David Flandro, Senior Vice President Contact European reinsurers are focused on two critical issues: residual exposure to risky assets and effective capital deployment. This is a stark change from the past two years, in which the return of capital to shareholders was the dominant priority for many. The excess capital positions of the years following Hurricanes Katrina, Rita, ... Continue Reading »
Chart: European Reinsurer Investment Allocation
The degree of asset-side losses in the first nine months of the year broadly reflected companies' exposures to residential mortgage-backed securities (RMBS), equities, and "other" investments. Swiss Re, ACE, and Flagstone had relatively high exposures to these asset classes. To download this chart, right-click on the image, and select “Save Picture As”. If you have any trouble, ... Continue Reading »
Chart: European Composite P&C Combined Ratios
Underwriting results for the Guy Carpenter European Composite were less positive in 2008 than in 2007, with earnings mitigated by hurricane losses. Still, most groups had combined ratios of below 100 percent, with only two companies reporting technical losses in the first nine months. The simple average of Europeans' nine month combined ratios was 98.8 percent. For comparison, i ... Continue Reading »
Chart: European Composite Hurricane Exposures
Losses from Hurricanes Gustav and Ike contributed substantially to technical profit declines. Hurricane losses were more significant as a percentage of capital for smaller European companies than for larger ones. Relative loss of capital appears to have been broadly, although not exactly, correlated to size. Hannover Re and Flagstone were hit hardest, with each losing 9 percent ... Continue Reading »
Chart: European Composite Hurricane vs Investment Losses
The effects of natural catastrophes and asset-side losses differed significantly by company. While the two major hurricanes had a relatively minor effect on Swiss Re, third quarter asset losses impaired capital severely. The opposite was true for Paris Re, which saw larger hurricane losses than asset losses in the quarter. Hannover Re and Flagstone experienced significant ... Continue Reading »
Bermuda-Based Firms Persevere
Market Information Department, Guy Carpenter Property and financial catastrophes, combined with earlier stock buybacks, reduced Bermuda-based (re)insurer shareholders' equity over the first three quarters of 2008. Even with a 7.5 percentage point increase to the Guy Carpenter Bermuda Composite's combined ratio and an 86 percent drop in underwriting profits, this group of 17 ... Continue Reading »
Chart: Bermuda Composite Financing Activity
XL Capital reported total assets of USD44.6 billion and shareholders' equity of USD8.7 billion at the end of the third quarter - representing 26 percent of the Guy Carpenter Bermuda Composite's asset base and 17.4 percent of aggregate shareholders' equity. The firm acquired such large amounts of capital this year because it needed to fund the execution of a master agreement to ... Continue Reading »
Chart: Bermuda Composite Combined Ratio
Compared to the past five years, the Guy Carpenter Bermuda Composite's underwriting results are not abnormal. Unusually low catastrophe losses in 2006 and 2007 make the first nine months of 2008 seem extreme. Material loss and loss adjustment expense redundancies were unusually low in 2006 and 2007 as well. Reserve redundancies reduced the Bermuda Composite's combined ratio by ... Continue Reading »
Chart: Bermuda Composite Price/Book Ratios
Increased demand for reinsurance, particularly after Bermuda's 2008 share buybacks and dividend payments - and the year's impairment of investment assets - may require firms in the Guy Carpenter Bermuda Composite to raise capital in 2009 (though the group believes it is well-capitalized already). If there is a spike in demand, adding cash to balance sheets could be an expensive ... Continue Reading »
Chart: Bermuda Composite Asset Allocation
Cash and short-term investments reached their highest levels since 2008 - in both absolute and percentage terms - by the end of the third quarter. The Guy Carpenter Bermuda Composite had 8 percent of its aggregate investments in this asset class at the end of 2003, an amount that reached 11.6 percent at the end of September 2008. Assets held in bonds dipped slightly from 55.8 ... Continue Reading »
