February 7th, 2011

Guy Carpenter European Reinsurance Composite: 3rd Q 2010

Posted at 1:00 AM ET

flandro_davidDavid Flandro, Global Head of Business Intelligence
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Net income for Guy Carpenter’s European Reinsurance Composite grew by 38 percent for the first nine months of 2010 relative to the prior-year period, despite USD5.7 billion of incurred catastrophic losses. As with the broader composite, these losses were mostly related to the Chilean Earthquake, Windstorm Xynthia, the Deepwater Horizon oil rig explosion and the New Zealand Earthquake. They contributed 11.4 percentage points to the Composite’s combined ratio of 97.7 percent.

Investment income was down 10 percent from the prior-year period, reflecting lower investment yields. Realized capital gains experienced a complete reversal from 2009’s losses, due largely to a decline in asset impairments. Companies now need to face the challenge of how to reinvest cash and maturing investments in the current low yield environment.

gc-europe-insurance-3rd-2010

Shareholders’ funds for the European Composite grew by 11.4 percent from year-end 2009, largely on the continued recovery of asset values and strong operating results. With overall market conditions failing to have improved materially over the past 18 months, companies have decided to return capital to shareholders in the form of buybacks and, secondarily, of dividends. Capital returns through the nine months of 2010 amounted to nearly USD4.7 billion.

Most of the balance sheet de-risking activities initiated last year have largely been completed. Concerns over exposure to sovereign debt (namely to Greece, Ireland, Italy, Portugal, and Spain) increased, but the European Composite members have minimal exposure to these countries (with the exception of Munich Re, which held approximately EUR8.0 billion).

Non-life gross premiums written contracted by 4.5 percent for the first nine months of 2010 versus the prior-year period while gross writings for life business grew by 4.3 percent, helping limit the impact on the overall top line to a decline of 1.1 percent.

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