January 6th, 2010

Nine Months 2009: Guy Carpenter Bermuda Composite

Posted at 11:40 AM ET

Chris Klein, Global Head of Business Intelligence


After a challenging 2008, the companies in Guy Carpenter’s Bermuda Composite experienced substantial recovery in their balance sheets as a more positive investment environment and the absence of a major US hurricane drove income higher. The composite’s net income improved to $7.28 billion in the first nine months of 2009, up from a $440 million loss in the same period last year.


On the underwriting side, the Bermuda Composite’s underwriting figures improved, with total non-life underwriting profits jumping to $3.7 billion in the first nine months of 2009 from just $468 million in the same period in 2008.

The lack of catastrophic losses helped the Bermuda Composite companies report an aggregate combined ratio of 85 percent for the first nine months of 2009, a 12 percentage point improvement from the first nine months of 2008 when results were impacted by catastrophic losses of almost $4 billion, primarily relating to Hurricanes Gustav and Ike. The combined ratio for the nine months of 2009 also benefited from reserve releases which reduced the aggregate combined ratio by nearly 5 percentage points. However, there were very wide variations in reserve benefits, with some companies reporting double digit percentage benefits to their loss and combined ratios.

Earnings were also boosted by the turnaround in the investment markets. Realized losses from the disposal of investments declined by 40% to $0.9 billion. Unrealized investment losses reversed from a deficit of $1.7 billion in the first nine months of 2008 to gains of $1.8 billion in the first nine months of 2009. Meanwhile, investment income from dividends and interest on investment and deposits was little changed at $4.1 billion.


Aggregate shareholders’ funds (SHF) increased by 20 percent in the first nine months of 2009. More significantly, SHF at September 30, 2009 exceeded the level of the Bermuda Composite at the start of 2008, when the sector was generally accepted to be in possession of excess capital.

A significant cause of the decrease in SHF in 2008 was share buy-backs totaling $3.3 billion and were primarily completed in the first half of the year. In the midst of the financial crisis, many of the companies in the Bermuda Composite suspended their share repurchase programs later in 2008. However, many of these same companies have begun looking at buying back shares during the third quarter of 2009 and this activity is likely to continue as many companies, especially public ones, face pressure from analysts and shareholders to utilize or return any excess capital.

Bermuda was the location of some of the most notable corporate activity in the reinsurance sector in 2009. The Bermuda-domiciled company Partner Re acquired Paris Re and Validus bought IPC Holdings after a protracted contest with Max Capital. Valuations for many Bermuda companies remain depressed and speculation about possible combinations continues. In 2010, Bermuda companies will face the challenge of achieving growth in a weaker market either organically, through merger and acquisition or returning capital to shareholders.

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