering a stable outlook rather than on an episodic one, which is driven by the circumstances of the current cycle.”
Access Aon’s Reinsurance Aggregate report here. For more information about Aon’s Reinsurance Solutions, please visit:
https://www.aon.com/home/solutions/reinsurance.html.
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