Aon plc (NYSE: AON), the leading global professional services firm providing a broad range of risk, retirement, reinsurance and health solutions, today launches its latest report on Aon’s Reinsurance Aggregate (‘the ARA’). This edition analyses the full year 2019 financial performance of a select group of 23 global reinsurers, which together underwrite around 50 percent of the world’s non-life reinsurance premiums and a large majority of the life reinsurance premiums. It establishes a useful ‘baseline’ from which to assess the potential impacts of the COVID-19 crisis on the reinsurance sector as a whole.
The key financial highlights for full year 2019 were as follows:
• ARA total capital was USD255 billion at December 31, 2019 – an increase of 10% relative to the prior year-end.
• ARA Property & Casualty (P&C) gross premiums written rose by 9% to USD210 billion, while P&C net premiums earned increased by 7% to USD165 billion.
• The ARA’s net combined ratio was 100.3% (2018: 99.1%); natural catastrophe losses contributed 6.0pp (7.3pp), while favourable prior year reserve development provided 1.5pp (3.5pp) of benefit.
• The total investment yield reported through the ARA’s income statements swung from a post-financial crisis low of 2.6% in 2018, to a high of 4.4% in 2019.
• ARA pre-tax profit stood at USD21.5 billion in 2019, an increase of 87% relative to the prior year. Net income almost doubled to USD18.2 billion.
Mike Van Slooten, Head of Business Intelligence for Reinsurance Solutions, and author of the ARA report, said: “Reinsurers faced a challenging operating environment in 2019. On the underwriting side, carriers were confronted with higher retrocessional costs, adverse development of recent catastrophe losses, and deteriorating trends in US casualty business. At the same time, interest rates in the key US and UK markets went into reverse, as policymakers sought to address worsening prospects for global economic growth.
“On a positive note, reinsurers benefited from a modest increase in demand for cover, and the re-pricing of loss-impacted business, while natural catastrophe losses reduced to a level broadly in-line with long-term averages. On the investment side, total returns were boosted by very strong stock market performance and unrealised gains on bond portfolios associated with the cuts in interest rates. As a result, after two years of sub-par earnings in 2017 and 2018, the ARA’s return on equity rebounded to 9.5% in 2019, which was some way ahead of the average cost of capital.”