The Aon Benfield Aggregate
Results for the six months ended June 30, 2013
Empower Results® Contents
Global Reinsurer Capital 3 Executive Summary 4 ABA Capital 5 Capital Development 5 Capital Management 7 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 ABA Reaction 19 Convergence in Action 20 ABA Valuation 21 Financial Strength Ratings 23 Appendix 1: ABA Data 24
About Aon Benfield
Aon 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
Global Reinsurer Capital
Aon Benfield estimates that global reinsurer capital totaled USD510 billion at June 30, 2013, an increase of 1% relative to December 31, 2012. This calculation is a broad measure of capital available for insurers to trade risk with and includes both traditional and non-traditional forms of reinsurer capital.
Exhibit 1: Global Reinsurer Capital
600 11% 1% 500 -3% 18% 400 -17% 18%
300 505 510 470 455 200 410 400 340 USD (billions) 100
0 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 1H 2013
Source: Company reports, Aon Benfield Analytics
Major insurers and reinsurers generally maintained their solid operating performance in the first half of 2013, aided by tentative economic recovery in the US, continued growth in emerging markets and below average insured catastrophe losses. However, the support to capital positions was muted by the unwinding of unrealized investment gains that have accumulated on bond portfolios since the onset of the financial crisis. Interest rates began to climb in May and June ahead of expected tapering of the Federal Reserve’s quantitative easing program and yields have continued to rise into the second half. The impact on reported industry capital has been mitigated by the growing involvement of capital market investors in the reinsurance sector through non-equity participations, a trend presenting a growing challenge to ‘traditional’ reinsurer business models.
A NOTE OF CAUTION ON THE VAGARIES OF INSURANCE ACCOUNTING The first half of 2013 has highlighted the extent to which accounting choices can influence reported results. There have always been inconsistencies in the methodology applied to the calculation of combined ratios and returns on equity, two of the staple metrics for analyzing company performance. However, the real issue in this period was the accounting treatment of unrealized losses on bond portfolios relating to rising interest rates in May and June. Companies that classify a high proportion of their fixed-income securities as ‘held for trading’ saw a significant impact in the investment results reported through income statements, with consequent effects upon pre- and post-tax earnings and return on equity. In cases where the majority of bonds are held as ‘available for sale’, most of the impact was recorded below the line (in other comprehensive income) and taken directly to equity. As a consequence, direct comparison of company results can be misleading.
3 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Executive Summary
Overview The first half of 2013 featured generally stable reinsurance demand and pricing, below average insured catastrophe losses, generally benign attritional loss experience and continued low interest rates. Bond yields rose in May and June ahead of expected tapering of the Federal Reserve’s quantitative easing program and, as a result, the unrealized gains that have accumulated on bond portfolios since the financial crisis have begun to unwind. This is negative for book values in the short-term, but positive for earnings in the longer-term.
New income streams and operating advantages are starting to flow to leading reinsurers that have engaged with the new capital flowing mainly from pension plans, life insurers, endowments and high net worth individuals. Their roles are mainly in (a) sponsoring catastrophe bond transactions to lower their weighted average cost of underwriting capital, particularly for peak modeled perils (b) sharing quality underwriting performance and access to mature reinsurance and insurance relationships through sidecars and other managed vehicles and (c) managing bond funds where reinsurers have relationship and familiarity benefits with bond sponsors. These activities show the beginnings of a true rotation in how the reinsurance business will be capitalized.
Key Findings Aon Benfield estimates that global reinsurer capital rose by 1% to USD510 billion over the six months ending June 30, 2013, the generally solid earnings of major insurers and reinsurers and a continuing influx of new funds from capital markets investors being partially offset by unrealized losses on bond portfolios.
The shareholders’ funds of the 31 companies forming the Aon Benfield Aggregate (ABA) totaled USD313 billion, a reduction of 1% or USD4 billion since the end of 2012. The primary drivers were net income of USD16 billion offset by dividends and share buybacks totaling USD15 billion and unrealized investment losses of USD4 billion.
Gross property and casualty (P&C) premiums written by the ABA rose by 5% to USD109 billion, split 45% to direct insurance and 55% to reinsurance. The main engine of organic growth was the US market, driven by improving economic conditions and higher pricing in certain primary insurance lines.
Relative to the prior year, the ABA reported a 26% increase in P&C underwriting profit to USD8.9 billion, higher catastrophe losses being offset by more favorable prior year reserve development. The combined ratio improved by 1.7 points to 89.0%.
Annualized pre-tax operating returns (excluding all realized and unrealized gains and losses) relative to average total equity stood at 11.4%. Adjusting net income to include all unrealized movements reported through other comprehensive income, the return on average common equity stood at 7.8%.
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 trends in the non-life reinsurance marketplace. All of the constituents are publicly-listed, with the exception of two US subsidiaries of Berkshire Hathaway, namely General Reinsurance Corporation (Gen Re) and National Indemnity Company (NICO).
From 2013, Markel replaces Alterra as a constituent of the ABA, following its acquisition on May 1, 2013. Markel’s published results include Alterra’s contribution from that date only, but for the purposes of the ABA capital calculation (Exhibit 2), Alterra’s reported capital has been included in previous year-end totals.
4 Aon Benfield
ABA Capital
The reported shareholders’ funds of the 31 ABA companies totaled USD313 billion at June 30, 2013, a reduction of 1% since the end of 2012. Bond valuations were impacted by rising interest rates in May and June, denting reported earnings and resulting in significant unrealized losses taken directly to equity.
Exhibit 2: ABA Shareholders’ Funds
350 12% -1% 300 2% 15% 250 12% -17% 29% 200
150 317 313 278 283 226 242 100 201 187 USD (billions) 50
0 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 1H 2013
Source: Company reports, Aon Benfield Market Analysis
Capital Development Exhibit 3 shows the principal components of the change in ABA shareholders’ funds over the six months ending June 30, 2013. Improved underwriting performance relative to the prior year drove a 6% increase in reported net income, but this was out-weighed by the effects of more active capital management, adverse exchange rate movements and higher interest rates. NICO benefitted from USD6.1 billion of unrealized gains on its large equity holdings. The remainder of the ABA reported unrealized losses of USD10.0 billion, driven by the impact of rising yields on bond valuations. Excluding NICO, the reduction in ABA capital stood at 4%.
Exhibit 3: ABA Shareholders’ Funds Development
350 16.2 -10.9
1.5 -3.2 -3.9 325 -4.0 317.1 -0.2 312.5
300 USD (billions) USD 275
250 FY 2012 Additional Net Dividends Foreign Investment Share Other 1H 2013 SHF capital income exchange losses buybacks SHF
Source: Company reports, Aon Benfield Market Analysis
5 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 4 shows the reported shareholders’ funds of the ABA constituents at June 30, 2013. At USD87 billion, NICO alone represented 28% of ABA capital. The top four aggregated to USD177 billion or 57% of the total.
Exhibit 4: Reported Shareholders’ Funds by ABA Constituent 90 80 40 70 60 30 50 40 3020 20 USD (billions) USD 10 0
0
Source: Company reports, Aon Benfield Market Analysis
Exhibit 5 shows the movements in the reported shareholders’ funds of the ABA constituents over the six months ending June 30, 2013. Two-thirds of the companies reported reductions, driven by a combination of active capital management and unrealized losses on bond portfolios. Hiscox, Lancashire, Swiss Re and Validus all paid special dividends in the period. The effect of unrealized losses was most significant at Munich Re (USD2.8 billion), Swiss Re (USD2.7 billion), ACE (USD1.3 billion), XL (USD0.8 billion) and Hannover Re (USD0.5 billion). Markel reported a substantial increase in shareholders’ funds to USD6.3 billion, driven by the Alterra acquisition.
Exhibit 5: Movements in Reported Shareholders’ Funds
70% 60% 50% 25% 40% ABA 20% 30% 15% 20% 10% 10% 5% 0% 0% -10% -20%-5% -10%
-15%
Source: Company reports, Aon Benfield Market Analysis
6 Aon Benfield
Capital Management Relative to the first half of 2012, dividends and share buybacks increased by 32% to USD14.9 billion, equivalent to 4.8% of opening shareholders’ funds. Dividend payments rose by 20% to USD10.9 billion, the most significant in capital terms being at Lancashire (16%), Hiscox (14%), Gen Re (10%), Beazley (9%) and Swiss Re (8%). Share buybacks rose by 81% to USD4.0 billion, the most active purchasers being Platinum (12%), PartnerRe (11%), Validus (9%), Axis (8%) and Montpelier Re (7%).
Exhibit 6: Dividends and Share Buybacks as % of Opening Shareholders’ Funds 20% Dividends Share buy-backs 15%
10%
5%
0%
Source: Company reports, Aon Benfield Market Analysis
7 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Premium Income
Gross property and casualty (P&C) premiums written by the ABA totaled USD109 billion in the first six months of 2013, an increase of 5% relative to the same period in the prior year. This was split 45% to direct insurance and 55% to reinsurance.
Exhibit 7: ABA P&C Gross Premiums Written
200 Full Year 192 181 Half Year 150
7% 5% 100 109 97 103 USD (billions) 50
0 2011 2012 2013
Source: Company reports, Aon Benfield Market Analysis
The main engine of organic growth was the US market, driven by improving economic conditions and higher pricing in certain primary insurance lines. The other main contributory factors were acquisition effects and continuing exposure growth in emerging markets.
Exhibit 8: P&C Gross Premiums Written by ABA Constituent
16 P&C Insurance 14 P&C Reinsurance 12
10
8
6 USD (billions) USD 4
2
0
Source: Company reports, Aon Benfield Market Analysis
The distribution of P&C gross premiums written across the 31 ABA constituents is shown in Exhibit 8. For the purposes of this chart only, Munich Re’s primary P&C insurance business (ERGO) is included. The splits between insurance and reinsurance are shown for illustrative purposes only, based on company disclosure that is not entirely consistent.
8 Aon Benfield
Exhibit 9: Changes in P&C Gross Premiums Written
50% ABA 40%
30%
20%
10%
0%
-10%
-20%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Exhibit 9 shows year-on-year movements in P&C gross premiums written across the ABA. Strong growth at Markel, Alleghany and Validus was partly acquisition-related: Alterra, Transatlantic and Flagstone were consolidated from May 1, 2013, March 6, 2012 and November 30, 2012, respectively. Excluding a large quota share contract in Florida, Everest Re reported growth of 12% (US insurance and reinsurance).
At the other end of the spectrum, Lancashire reported an 18% reduction in gross premiums written, driven by its exit from property direct and facultative and most retrocession business. The 15% reduction at NICO reflected the termination of a 20% quota share across most of Swiss Re’s P&C book (which represented 50% of net premiums earned in the first half of 2012), offset by non-specified growth elsewhere.
Exhibit 10: Changes in P&C Reinsurance Gross Premiums Written
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
*On a constant currency basis Source: Company reports, Aon Benfield Market Analysis
9 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 10 shows year-on-year movements in gross P&C reinsurance premiums written across the ABA, based on segmental disclosure. Six companies reported growth in excess of 15%, the top three results being influenced by the aforementioned acquisitions. Validus reported underlying growth of 21%, driven by new proportional crop treaties and property business written through the AlphaCat division. Allied World reported growth of 28%, driven by US property cat (through its partnership with Aeolus), crop and general casualty.
Exhibit 11: Ceded Reinsurance as a % of P&C Gross Premiums Written 50% ABA 40%
30%
20%
10%
0%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Net P&C insurance and reinsurance premiums written by the ABA rose by 7% to USD91.6 billion in the first half of 2013, an overall retention ratio of 84.2%, compared with 83.1% in the comparative period of the prior year. The result was skewed by the termination of the 20% quota share between Swiss Re and NICO at the end of 2012. More than half of the ABA companies actually reported increased reinsurance cession rates, contributory factors being increased use of third party capital and opportunistic purchases of additional catastrophe protection. It should be noted that Gen Re operates with an internal quota share to NICO.
Exhibit 12: P&C Net Premiums Earned by ABA Constituent
12
10
8
6
USD (billions) USD 4
2
0
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
10 Aon Benfield
Net P&C insurance and reinsurance premiums earned by the ABA rose by 6% to USD81.1 billion in the first half of 2013, the five largest constituents representing 51% of the total. The distribution is shown in Exhibit 12.
Exhibit 13: Changes in P&C Net Premiums Earned 50% ABA 40%
30%
20%
10%
0%
-10%
-20%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Exhibit 13 shows year-on-year movements in P&C net premiums earned across the ABA. The reported outcomes for Swiss Re, RenaissanceRe and Beazley benefitted from increased premium retention, relative to the prior year.
11 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Earnings
Operating performance remained solid in the first half of 2013, driven by higher premium leverage, below average insured natural catastrophe losses and increased prior year reserve releases. Bond valuations were reduced by rising interest rates in May and June, with only part of the impact reported through income statements.
Exhibit 14: ABA Pre-Tax Profit
30
18.9 18.9 20 Capital gains/losses
10 Non-life underwriting result 2.8 Investment income USD (billions) 0 Life underwriting result Other -10 Pre-tax profit
-20 1H 2011 1H 2012 1H 2013
Source: Company reports, Aon Benfield Market Analysis
Pre-tax profit reported through ABA income statements was unchanged at USD18.9 billion in the first half of 2013. P&C underwriting profit rose by 26% to USD8.9 billion, including an increased contribution of USD3.7 billion from prior year reserve releases. Ordinary investment income was stable and remained the main driver of the result. Capital gains more than halved to USD0.5 billion, but this outcome is misleading, as the majority of the unrealized losses on bond portfolios were taken directly to equity.
Exhibit 15: Pre-Tax Profit by ABA Constituent
3.5
3.0
2.5
2.0
1.5
USD (billions) USD 1.0
0.5
0.0
-0.5
Source: Company reports, Aon Benfield Market Analysis
12 Aon Benfield
Exhibit 15 shows the distribution of reported pre-tax profits across the 31 ABA constituents. The impact of rising interest rates varied depending on investment classification choices and direct result comparison can therefore be misleading. The combined results of NICO, Swiss Re, Munich Re and ACE rose by 15% to USD10.5 billion, representing 56% of the total. Fairfax, one of the few companies taking all investment valuation changes through the income statement, reported an overall deficit, despite improved underwriting performance, driven by USD0.7 billion of unrealized losses.
Underwriting Performance The ABA combined ratio improved by 1.7 percentage points in the first half of 2013, reflecting higher premium leverage, lower attritional loss activity and increased prior year reserve releases. Worldwide insured natural catastrophe losses totaled USD20 billion, down 20% relative to both 2012 and the 10 year average (Source: Impact Forecasting). However, net catastrophe losses disclosed by the ABA rose by 55% to USD4.2 billion, reflecting higher cessions to the reinsurance market, particularly in the case of the floods in Central Europe.
Exhibit 16: ABA Combined Ratio Composition
115.1% 120%
100% 29.4% 90.7% 89.0% 3.5% 5.1% 80% Total catastrophe losses
Attritional loss ratio 60% 59.4% 59.4% 57.9% Expense ratio 40% Prior year reserve adjustment 20% 30.2% 30.8% 30.5%
0% -4.0% -3.0% -4.5% -20% 1H 2011 1H 2012 1H 2013 Source: Company reports, Aon Benfield Market Analysis
Exhibit 17 shows the distribution of reported combined ratios across the 31 ABA constituents in the first half of 2013. All companies were profitable on a calendar year basis. Markel’s underwriting result includes USD62 million of expenses relating to the Alterra acquisition, which added almost 5 points to the combined ratio.
Exhibit 17: Reported Combined Ratios
120% Loss ratio Expense ratio ABA 100%
80%
60%
40%
20%
0%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
13 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 18 shows reported P&C underwriting results by ABA constituent. Swiss Re, NICO, Munich Re and ACE between them contributed 42% of the total profit.
Exhibit 18: P&C Underwriting Results
1,200
1,000
800
600
USD (millions) USD 400
200
0
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Exhibit 19 shows prior year reserve releases as a percentage of net premiums earned by ABA constituent. QBE was the only company to report adverse development overall, driven by casualty lines in Argentina and Italy and program business in run-off in the US. Between them, Aspen, Lancashire, Munich Re, Swiss Re and Validus added USD181 million to Costa Concordia reserves during the period.
Exhibit 19: Loss Reserve Adjustments as % of Net Premium Earned
40% ABA 35%
30%
25%
20%
15%
10%
5%
0%
-5%
*P&C reinsurance segment only **No disclosure Source: Company reports, Aon Benfield Market Analysis
14 Aon Benfield
Exhibit 20 shows reported accident year combined ratios by ABA constituent (i.e. discounting prior year movements). Five ABA companies were unprofitable on this basis.
Exhibit 20: Accident Year Combined Ratios
140% ABA 120%
100%
80%
60%
40%
20%
0%
*P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
Investment Results Ordinary investment income was unchanged at USD18.2 billion in the first half of 2013. The consequences of the low interest rate environment of recent years can clearly be seen in the declining yields on average cash and investments displayed in Exhibit 21. Realized and unrealized gains taken through ABA income statements more than halved to USD0.5 billion. Many companies also took substantial post-tax unrealized losses directly to equity at June 30, 2013.
Exhibit 21: ABA Investment Return
6% Total Investment Return (incl. Capital Gains/Losses) Underlying Investment Return
4.0% 3.8% 4% 3.5% 3.8% 3.6% 3.4%
2%
0% 1H 2011 1H 2012 1H 2013 Source: Company reports, Aon Benfield Market Analysis
15 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Net Income The ABA companies reported net income attributable to common shareholders of USD16.0 billion for the first half of 2013, an increase of 6% relative to the same period in the prior year.
Exhibit 22: ABA Net Income
20
16
12
8 15.1 16.0 USD (billions) USD
4
2.5 0 1H 2011 1H 2012 1H 2013
Source: Company reports, Aon Benfield Market Analysis
Exhibit 23 shows the distribution of net income attributable to common shareholders by ABA constituent. The combined results of NICO, Swiss Re, Munich Re and ACE rose by 26% to USD9.0 billion, representing 56% of the total. The impact of rising interest rates varied depending on investment classification choices and direct result comparison can therefore be misleading.
Exhibit 23: Net Income by ABA Constituent
3.5
3.0
2.5
2.0
1.5
1.0 USD (billions) USD
0.5
0.0
-0.5
Source: Company reports, Aon Benfield Market Analysis
16 Aon Benfield
Return on Equity Analysis of returns on equity in the first half of 2013 is compromised by the partial inclusion of investment valuation movements in ABA income statements. For the sake of consistency, Exhibit 24 shows annualized pre- tax operating returns, excluding all realized and unrealized gains and losses, relative to average total equity.
Exhibit 24: ABA Pre-Tax Operating Income as % of Average Total Equity
20%
15% 12.0% 11.4%
10%
5%
1.1% 0% 1H 2011 1H 2012 1H 2013
Source: Company reports, Aon Benfield Market Analysis
Exhibit 25 shows pre-tax operating returns by ABA constituent.
Exhibit 25: Pre-Tax Operating Income as % of Average Total Equity
30% ABA
25%
20%
15%
10%
5%
0%
Source: Company reports, Aon Benfield Market Analysis
17 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
An alternative view is to look at net income adjusted to include all unrealized losses included in other comprehensive income relative to average common equity. On this basis, the ABA generated a return of 7.8% in the first half of 2013, reducing to 2.6% excluding NICO.
Exhibit 26: ABA Adjusted Net Income as % of Average Common Equity 20% Adjusted Net Income ROE 16.9% Adjusted Net Income ROE ex NICO 15% 16.0%
10%
7.8%
5%
1.9% 2.6% 0.8% 0% 1H 2011 1H 2012 1H 2013
Source: Company reports, Aon Benfield Market Analysis
Exhibit 27 shows adjusted net income returns by ABA constituent.
Exhibit 27: Adjusted Net Income as % of Average Common Equity
25% ABA 20%
15%
10%
5%
0%
-5%
-10%
Source: Company reports, Aon Benfield Market Analysis
18 Aon Benfield
ABA Business Model Evolution
A structural shift in the way capital is raised and deployed to mitigate insurance risk is in progress. The pool of potential investors is broadening and new money is flowing towards structures offering access to quality business at relatively low cost. These changes are forcing 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 broadened the pool of potential investors to pension funds, high net worth individuals and sovereign wealth funds, who typically will:
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 products such as catastrophe bonds and industry loss warranties, or other ‘non- traditional’ structures, such as sidecars and collateralized reinsurance, on their investors’ behalf. 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.
Implications for ‘Traditional’ Reinsurers Earnings were already under pressure from below average premium gearing and low interest rates. Now new vehicles operating at a lower cost of capital are making in-roads into higher-margin areas that remain a key driver of profits. 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 bigger 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 base more effectively.
ABA Reaction Cost structures and client offerings are currently under review. Over time, it is expected that less reinsurance business will be written on rated balance sheets and more through ‘satellite’ structures backed by third party capital. RenaissanceRe has operated this model for many years and other ABA companies are now pursuing similar strategies. Capital market involvement that may previously have been limited to secondary investment in catastrophe bonds or simple quota share ‘sidecar’ structures is now morphing into full-on engagement.
Several ABA companies are already involved in the management of third party funds, including Amlin (Leadenhall), Montpelier Re (Blue Water), SCOR (Atropos) and Validus (AlphaCat). New capital markets divisions were established by Aspen, Axis, Lancashire, Montpelier Re, Sirius and XL in 2013, while Hannover Re (Leine) and RenaissanceRe (Medici) recently opened existing internal funds to third parties. An alternative route, pursued by Alleghany/Transatlantic (Pillar), Allied World (Aeolus) and Hiscox (Third Point Re), is to invest in strategic partnerships with established independent specialist fund managers.
19 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Convergence in Action More than USD1 billion of capital has been injected into ABA sidecar vehicles in 2013, including eight new structures. Investors favor these reloadable joint ventures, as they have lower regulatory and operational entry barriers than new start-ups and a built-in exit strategy. These transactions included several Bermuda sponsors that have tapped the market multiple times, including Alterra (New Point V), Lancashire (Saltire I), Hiscox (Kiskadee Re), RenaissanceRe (Upsilon Re II) and Validus (AlphatCat Re). However, there were also new sponsors, such as ACE (Altair Re), Argo (Harambee Re), Everest Re (Mt. Logan Re) and PartnerRe (Lorenz Re).
Many ABA constituents have been able to take advantage of the newly available capacity from the capital markets to drive down their own risk transfer costs. Retrocession costs have reduced and several companies have purchased additional protection, with consequent impact on disclosed modeled exposures. Several ABA constituents also executed on new catastrophe bond transactions, including new sponsor Axis.
Exhibit 28: Recent Examples of Convergence in Action
Company ACE Altair Re formed with $95m of third party capital to provide collateralized capacity for ACE Tempest Re (Apr 2013) Alleghany Partnerships with Ares Management (July 2013) and Pillar Capital (Dec 2012) Allied World Partnership with Aeolus Capital (Dec 2012) Longstanding partnership with Leadenhall Capital (May 2008); Tramline Re II Ltd cat bond (Jun 2013); Tramline Re Ltd cat Amlin bond (Dec 2011); Special Purpose Syndicate 6106 (since 2009) Reported casualty reinsurance initiative with Highbridge Capital (Jul 2013); Larry Richardson (ex-RenRe) appointed SVP Capital Arch Markets (Mar 2012) Property insurance and reinsurance sidecar Harambee Re (Jan 2013); Mark Gibson (ex-BNP) appointed Director of Alternative Argo Risk Capital (Jun 2012); Loma Re 2 cat bond (Dec 2011); Loma Re 1 cat bond (Jun 2011) Aspen Aspen Capital Markets formed under Brian Tobben (Apr 2013); ILW partnership with Cartesian Capital (Jun 2009-Jul 2013) Northshore Re cat bond (Aug 2013); Ben Rubin (ex-BoAML) appointed EVP Capital Markets (Jun 2013); Axis Re Weather & Axis Commodity Markets initiative (Jun 2013) Beazley Special Purpose Syndicate 6107 (since 2010) Catlin Considering offering third party capital management (Aug 2013); Special Purpose Syndicates 2088, 6111 & 6112 (from 2012) Endurance Jerome Faure (ex-ILS Capital) appointed CEO Global Reinsurance (Feb 2013) Sidecar Mt Logan Re launched under Rick Pagnani with $50m of seed capital to provide collateralized capacity to the Everest Re worldwide property cat market (Jan 2013); purchased ILW retro to reduce Florida PML (Jun 2013) Fairfax No public disclosure Hannover Re Opened internal ILS fund to third parties via Leine Investment (Jan 2013); multiple sidecar and cat bond sponsor Michael Jedraszak appointed Director of ILS (Jul 2013); Kiskadee Re formed to write collateralized reinsurance (Apr 2013); Hiscox partnership with Third Point (Oct 2012), Special Purpose Syndicate 6104 (since 2008) Darren Redhead (ex-DE Shaw) appointed to head Kinesis Capital Management (Mar 2013); collateralized worldwide aggregate Lancashire cover through Saltire (Nov 2012); collateralized property retro through Accordion sidecar (Jul 2012) Mapfre No public disclosure Markel Collateralized retro via Alterra’s New Point sidecar series - $247m of capital at Dec 2012 (Markel $75m, Stone Point $75m) Launched Blue Capital with $50m of seed capital (Oct 2012); total partnership capital exceeded $200m at June 30; writes Montpelier Re collateralized reinsurance via Blue Water Re Has operated an internal ILS fund for 6+ years; openly discussed establishing a third party fund (Sep 2012); multiple structurer Munich Re and sponsor of cat bonds Lorenz Re formed with $75m of third party capital to provide additional capacity to PartnerRe on a diversified portfolio of cat PartnerRe treaties over a multi-year period (Mar 2013); has operated an internal ILS fund for several years Platinum Purchased $50m of non-traditional cat cover in 2Q; has ceded $75m of premium and reserves to Third Point Re since Oct 2012 QBE No public disclosure Mona Lisa Re cat bond (Jul 2013); internal ILS fund Medici opened to third parties (Jun 2013); multiple sidecar sponsor (Top RenaissanceRe Layer/DaVinci/Upsilon/Timicuan) SCOR Launched ILS fund Atropos with $100m of seed capital (Aug 2011); multiple cat bond sponsor (Atlas Re series) No immediate plans to open internal ILS fund to third parties (Nov 2012); Sector Re sidecar series; multiple cat bond structurer Swiss Re and sponsor ILS activities are coordinated by AlphaCat Managers; collateralized property cat and retro is written via the AlphaCat Re sidecar Validus series; provided $50m of seed capital to PaCRe, a joint venture with Paulson & Co writing top layer cat business (Apr 2012) White Sirius Capital Markets headed by Michael Halsband (ex-Deutsche Bank) and Deanne Nixon (May 2013) Mountains XL and Stone Point will commit $135m of seed capital to establish a Bermuda-based ILS manager (Jul 2013); Craig Wenzel (ex- XL Deutsche Bank) appointed SVP Capital Markets (Dec 2012) Source: Company reports, Aon Benfield Market Analysis
20 Aon Benfield
ABA Valuation
The overall market capitalization of the ABA companies has increased by 10% since the beginning 2013. The trailing price-to-book ratio has improved from 0.9x to 1.0x over the same period.
Exhibit 29: ABA Market Capitalization (indexed to January 1, 2008)
120
110
100
90
80
70
60
50
40 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Note: Excluding Berkshire Hathaway Source: Bloomberg, Aon Benfield Market Analysis
Most ABA constituents have experienced rising share prices in 2013. Movements since the beginning of the year are shown in Exhibit 30.
Exhibit 30: Share Price Development (January 1, 2013 – August 28, 2013)
50%
40%
30%
20%
10%
0%
-10%
Source: Bloomberg, Aon Benfield Market Analysis
21 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
The trailing price-to-book ratio of the ABA as a whole improved from 0.9x at December 31, 2012 to 1.0x at June 30, 2013. Development since the onset of the financial crisis is shown in Exhibit 30.
Exhibit 31: ABA Trailing Price-to-Book Ratio (January 1, 2008 – August 28, 2013)
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Note: Excluding Berkshire Hathaway Source: Bloomberg, Aon Benfield Market Analysis
Changes in the trailing price-to-book ratios of the individual ABA constituents since the beginning of 2013 are shown in Exhibit 32.
Exhibit 32: Trailing Price-to-Book Ratios by ABA Constituent
2.0 August 28, 2013 January 1, 2013 Average Average
1.0
0.0
Source: Bloomberg, Aon Benfield Market Analysis
22 Aon Benfield
Financial Strength Ratings
Exhibit 33: Financial Strength Ratings
Main Operating Company A.M. Best Standard & Poor’s
ACE Tempest Reinsurance Ltd A+ Positive AA- Positive
Allied World Assurance Company Ltd A Stable A Stable Alterra Bermuda Ltd A Stable A Stable
Amlin AG A Stable A Stable
Arch Reinsurance Ltd A+ Stable A+ Stable Argo Re Ltd A Stable Not Rated -
Aspen Bermuda Ltd A Stable A Stable
AXIS Specialty Ltd A Positive A+ Stable Beazley Insurance Company, Inc A Stable Not Rated -
Catlin Insurance Company Ltd A Stable A Stable
Endurance Specialty Insurance Ltd A Stable A Stable Everest Reinsurance (Bermuda) Ltd A+ Stable A+ Stable
General Reinsurance Corporation A++ Stable AA+ Negative
Hannover Rückversicherungs SE A+ Stable AA- Stable Hiscox Insurance Company (Bermuda) Ltd A Stable Not Rated -
Lancashire Insurance Company Ltd A Stable A- Stable
MAPFRE Re, Compania de Reaseguros SA A Negative BBB+ Negative Montpelier Reinsurance Ltd A Stable A- Stable
Munich Reinsurance Company A+ Stable AA- Stable
National Indemnity Company A++ Stable AA+ Negative Odyssey Reinsurance Company A Stable A- Stable
Partner Reinsurance Company Ltd A+ Stable A+ Stable
Platinum Underwriters Bermuda Ltd A Stable A- Stable QBE Re (Europe) Ltd A Stable A+ Stable
Renaissance Reinsurance Ltd A+ Stable AA- Stable
SCOR Global P&C SE A Stable A+ Stable
Sirius International Insurance Corporation A Stable A- Stable
Swiss Reinsurance Company A+ Stable AA- Stable
Transatlantic Reinsurance Company A Stable A+ Stable
Validus Reinsurance Ltd A Stable A Stable
XL Re Ltd A Stable A Positive Ratings at August 2013 Source: A.M. Best, Standard & Poor’s
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.
23 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Appendix 1: ABA Data
Exhibit 34: Results for the six months ended June 30, 2013
P&C Gross P&C Gross P&C Net P&C Net Reporting Premiums Premiums Premiums Premiums Currency Written Written Written Written Company (millions) 1H 2012 1H 2013 Change 1H 2012 1H 2013 Change ACE USD 9,415 9,953 6% 6,728 7,200 7%
Alleghany USD 1,909 2,589 36% 1,658 2,253 36% Allied World USD 1,328 1,602 21% 1,084 1,276 18%
Amlin GBP 1,815 1,839 1% 1,489 1,525 2%
Arch USD 2,118 2,204 4% 1,684 1,763 5% Argo USD 871 980 13% 603 669 11%
Aspen USD 1,449 1,461 1% 1,215 1,210 0%
Axis USD 2,540 2,966 17% 2,169 2,564 18% Beazley USD 1,013 1,067 5% 651 758 16%
Catlin USD 3,010 3,299 10% 2,258 2,437 8%
Endurance USD 1,666 1,750 5% 1,327 1,374 3% Everest Re USD 1,956 2,441 25% 1,872 2,362 26%
Fairfax USD 3,647 3,597 -1% 3,087 3,036 -2%
Gen Re USD 511 485 -5% 259 244 -6% Hannover Re EUR 4,080 4,097 0% 3,680 3,696 0%
Hiscox GBP 906 1,018 12% 702 770 10%
Lancashire USD 515 424 -18% 366 308 -16% Mapfre EUR 8,192 8,665 6% 6,586 6,568 0%
Markel USD 1,296 1,844 42% 1,148 1,590 39%
Montpelier Re USD 513 504 -2% 431 424 -2% Munich Re* EUR 8,397 8,533 2% 7,989 8,107 1%
NICO USD 4,180 3,572 -15% 4,166 3,358 -19%
PartnerRe USD 2,308 2,607 13% 2,189 2,463 13%
Platinum USD 285 283 -1% 285 281 -1%
QBE USD 9,223 9,446 2% 7,509 7,767 3%
RenaissanceRe USD 1,331 1,339 1% 920 996 8%
SCOR EUR 2,255 2,378 5% 2,004 2,069 3%
Swiss Re USD 11,421 11,538 1% 8,879 10,847 22%
Validus USD 1,464 1,807 23% 1,238 1,498 21%
White Mountains USD 1,369 1,261 -8% 1,171 1,057 -10%
XL USD 4,080 4,349 7% 3,311 3,502 6%
ABA USD 103,455 108,871 5% 85,947 91,624 7% *P&C reinsurance segment only Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
24 Aon Benfield
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d)
Calendar Year Loss Loss Expense Expense Combined Combined Ratio Ratio Ratio Ratio Ratio Ratio Company 1H 2012 1H 2013 1H 2012 1H 2013 1H 2012 1H 2013 Change ACE 58.3% 58.0% 30.6% 30.1% 88.9% 88.1% -0.9pp
Alleghany 59.8% 56.8% 22.2% 31.0% 82.0% 87.9% 5.9pp Allied World 56.0% 54.6% 29.2% 29.3% 85.2% 84.0% -1.2pp
Amlin 52.8% 53.1% 31.2% 31.9% 84.0% 85.0% 1.0pp
Arch 56.5% 54.1% 32.2% 31.9% 88.7% 86.0% -2.6pp Argo 61.7% 58.4% 41.2% 40.4% 102.9% 98.8% -4.0pp
Aspen 54.1% 57.1% 36.3% 36.6% 90.4% 93.7% 3.3pp
Axis 57.7% 59.4% 35.9% 33.3% 93.6% 92.7% -0.9pp
Beazley 54.0% 52.0% 37.0% 37.0% 91.0% 89.0% -2.0pp
Catlin 51.5% 54.6% 34.7% 34.3% 86.3% 88.9% 2.7pp
Endurance 65.4% 60.0% 28.9% 30.2% 94.3% 90.2% -4.1pp Everest Re 59.5% 58.2% 29.5% 26.0% 89.0% 84.2% -4.8pp
Fairfax 66.6% 62.3% 31.6% 31.8% 98.2% 94.1% -4.1pp
Gen Re 38.3% 53.9% 30.3% 41.0% 68.5% 94.9% 26.3pp Hannover Re 71.1% 68.6% 25.8% 25.8% 96.8% 94.4% -2.4pp
Hiscox 41.0% 37.5% 40.7% 37.2% 81.7% 74.7% -6.9pp
Lancashire 31.7% 23.5% 35.5% 35.3% 67.2% 58.8% -8.3pp Mapfre 67.4% 67.2% 28.2% 27.9% 95.6% 95.1% -0.5pp
Markel 48.9% 54.1% 44.5% 43.9% 93.3% 98.0% 4.6pp
Montpelier Re 32.9% 32.6% 34.2% 32.9% 67.2% 65.5% -1.6pp Munich Re* 66.0% 62.8% 29.8% 29.6% 95.8% 92.4% -3.4pp
NICO 52.4% 42.9% 32.3% 25.4% 84.7% 68.3% -16.4pp
PartnerRe 57.0% 61.4% 30.7% 28.6% 87.8% 90.0% 2.2pp Platinum 51.6% 28.4% 30.5% 32.2% 82.1% 60.6% -21.5pp
QBE 61.5% 59.4% 31.4% 33.3% 92.9% 92.8% -0.1pp
RenaissanceRe 12.4% 23.3% 25.5% 25.9% 38.0% 49.2% 11.2pp
SCOR 64.9% 64.5% 28.9% 29.8% 93.8% 94.3% 0.5pp
Swiss Re 54.9% 55.8% 30.4% 29.9% 85.3% 85.7% 0.4pp
Validus 42.9% 38.0% 32.8% 31.7% 75.7% 69.7% -6.0pp
White Mountains 50.9% 52.3% 36.7% 34.0% 87.7% 86.3% -1.4pp
XL 60.9% 60.3% 32.1% 30.5% 93.0% 90.8% -2.3pp
ABA 60.0% 58.5% 30.8% 30.5% 90.7% 89.0% -1.7pp *P&C reinsurance segment only Source: Company reports, Aon Benfield Market Analysis
25 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d)
Accident Year Prior Year Prior Year Accident Accident Prior Year Prior Year Reserve Reserve Year Year Reserve Reserve Adjustment Adjustment Combined Combined Adjustment Adjustment as % of NPE as % of NPE Ratio Ratio Company 1H 2012 1H 2013 1H 2012 1H 2013 1H 2012 1H 2013 Change ACE -206 -198 3.3% 3.0% 92.2% 91.0% -1.2pp
Alleghany -1 -134 0.0% 6.2% 82.0% 94.1% 12.1pp Allied World -81 -92 9.8% 9.5% 95.0% 93.5% -1.5pp
Amlin -53 -61 5.4% 5.8% 89.4% 90.8% 1.4pp
Arch -117 -124 8.3% 8.2% 97.0% 94.2% -2.7pp Argo -7 -17 1.3% 2.7% 104.2% 101.6% -2.6pp
Aspen -66 -54 6.5% 5.1% 96.9% 98.8% 1.8pp
Axis -120 -97 7.1% 5.3% 100.6% 98.0% -2.6pp
Beazley -48 -61 6.8% 8.0% 97.8% 97.0% -0.8pp
Catlin -30 -56 1.8% 2.9% 88.0% 91.8% 3.8pp
Endurance -37 -114 3.9% 11.8% 98.2% 102.0% 3.8pp Everest Re 0 -1 0.0% 0.0% 89.0% 84.3% -4.7pp
Fairfax -50 -142 1.9% 4.9% 100.1% 99.0% -1.0pp
Gen Re -94 -70 35.3% 25.5% 103.9% 120.3% 16.5pp Hannover Re n.d. n.d. n.d. n.d. n.d. n.d. n.d.
Hiscox -116 -74 20.5% 11.7% 102.1% 86.4% -15.7pp
Lancashire -44 -7 14.9% 2.8% 82.1% 61.7% -20.4pp Mapfre n.d. n.d. n.d. n.d. n.d. n.d. n.d.
Markel -191 -204 18.3% 15.1% 111.6% 113.1% 1.5pp
Montpelier Re -45 -66 14.8% 22.1% 82.0% 87.7% 5.7pp Munich Re* 0 -250 0.0% 3.1% 95.8% 95.5% -0.3pp
NICO -48 -652 1.5% 20.8% 86.2% 89.1% 2.9pp
PartnerRe -279 -310 16.5% 16.3% 104.3% 106.3% 2.0pp Platinum -51 -99 18.0% 36.6% 100.1% 97.2% -2.9pp
QBE 117 178 -1.6% -2.4% 91.3% 90.3% -1.0pp
RenaissanceRe -101 -64 19.4% 11.4% 57.3% 60.6% 3.3pp
SCOR 28 -31 -1.4% 1.5% 92.4% 95.7% 3.4pp
Swiss Re -302 -445 4.3% 5.6% 89.6% 91.3% 1.6pp
Validus -68 -107 7.6% 9.9% 83.2% 79.6% -3.6pp
White Mountains -11 -14 1.1% 1.4% 88.8% 87.7% -1.1pp
XL -182 -150 6.6% 5.1% 99.6% 95.8% -3.8pp
ABA -2,292 -3,677 3.0% 4.5% 93.7% 93.5% -0.2pp *P&C reinsurance segment only Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
26 Aon Benfield
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d)
Net Net Capital Capital Total Total Investment Investment Gains/ Gains/ Investment Investment Income Income Losses Losses Return Return Company 1H 2012 1H 2013 1H 2012 1H 2013 1H 2012 1H 2013 Change ACE 1,081 1,065 -134 310 947 1,375 45%
Alleghany 144 219 105 37 249 256 3%
Allied World 90 71 142 -36 232 35 -85% Amlin 25 24 57 41 82 65 -21%
Arch 181 159 76 68 257 227 -12%
Argo 61 53 10 21 72 74 3% Aspen 105 94 10 9 116 103 -11%
Axis 190 192 45 61 235 253 7%
Beazley 28 29 8 -29 36 0 -99% Catlin 59 54 24 -45 83 9 -89%
Endurance 89 82 20 15 108 97 -11%
Everest Re 302 295 82 161 384 455 19% Fairfax 236 258 76 -476 312 -218 n.m.
Gen Re 386 512 11 40 396 552 39%
Hannover Re 651 650 59 39 709 689 -3% Hiscox 21 21 21 1 43 22 -49%
Lancashire 19 23 5 12 24 35 45%
Mapfre 780 768 33 41 812 809 0% Markel 143 143 20 29 164 172 5%
Montpelier Re 35 33 46 -62 81 -29 n.m.
Munich Re 3,825 3,545 225 18 4,050 3,563 -12% NICO 2,899 2,967 -448 -20 2,451 2,946 20%
PartnerRe 300 248 231 -276 531 -28 n.m.
Platinum 55 36 45 23 100 59 -40% QBE 394 330 292 29 686 359 -48%
RenaissanceRe 95 80 75 -55 171 25 -85%
SCOR 248 216 34 -7 282 209 -26%
Swiss Re 3,427 3,733 -173 516 3,254 4,249 31%
Validus 53 55 -19 -143 34 -88 n.m.
White Mountains 82 57 51 38 133 95 -28%
XL 550 558 8 77 559 635 14%
ABA 18,219 18,215 1,186 487 19,404 18,702 -4% Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
27 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d)
Pre-tax Pre-tax Pre-tax Pre-tax Profit/Loss Profit/Loss Operating ROE* Operating ROE* Company 1H 2012 1H 2013 Change 1H 2012 1H 2013 Change ACE 1,559 2,081 33% 13.5% 12.9% -0.6pp
Alleghany 756 400 -47% 28.3% 11.3% -17.0pp
Allied World 327 158 -52% 11.5% 11.6% 0.1pp Amlin 184 160 -13% 17.4% 15.2% -2.2pp
Arch 387 443 15% 12.9% 14.4% 1.5pp
Argo 53 80 51% 5.8% 8.0% 2.2pp Aspen 175 139 -21% 10.0% 7.7% -2.2pp
Axis 330 401 21% 10.2% 12.0% 1.8pp
Beazley 113 82 -27% 19.2% 18.8% -0.4pp Catlin 231 145 -37% 12.4% 10.9% -1.5pp
Endurance 156 165 6% 10.2% 11.0% 0.8pp
Everest Re 582 792 36% 16.0% 18.9% 2.9pp Fairfax 108 -195 n.m. 0.7% 6.4% 5.7pp
Gen Re 479 568 19% 9.9% 10.2% 0.2pp
Hannover Re 547 608 11% 16.7% 17.6% 0.9pp Hiscox 126 181 44% 16.2% 26.1% 9.9pp
Lancashire 107 137 28% 14.9% 18.9% 4.0pp
Mapfre 824 866 5% 16.2% 16.2% 0.0pp Markel 194 163 -16% 9.6% 5.2% -4.5pp
Montpelier Re 176 73 -58% 16.4% 16.4% 0.0pp
Munich Re 1,917 1,808 -6% 13.9% 13.5% -0.4pp NICO 3,025 3,445 14% 9.5% 8.3% -1.2pp
PartnerRe 649 23 -96% 12.7% 9.0% -3.7pp
Platinum 129 146 13% 9.8% 13.5% 3.6pp QBE 914 585 -36% 11.3% 9.8% -1.5pp
RenaissanceRe 448 284 -37% 16.5% 15.2% -1.4pp
SCOR 260 237 -9% 10.0% 10.2% 0.2pp
Swiss Re 2,065 2,600 26% 13.9% 13.0% -0.9pp
Validus 240 183 -24% 14.1% 15.2% 1.1pp
White Mountains 178 155 -13% 5.7% 5.6% -0.1pp
XL 452 671 48% 8.1% 10.3% 2.2pp
ABA 18,925 18,875 0% 12.0% 11.4% -0.6pp *Calculated by excluding the impact of net realized and unrealized investment gains/losses reported through income statements Figures in reporting currencies, but converted to USD (millions) for ABA line n.m. = not meaningful Source: Company reports, Aon Benfield Market Analysis
28 Aon Benfield
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d)
Common Common Return on Return on Net Income Net Income Equity* Equity* Company 1H 2012 1H 2013 Change 1H 2012 1H 2013 Change ACE 1,301 1,844 42% 10.4% 13.5% 3.1pp
Alleghany 669 310 -54% 29.1% 9.6% -19.5pp
Allied World 315 157 -50% 19.6% 9.4% -10.2pp Amlin 169 140 -17% 23.2% 17.8% -5.4pp
Arch 360 422 17% 16.1% 17.3% 1.3pp
Argo 44 64 48% 5.9% 8.6% 2.7pp Aspen 149 115 -23% 10.4% 8.1% -2.3pp
Axis 290 375 29% 11.4% 14.7% 3.3pp
Beazley 100 72 -28% 18.2% 12.2% -6.0pp Catlin 184 118 -36% 13.3% 8.1% -5.2pp
Endurance 139 145 5% 11.3% 12.6% 1.3pp
Everest Re 519 660 27% 16.6% 19.8% 3.1pp Fairfax 63 -27 n.m. 1.7% -0.7% -2.4pp
Gen Re 397 539 36% 8.4% 10.4% 1.9pp
Hannover Re 405 408 1% 15.5% 14.0% -1.5pp Hiscox 125 158 27% 19.4% 23.0% 3.6pp
Lancashire 104 134 29% 15.1% 20.2% 5.1pp
Mapfre 434 456 5% 12.2% 11.6% -0.6pp Markel 147 117 -21% 8.3% 4.6% -3.8pp
Montpelier Re 169 65 -62% 23.5% 8.9% -14.6pp
Munich Re 1,588 1,501 -5% 13.2% 11.4% -1.8pp NICO 2,545 3,029 19% 7.0% 7.3% 0.3pp
PartnerRe 505 20 -96% 17.8% 0.7% -17.1pp
Platinum 121 136 13% 14.2% 15.0% 0.8pp QBE 760 477 -37% 13.9% 8.5% -5.4pp
RenaissanceRe 344 217 -37% 21.7% 13.9% -7.8pp
SCOR 206 189 -8% 9.2% 8.0% -1.2pp
Swiss Re 1,224 2,166 77% 8.1% 13.5% 5.4pp
Validus 292 254 -13% 16.9% 13.3% -3.6pp
White Mountains 120 147 22% 6.1% 7.9% 1.8pp
XL 398 623 57% 8.3% 12.2% 4.0pp
ABA 15,138 15,996 6% 10.8% 10.4% -0.4pp *Common net income as a percentage of average common equity Figures in reporting currencies, but converted to USD (millions) for ABA line n.m. = not meaningful Source: Company reports, Aon Benfield Market Analysis
29 The Aon Benfield Aggregate – Results for the six months ended June 30, 2013
Exhibit 34: Results for the six months ended June 30, 2013 (cont’d)
Cash and Cash and Shareholders’ Shareholders’ Investments Investments Funds Funds Company FY 2012 1H 2013 Change FY 2012 1H 2013 Change ACE 61,333 60,821 -1% 27,531 27,295 -1%
Alleghany 18,976 18,783 -1% 6,404 6,498 1%
Allied World 8,799 9,032 3% 3,326 3,373 1% Amlin 4,396 4,462 1% 1,497 1,650 10%
Arch 13,127 13,427 2% 5,169 5,234 1%
Argo 4,297 4,087 -5% 1,514 1,491 -2% Aspen 8,240 8,017 -3% 3,488 3,235 -7%
Axis 14,397 14,388 0% 5,780 5,562 -4%
Beazley 4,330 4,202 -3% 1,205 1,158 -4% Catlin 8,774 8,529 -3% 3,512 3,491 -1%
Endurance 6,639 6,515 -2% 2,711 2,736 1%
Everest Re 16,805 16,267 -3% 6,733 6,623 -2% Fairfax 26,125 24,883 -5% 8,821 8,486 -4%
Gen Re 15,119 14,439 -4% 10,693 10,115 -5%
Hannover Re 46,565 46,391 0% 6,032 5,595 -7% Hiscox 3,073 3,183 4% 1,365 1,390 2%
Lancashire 2,253 2,090 -7% 1,387 1,266 -9%
Mapfre 39,402 40,530 3% 7,810 7,868 1% Markel 9,333 16,584 78% 3,889 6,321 63%
Montpelier Re 3,320 3,248 -2% 1,629 1,570 -4%
Munich Re 208,614 204,198 -2% 27,181 25,405 -7% NICO 124,064 136,233 10% 79,409 86,604 9%
PartnerRe 18,831 17,856 -5% 6,933 6,367 -8%
Platinum 4,062 3,727 -8% 1,895 1,747 -8% QBE 31,587 29,969 -5% 11,358 11,163 -2%
RenaissanceRe 6,595 6,374 -3% 3,503 3,568 2%
SCOR 22,552 21,985 -3% 4,800 4,696 -2%
Swiss Re 176,894 168,667 -5% 34,002 30,110 -11%
Validus 8,156 7,871 -3% 4,021 3,618 -10%
White Mountains 8,256 7,724 -6% 3,732 3,689 -1%
XL 36,599 35,216 -4% 10,510 9,893 -6%
ABA 1,067,444 1,057,928 -1% 314,264* 312,514 -1% *To allow more consistent comparison, Transatlantic and Alterra’s reported capital is included in the year-end capital figures shown in Exhibit 2 and 3 Figures in reporting currencies, but converted to USD (millions) for ABA line Source: Company reports, Aon Benfield Market Analysis
30
Contact Information Should you have any questions about this report, please contact marketanalysis@aonbenfield.com, or a member of Aon Benfield Analytics, including:
Mike Van Slooten mike.vanslooten@aonbenfield.com
Jonny Eggins jonathan.eggins@aonbenfield.com
Marie Teissier marie.teissier@aonbenfield.com
Mike McClane michael.mcclane@aonbenfield.com
Eleanore Obst eleanore.obst@aonbenfield.com
Scan here to access all editions of the Aon Benfield Aggregate
Aon Benfield 55 Bishopsgate London EC2N 3BD t +44 (0)20 7088 0044 f +44 (0)20 7575 7001 aonbenfield.com
Aon UK Limited trading as Aon Benfield (for itself and on behalf of each subsidiary company of Aon Plc) (“Aon Benfield”) reserves all rights to the content of this report. This document is intended as a courtesy to the recipient for general information and marketing purposes only and should not be construed as giving advice or opinions of any kind (including but not limited to insurance, tax, regulatory or legal advice). The contents of this document are based on publicly available information and/or third party sources in respect of which Aon Benfield has no control and which have not necessarily been verified. The content of this document is made available without warranty of any kind and without any other assurance whatsoever as to its completeness or accuracy. Aon Benfield disclaims any legal or other liability to any person or organization or any other recipient of this document (together a "Recipient") for loss or damage caused by or resulting from any reliance placed on this document or its contents by such Recipient.