June 15th, 2009

Global Reinsurance Composite Net Income, Combined Ratio Improve

Posted at 1:30 AM ET

Christopher Klein, Global Head of Business Intelligence
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The Guy Carpenter Global Reinsurance Composite’s net loss narrowed from the first quarter of 2008 to that of 2009. This year, the group showed an aggregate net loss of USD127 million — an improvement of 86 percent. Declines in unrealized losses and better non-life underwriting results are the primary drivers.

[Chart after the jump]

1gc-reinsurance-global-composite-source

Unrealized losses improved from USD5.3 billion for the first quarter of 2008 to USD3.2 billion for the first quarter of 2009. This 39 percent change made it the most influential factor in the Global Reinsurance Composite’s overall result year-over-year. Most of the change, however, came from a few large players, which means that, for the majority of the reinsurers covered, unrealized losses were flat from first quarter to first quarter.

Realized losses, though, increased 271 percent year-over-year to USD1.7 billion, with European and Bermudan reinsurers sustaining the greatest impacts. The drastic change came from reinsurers’ existing positions that had become unprofitable in 2008, thus crystallizing unrealized losses. Nonetheless, the companies in the Global Reinsurance Composite appear to have turned the corner. Only two of 16 posted net losses after realized and unrealized gains and losses.

Non-life underwriting results, on the other hand, were up industry-wide. The Global Reinsurance Composite posted an aggregate gain of 60 percent –from USD700 million to USD1.1 billion from the first quarter of 2008 to the first quarter of 2009. Last year’s non-life underwriting result was depressed by a significant increase in the size and frequency of large per risk property claims (relative to the first quarter of 2007), a situation that did not extend to the beginning of this year. Further, non-life underwriting performance at the beginning of 2009 was bolstered by releases from prior years’ loss reserves. Consequently, the Global Reinsurance Composite’s combined ratio decreased from 96 percent for the first quarter of 2008 to 93 percent for that of 2009.

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