A new report reveals that the Aon Reinsurance Aggregate achieved a return on equity (ROE) of 10.9% in 2021, which is the best result since 2014.
The firm said that investment returns provided much of the impetus, with equities and other alternative assets performing strongly during the year.
On the underwriting side, pandemic-related impacts diminished, revealing the benefits of compounded rate increases and tightened terms and conditions, although still with an overlay of above-average natural catastrophe losses.
Aon’s Reinsurance Aggregate (ARA) report analyses the financial results of 22 companies which together underwrite more than 50 percent of the world’s life and non-life reinsurance premiums.
Mike Van Slooten, head of business intelligence at Aon, said: “These were good results, given the extent of the natural catastrophe activity in 2021, but the past five years have been challenging from an earnings perspective. Results have diverged over this period and recent changes in underwriting risk appetite reflect attempts to manage volatility, in what has become a very complicated risk environment.”
According to Aon, this year has not begun well. Major losses have continued, and the invasion by Russia of Ukraine has created the potential sizeable insured losses, while exacerbating inflation.
Van Slooten added: “Central banks are raising interest rates more quickly than expected to counter the inflationary threat, and mark-to-market losses on fixed income securities had a heavy impact on investment returns and book values in the first quarter. Developments in the capital markets will have a strong bearing on sector performance in 2022.”
Other highlights in the report were that property and casualty premiums rose by 18% to $265bn in 2021, with that sector’s underwriting profit now standing at $7.6bn.
Total investment return rose by 20% to $33.0bn, representing a yield of 3.7%. Net income of $22.8bn represented a return on equity of 10.9%.