Reinsurance broker Aon Benfield has reported that the traditional reinsurance sector remained profitable in 2017 despite record-breaking catastrophe losses, with net income across its Aon Benfield Aggregate (ABA) group standing at US $4 billion, and total equity rising 2.5% to $204 billion, driven in part by high investment income.
The ABA tracks the annual results of 21 major reinsurers domiciled in developed markets that write around 50% of global property and casualty (P&C) premium on a combined basis.
In its 2018 Reinsurance Market Outlook report, Aon Benfield found that total equity across the ABA constituents rose by $5 billion, although it noted that this outcome was flattered by a 14% year-on-year weakening of the U.S. dollar versus the euro.
In original currencies, only eight of the constituents reported increases in total equity, although reductions were largely influenced by active capital management prior to the third quarter hurricanes.
Aon Benfield also observed that gross written premiums by the ABA totalled $249 billion, with the volume of P&C business standing at $174 billion, primary insurance up 8% to $89 billion, and assumed reinsurance up 5% to $85 billion.
Combined ratios increased to 107.4% in 2017, with net natural catastrophe losses contributing 16.4% and the five-year average now standing at 94.7%.
The alternative market was found to have absorbed over $1 billion of reinsured losses for the ABA constituents via third-party investors.
Investment returns also exceeded expectations despite persistently low interest rates, with net investment income of $20.6 billion and capital gains of $8.9 billion offsetting P&C underwriting losses of $10.6 billion and other charges of $13.7 billion.
Across the ABA as a whole, pre-tax profit fell by 75% to $5.1 billion, and the return attributable to common shareholders divided by average common shareholders’ equity stood at 2% in 2017, compared with a five-year average of 8.5%.
