1. business and industrial
2. company
3. earnings

BEST’S SPECIAL REPORT
Global Reinsurance
Our Insight, Your Advantage.
Financial Review
April 7, 2015
“Results
masked by
low Cats and
continued
reserve
releases”
Appearances Can Be Deceiving
During 2014 the reinsurance industry continued to face increased challenges in terms of price
declines, increased commissions and tougher terms and conditions. However the industry did
manage to deliver solid results for the year with most companies reporting strong combined ratios
and profitable returns. The benign level of cats and the never-ending favorable reserve releases was
once again the determining factor for such strong performance.
Regardless of how the industry has been performing and delivering profitable results, A.M. Best does
recognize the warning signs and in August of 2014 we revised our outlook for the industry from
stable to negative. The main reasons for our decision was our view that the industry continues to
face serious challenges in terms of the overflow of capital, softening premium rates, low interest
rates, and the possibility of lax underwriting by some in order to maintain business.
The competitive landscape continued during the January renewal with increased retentions, higher
ceding commissions and broader terms and conditions. While competition was most pronounced on
U.S. property catastrophe programs, the overflow of capacity to other business classes and regions
continues to place pressure on business across the board. January 1 2015 renewals once again
reported a decline in reinsurance prices between 5-15% depending on risk and loss experience.
The dramatic price declines in 2014 and for January 1 continued to be attributed to the lack of
market-changing losses, increased retentions and the abundance of capital in the market. For
global companies, however, the approach to risk selection appears to be orderly and the industry is
expected to remain cautious on the risks they elect to write as capacity remains high and the market
becomes increasingly more competitive. Portfolios continue to shift more toward primary business
given that pricing continues to be relatively more attractive and access to the business easier than
on the reinsurance side. Reinsurers also continue to increase their utilization of retro-reinsurance
capacity as a means to reduce their cost of capital.
In addition, on the investment side things do not look much better. The persistent low interest rate
environment has continued to put pressure on returns leading to the need for better underwriting
returns. That said, some companies have started investing into riskier assets in search of yield. This
has been done in a measured manner and we expect that companies remain mindful of excessively
risky investments that could damage the strength of rated balance sheets.
analytical Contacts:
M&A activity took center stage in 4Q14 and during the first part of 2015 with some significant merger
deals announced. XL Group signed a definitive agreement to buy Catlin, RenRe to buy Platinum
Underwriters and Partner Re and Axis signed an agreement to combine into a single company
through a merger of equals and most recently Endurance Specialty Holdings Ltd. (Endurance) has
signed to acquire Montpelier Re Holdings Ltd (Montpelier).
Mariza Costa, Oldwick
+1 (908) 439-2200 Ext. 5308
Mariza.Costa@ambest.com
M&A activity is expected to continue as the need for scale, global presence and diversified books of
business continues to place pressure on companies.
Greg Reisner, Oldwick
+1 (908) 439-2200 Ext. 5224
Greg Reisner@ambest.com
Capital management was also a focus in 2014 and is expected to remain in 2015 as companies
continue to actively return capital to shareholders in the form of dividends and share buybacks.
Global reinsurers returned approximately $17 billion of total capital in 2014 (exhibit 1) which
accounted for over 60% of the total net income reported for the year. Valuations remain low and
companies remain proactive in managing capital given its abundance in the market. Given that
Robert DeRose, Oldwick
+1 (908) 439-2200 Ext. 5453
Robert.DeRose@ambest.com
Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. No part of this report or document may be distributed
in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of the A.M. Best
Company. For additional details, refer to our Terms of Use available at the A.M. Best Company website: www.ambest.com/terms.
Special Report
Global Reinsurance
companies maintain very strong balance sheets, it is expected that share buybacks, absent any significant
CAT event, will continue to be part of companies’ capital management strategy for the near term.
Exhibit 1
Global Reinsurance Shareholders' Equity plus Cumulative Share
Repurchases and Dividends Since 2009
Shareholders' Equity (USD Billions)
350
20
300
250
200 0
2
3
12
8
16
194
194
10
22
12
27
218
219
36
150
100
184
235
Exhibit 1
50 Reinsurance Shareholders' Equity plus Cumulative Share
Global
Repurchases
and Dividends Since 2009
0
Shareholders' Equity (USD Billions)
350 2009
2010
Shareholders' Equity (End of Period)
300
2011
Share Repurchases
2012
2013
2014
Common and Preferred Dividends (as of 2010)
20
Source: Company reports, Imetrix, Bloomberg
12
10
36
27
22
Financial Performance – Results Driven By Yet 8another Benign Year
3
16
200 0 of A.M. Best’s global
12
The analysis
reinsurer composite
clearly illustrates underwriting profitability in
Exhibit2 2
250
2014 and improvement in overall earnings as the sector benefited from another year of record low
Global
150 Market Reinsurance Trends For Ratios and Reserve Development
catastrophe
losses. The composite produced a calendar year combined ratio of 89.5% as compared to
50.0%
120.0%in 2013 and 92.0% in 2012. According to Munich Re, insured
235
88.6%
losses for the entire
218 catastrophe 219
100 184
194
194
107.4%
45.0%
year totaled only $31 billion, same as in 2013, as compared with the 10 year average of $58 billion.
100.0%
94.6%
95.4%
The
largest
loss came from
snow storms in Japan92.0%
which reported
overall
losses
of
$5.9
billion
and
40.0%
50 89.5%
89.5%
88.6%
31.3%
insured losses of $3.1 billion. U.S. winter storms led to insured losses of $2.3 billion (total losses35.0%
of $4
80.0%
31.6%
31.4% 2014.
31.3%
billion) 0and30.6%
UK floods led
to $1.1 billion of insured
losses (total
losses
of
$1.5
billion)
during
33.1%
32.2%
30.0%
2009
2010
60.0%
Shareholders' Equity (End of Period)
2011
Share Repurchases
2012
2013
2014
25.0%
Common and Preferred Dividends (as of 2010)
Given that overall CAT losses remained below average in 2014, results for the global reinsurance
63.2%
20.0%
56.4% for 2014 (exhibit
Source: Company
reports,
Imetrix,
Bloomberg
market
remained
strong.
The
reported
calendar 60.7%
year combined
ratios of 89.5%
2)
76.1%
56.5%
63.8%
40.0%
58.9%
15.0%
also reflect the continuation of favorable loss reserve development that amounted to 5.3 points in
10.0%
20.0%
Exhibit 2
5.0%
Global
Market
Reinsurance
Trends
For
Ratios
and
Reserve
Development
0.0%
0.0%
2011
2012
Loss Ratio
Expense Ratio
107.4%
Source: Company reports, A.M. Best Research
120.0%
100.0%
80.0%
2009
2010
95.4%
89.5%
31.3%
31.6%
30.6%
2013
Fav. Loss Dev.
2014
5yr Avg
45.0%
92.0%
88.6%
31.3%
32.2%
89.5%
33.1%
94.6%
31.4%
60.0%
40.0%
40.0%
35.0%
30.0%
25.0%
63.8%
58.9%
76.1%
60.7%
20.0%
Exhibit
3
Global Reinsurance Market Trends for
0.0%
2011
2012
Return on2009
Equity 2010
Loss Ratio
16%
14.7% reports, A.M. Best Research
Source: Company
14%
12%
50.0%
12.1%
10.6%
Expense Ratio
56.5%
56.4%
63.2%
20.0%
15.0%
10.0%
5.0%
2013
Fav. Loss Dev.
13.1% 2
11.4%
2014
5yr Avg
0.0%
Four
Bermuda Four
Bermuda Four
2009
Special Report
2014 compared with 5.7 points in 2013 and
6.1 points in 2012. Since 2007, the global
reinsurance sector has benefited from $56
billion in favorable reserve development. That
said, the benefit from favorable development
is expected to decline going forward as we
believe older accident years have given as
much as they can and more recent accident
years are leaner in terms of potential
redundancy.
Underwriting profits along with investment
income and realized capital gains produced
another solid year for the global reinsurers.
That said, returns are starting to show signs
of a decline compared with prior years. The
sector generated a return on equity (ROE) of
11.4% in 2014 compared with 13.1% in 2013
and 12.1% in 2012 (exhibit 3). The general
expectation going forward is for an ROE in the
high single digits, given the continued decline
in rates, higher commissions, less reserve
redundancy, and low investment yields.
Investment income remains an important
element of the sector’s total returns, however,
investment returns continue to decline
as yields remain at historically low levels
(exhibit 4). In order to battle this trend
of lower yields, increased competition and
higher expenses companies are moving
portions of their investment portfolios into
higher return alternative investments at a
gradual pace. It remains to be seen how
aggressive companies will be in allocating
capital to such assets classes.
U.S. and Bermuda, “Big Four” and Lloyds
2010
Bermuda Four
2011
Loss Ratio
Source: Company reports, A.M. Best Research
201
Expense Ratio
Global Reinsurance
Exhibit 6
Exhibiton
3 Equity by Reinsurance Sector
Return
Global Reinsurance Market Trends for
30%
Return on Equity
16%
25%
14.7%
14%
20%
13.1%
12.1%
12%
15%
10%
10%
8%
5%
6%
0%
4%
10.6%
2009
-5%
2%
2010
2.5%
2011
European "Big Four"
11.4%
2012
US & Bermuda Market
2013
Lloyd's
Source:
0% Company reports, A.M. Best Research
2009
2010
2011
Return on Equity
2012
2013
2014
5YR Avg Return on Equity
Source: Company reports, A.M. Best Research
Exhibit 4
Exhibit
5
Net
Investment
Income as a % of Total Revenue
Combined Ratios by Reinsurance Sector
20%
18%
120%
107% 108% 107%
16%
14%
100%
12%
99%
94%
87%
95%
93%
Lloyds
2012
2013
91%
91
US &
Big
Bermuda Four
Lloy
86%
10%
80%
8%
6%
60%
4%
2%
40%
0%
U.S. & Bermuda
2009 2010
2011
Euro "Big Four"
2014
Source:
20% A.M. Best Research
Analyzing the performance between the
U.S. & Bermuda, European reinsurers, and Lloyds the market showed continued signs of strength.
Each segment achieved solid underwriting and overall0%profiBig
table Lloyd's
results.USThe
Bermuda
& U.S.
Big and
Lloyd's
US &
Big
Lloyd's
Four
Bermuda
Four
Bermuda Four
market appeared to have outperfromed from an underwriting perspective, producing a combined
2011
ratio of 87.5%, marginally better than Lloyds’ 88.1% result (exhibit2009
5). Last year Lloyds2010
marginally
Loss Ratio
outperformed the U.S. and Bermuda. This years’ slight
deterioration
in combined
ratios from Lloyds
Source:
Company reports,
A.M. Best Research
could be attributable in part to the recent aviation tragedies around the world. The European “Big
Four” (Munich, Swiss, Hannover and SCOR) produced a very acceptable 92.4% combined ratio
reflective of their broader portfolio diversification and
less dependence
on U.S. property catastrophe
Exhibit
6
business. Over the longer term this will prove to beReturn
a distinguishing
factor by
andReinsurance
an advantage in their
on Equity
Sector
future performance relative to other markets and companies.
30%
On a five-year basis, the U.S. & Bermuda market produced
25% an average combined ratio of 93.1% as
compared to a 93.6% for Lloyds and 96.5% for European reinsurers (exhibits 8, 9, 10). These five
20%
3
15%
20
Expense Ratio
0%
2009
2010
2011
Return on Equity
2012
2013
2014
5YR Avg Return on Equity
Special
Reportreports, A.M. Best Research
Source: Company
Global Reinsurance
Exhibit 5
Combined Ratios by Reinsurance Sector
120%
107% 108% 107%
100%
99%
94%
87%
95%
93%
91%
86%
91%
93%
91%
87%
87%
92%
88%
87%
Lloyd's
US &
Bermuda
80%
60%
40%
20%
0%
Big
Four
Lloyd's
US &
Big
Bermuda Four
2009
Lloyd's
US &
Big
Bermuda Four
2010
Lloyd's
US &
Big
Bermuda Four
2011
Loss Ratio
Source: Company reports, A.M. Best Research
Lloyd's
US &
Big
Bermuda Four
2012
Lloyd's
US &
Big
Bermuda Four
2013
Expense Ratio
year averages for the global reinsurance market includes the significant losses from the CAT events of
Exhibit 62011 (Japan, Australia, New Zealand, Thailand, U.S. tornadoes) and Superstorm Sandy in 2012.
Return on Equity by Reinsurance Sector
30%
25%
20%
15%
10%
5%
0%
Lloyds was the best performer in 2014 in terms of ROE reporting 14.7% compared with 11% for the
European “Big Four” and 10.6% for U.S. and Bermuda (exhibit 6). Over the past five years, Lloyds
has reported an average ROE of 13% versus 10.4% for U.S. & Bermuda and 10.0% for the European Big
Four. Each segment continues to benefit from favorable reserve development. Lloyds and the U.S. &
Bermuda market have averaged 6.1 points and 6.6 points respectively of favorable development over
the past five years versus 4.0 points for the European Big Four (exhibits 8, 9, 10).
In terms of capital, shareholders’ equity grew 7% in 2014 compared with 2013. This compared with
flat growth for the market in 2013 versus 2012. The increase during 2014 could be attributed to the
industry’s strong results given the lack of significant losses as well as capital gains. Contributions to
rated capacity from earnings totaled $25.7 billion in 2014.
2009
2010
2011
2012
2013
2014
However, let’s pause for a moment and take a short trip back in time to the year 2006. We are talking
about
the reinsurance
post
Hurricanes
and Wilma
financial crisis was still
European
"Big Four" sectorUS
& Bermuda
MarketKatrina, Rita
Lloyd's
Fiveand
Yearthe
Average
a couple
years
Now, it’s true that 2006 was an exceptional year and those market dynamics
Source: Company
reports,of
A.M.
Best away.
Research
can’t be expected to return anytime soon. Nonetheless, for perspective, think about that the fact
that the U.S. & Bermuda market that year reported a combined ratio of 87%, which included less
than 1 percentage point of favorable loss reserve development but the average ROE that year was an
astonishing 19.4%, with several companies reporting ROEs in excess of 20%. This provides a sense
Exhibit 4of the rate on line and investment returns companies were achieving back then. Today, benign cats
Net Investment
Income as a % of Total Revenue
years and a heaping pile of favorable reserve development allows the sector to barely scrape out a
20%
double digit return.
-5%
18%
16%
m&a expected to continue in 2015
14%
The end of 2014, early 2015 marked the move towards M&A in the reinsurance industry, particularly
12%
10%
8%
4
2014
Four
Bermuda Four
2009
Bermuda Four
2010
Bermuda Four
2011
Loss Ratio
Source: Company reports, A.M. Best Research
Special Report
Bermuda Four
Bermuda Four
2012
2013
Expense Ratio
Global Reinsurance
Exhibit 6
Return on Equity by Reinsurance Sector
30%
25%
20%
15%
10%
5%
0%
2009
2010
2011
2012
2013
2014
-5%
European "Big Four"
US & Bermuda Market
Lloyd's
Five Year Average
Source: Company reports, A.M. Best Research
in Bermuda where several major deals have been announced - RenRe/Platinum, XL/Catlin, PartnerRe/
AXIS and Endurance/Montpelier.
Exhibit 4
Netincrease
Investment
Income
as a % of
Totala function
Revenue
The
in mergers
and acquisitions
is likely
of the current market environment that is
only
20%expected to become more challenging as the year progresses. Recently announced deals seem
to18%
address the need for greater global scale and diversified product lines and distribution. Cedents
want companies that have a wide product offering and a strong market presence which seems to be
16%
replacing the days of specialty focused reinsurance companies. Competition for a shrinking amount
of14%
business is intensifying and companies understand that they must change the way they do business
12%the way they see the market. Expense controls, capital adequacy, disciplined underwriting,
and
strong
10% ERM and anticipation to what is emerging in the market needs to remain the focus for
companies.
8%
6%
M&A seems to address some of the challenges currently affecting the industry and the deals have
4%
been, and will likely continue to be, strategic in nature. Companies have mentioned the need for
2%
expense
saving and most seem to believe multi-million dollar savings is possible. Others indicate
0%customers want fewer; strong partners to work with and that programs are getting smaller and
that
& Bermuda
Lloydsfor global, experienced,
Euro "Big Four" strong, and well diversified companies
sometimes U.S.
more
complex. The need
2011 2012 2013 2014
2009 2010
isSource:
driving
the M&A wave and we believe this will continue in the medium term
A.M. Best Research
Reinsurance Ratings Outlook Remain Negative
A.M. Best is maintaining its outlook for the reinsurance sector at negative, citing the significant
ongoing market challenges that will hinder the potential for positive rating actions over time and
may translate into negative rating pressures. As current market conditions continue to place a strain
on profitability it is expected that rated balance sheets could experience some negative pressure.
Our current view is longer term than our typical 12-18 months. While A.M. Best does not anticipate
a significant number of negative outlooks or downgrades over the very near term, the market
headwinds at this point present significant longer-term challenges for the industry.
Declining rates, broader terms and conditions, unsustainable flow of net favorable reserve
development, low investment yields and continued pressure from alternative capital coming into
the market are all negative factors that we expect will adversely affect risk-adjusted returns over the
longer term.
5
Bermuda
2014
Special Report
Global Reinsurance
Cycle management has been a key strategy for those companies that are able to move between
primary and reinsurance lines of business. Companies have been focused on new growth
opportunities and investments into new geographies. On the investment side, companies are moving
slightly more towards higher return investments in search of yield, making investment portfolios
slightly riskier than over the past few years.
Companies with diversified books of business, advanced distribution capabilities and broad
geographic scope are better positioned to withstand the pressures in this type of operating
environment and have greater ability to target profitable opportunities as they arise. The recent uptick
in M&A activity may also serve as a release valve on ratings pressure as organizations gain increased
scale, capital efficiency and broader product and distribution capabilities.
Overall, this remains a challenging market, but the reinsurance industry posted solid results for 2014,
which was once again driven in part by the lack of large cat losses, continued share repurchases
and favorable reserve releases. Conditions will remain competitive and challenging, as primary
companies are expected to continue to retain more business and/or seek higher ceding commissions
or multi-year contracts. Margin compression also will likely continue as third-party capital seeks a
larger piece of the pie. As a result, A.M. Best is forecasting underwriting performance to produce
an average combined ratio of 94.8% and an average ROE of 8.2%, representing the current difficult
market environment and a normal level of cat activity. Despite the forecast for these dreary returns,
risk-adjusted capital should remain strong as companies also reduce their retained exposure to less
attractively priced business classes. A.M. Best also continues to expect significant share repurchases
for the global reinsurance segment, depending on the level of future catastrophe activity and market
opportunities.
A possible change in the ratings outlook back to stable would be based on A. M. Best’s view of future
earnings capability and risk-adjusted returns on capital. If the reinsurance market turns, rates start to
increase and operating fundamentals start to improve, A.M. Best will consider a revision of its current
ratings outlook.
6
Special Report
Global Reinsurance
Exhibit 7
Global Reinsurance Market - U.S. & Bermuda, European “Big Four” and
Lloyd’s Trend Summary
USD billions
5-Yr Avg
138.1
136.6
26.8
3.6
232.2
2014
156.1
152.5
25.2
11.3
240.2
2013
158.0
151.5
25.3
1.7
250.3
2012
146.6
143.7
27.3
7.6
250.4
2011
137.0
133.4
26.0
2.4
226.4
2010
128.0
126.7
24.3
10.6
227.9
2009
120.9
127.8
31.0
(4.2)
206.0
20.5
25.7
28.5
24.9
4.9
20.3
24.1
Shareholders’ Equity (End of Period)
202.0
235.3
218.9
218.4
194.3
193.9
184.3
Loss Ratio
Expense Ratio
Combined Ratio
63.2%
31.4%
94.6%
56.4%
33.1%
89.5%
56.5%
32.2%
88.6%
60.7%
31.3%
92.0%
76.1%
31.3%
107.4%
63.8%
31.6%
95.4%
58.9%
30.6%
89.5%
Favorable Loss Reserve Development
-5.4%
-5.3%
-5.7%
-6.1%
-6.3%
-4.9%
-3.9%
Net Investment Ratio1
Operating Ratio
19.7%
74.8%
16.5%
73.0%
16.7%
71.9%
19.0%
72.9%
19.5%
87.9%
19.2%
76.2%
24.2%
65.3%
Return on Equity
Return on Revenue
10.6%
8.8%
11.4%
10.7%
13.1%
11.4%
12.1%
9.9%
2.5%
2.2%
10.6%
8.9%
14.7%
11.7%
68.3%
284.1%
315.0%
66.3%
237.1%
260.3%
72.2%
268.4%
296.0%
67.1%
264.2%
293.5%
70.5%
298.4%
326.6%
66.0%
292.8%
326.6%
65.6%
296.7%
332.2%
NPW (P&C only)
Net Earned Premiums (P&C only)
Net Investment Income
Realized Investment Gains / (Losses)
Total Revenue
Net Income
NPW (P&C only) to Equity (End of Period)
Net Reserves to Equity (End of Period)
Gross Reserves to Equity (End of Period)
Net Investment Ratio based on PC NPE
Source: Company reports, Imetrix, Bloomberg
1
Exhibit 8
U.S. & Bermuda Reinsurance Market Trend Summary
USD billions
5-Yr Avg
54.9
54.0
7.6
1.3
66.3
2014
63.6
61.7
7.3
1.0
73.6
2013
59.8
56.6
6.8
1.4
69.6
2012
56.7
55.5
7.1
2.2
68.6
2011
55.0
54.4
7.6
(0.1)
64.6
2010
52.6
52.4
8.1
2.2
65.7
2009
50.3
51.1
8.2
0.8
63.1
9.4
11.6
12.1
10.1
0.9
11.2
12.4
96.1
110.4
101.4
101.7
93.7
95.1
88.4
Loss Ratio
Expense Ratio
Combined Ratio
62.8%
30.3%
93.1%
54.9%
32.6%
87.5%
55.3%
31.4%
86.7%
63.4%
29.8%
93.1%
77.3%
30.0%
107.3%
61.8%
30.9%
92.7%
56.1%
29.7%
85.8%
Favorable Loss Reserve Development
-6.1%
-5.8%
-6.5%
-5.8%
-6.0%
-6.2%
-6.1%
Net Investment Ratio1
Operating Ratio
14.0%
79.1%
11.8%
75.7%
12.0%
74.7%
12.7%
80.4%
14.0%
93.3%
15.4%
77.3%
16.0%
69.8%
Return on Equity
Return on Revenue
10.4%
14.1%
10.6%
15.7%
12.1%
17.4%
10.6%
14.8%
1.0%
1.5%
11.9%
17.1%
16.2%
19.7%
57.1%
131.0%
160.4%
57.6%
116.8%
138.2%
59.0%
125.6%
150.4%
55.7%
130.3%
157.7%
58.7%
137.5%
168.9%
55.3%
127.9%
158.0%
57.0%
133.6%
166.9%
NPW (P&C only)
Net Earned Premiums (P&C only)
Net Investment Income
Realized Investment Gains / (Losses)
Total Revenue
Net Income
Shareholders' Equity (End of Period)
NPW (P&C only) to Equity (End of Period)
Net Reserves to Equity (End of Period)
Gross Reserves to Equity (End of Period)
Net Investment Ratio based on PC NPE
Source: Company reports, Imetrix, Bloomberg
1
7
Special Report
Global Reinsurance
Exhibit 9
European “Big Four” Trend Summary
USD billions
5-Yr Avg
53.6
53.9
17.4
2.3
135.0
2014
61.4
60.4
16.3
10.1
134.6
2013
64.8
62.4
17.1
0.4
147.2
2012
58.5
58.1
18.6
5.2
149.4
2011
53.4
51.0
17.0
2.4
132.3
2010
48.1
47.8
14.3
8.3
132.7
2009
43.1
50.2
19.9
(5.0)
113.5
7.5
9.3
11.1
10.2
4.7
5.7
5.5
75.8
89.9
83.9
85.0
72.4
70.7
67.0
Loss Ratio
Expense Ratio
Combined Ratio
67.0%
29.6%
96.5%
61.7%
30.7%
92.4%
61.6%
29.8%
91.4%
61.6%
29.7%
91.3%
77.5%
29.5%
107.0%
68.8%
30.0%
98.8%
65.5%
28.8%
94.3%
Favorable Loss Reserve Development
-4.0%
-3.3%
-3.7%
-5.8%
-6.5%
-3.1%
-0.8%
Net Investment Ratio1
Operating Ratio
32.5%
64.0%
27.0%
65.3%
27.5%
63.9%
32.1%
59.2%
33.3%
73.7%
29.9%
68.9%
39.8%
54.5%
Return on Equity
Return on Revenue
10.0%
5.4%
11.0%
6.9%
13.1%
7.5%
13.0%
6.8%
6.6%
3.6%
8.3%
4.3%
8.8%
4.8%
70.5%
533.3%
558.2%
68.4%
426.9%
446.0%
77.3%
492.7%
515.9%
68.8%
467.0%
489.1%
73.8%
557.1%
569.5%
68.1%
571.0%
604.0%
64.3%
578.9%
612.3%
5-Yr Avg
29.6
28.8
1.8
0.0
30.8
2014
31.1
30.4
1.6
0.1
32.0
2013
33.4
32.5
1.4
(0.1)
33.5
2012
31.4
30.2
1.6
0.1
32.3
2011
28.6
28.0
1.4
0.1
29.5
2010
27.3
26.5
1.9
29.5
2009
27.4
26.6
2.8
29.5
3.7
4.9
5.3
4.5
(0.8)
3.4
6.2
30.0
35.1
33.6
31.2
28.2
28.1
28.9
Loss Ratio
Expense Ratio
Combined Ratio
56.8%
36.8%
93.6%
49.0%
39.1%
88.1%
48.6%
38.2%
86.8%
54.0%
37.1%
91.1%
71.3%
36.9%
108.1%
58.6%
35.9%
94.5%
51.6%
35.9%
87.4%
Favorable Loss Reserve Development
-6.6%
-8.0%
-8.0%
-7.2%
-6.5%
-5.9%
-5.6%
Net Investment Ratio
Operating Ratio
6.5%
87.1%
5.3%
82.8%
4.3%
82.5%
5.4%
85.8%
5.0%
103.1%
7.4%
87.2%
10.6%
76.9%
Return on Equity
Return on Revenue
13.0%
11.9%
14.7%
15.3%
16.2%
15.8%
15.1%
13.9%
-2.8%
-2.7%
11.9%
11.5%
24.9%
20.9%
98.6%
150.7%
201.8%
88.7%
129.9%
168.8%
99.2%
139.4%
186.3%
100.7%
153.0%
208.3%
101.4%
168.6%
226.8%
97.1%
151.3%
199.6%
94.8%
141.1%
187.8%
NPW (P&C only)
Net Earned Premiums (P&C only)
Net Investment Income
Realized Investment Gains / (Losses)
Total Revenue
Net Income
Shareholders' Equity (End of Period)
NPW (P&C only) to Equity (End of Period)
Net Reserves to Equity (End of Period)
Gross Reserves to Equity (End of Period)
Net Investment Ratio based on PC NPE
Source: Company reports
1
Exhibit 10
Lloyd’s Market Trend Summary
USD billions
NPW (P&C only)
Net Earned Premiums (P&C only)
Net Investment Income
Realized Investment Gains / (Losses)
Total Revenue
Net Income
Shareholders' Equity (End of Period)
NPW (P&C only) to Equity (End of Period)
Net Reserves to Equity (End of Period)
Gross Reserves to Equity (End of Period)
Source: Company reports
8
Special Report
Global Reinsurance
Contributors
Scott Mangan
Published by A.M. Best Company
Special Report
Chairman & President Arthur Snyder III
Executive Vice President Larry G. Mayewski
Executive Vice President Paul C. Tinnirello
Senior Vice Presidents Douglas A. Collett, Karen B. Heine,
Matthew C. Mosher, Rita L. Tedesco
A.M. Best Company
World Headquarters
Ambest Road, Oldwick, NJ 08858
Phone: +1 (908) 439-2200
WASHINGTON OFFICE
830 National Press Building
529 14th Street N.W., Washington, DC 20045
Phone: +1 (202) 347-3090
A.M. Best América latina, S.A. de C.V.
Paseo de la Reforma 412
Piso 23
Mexico City, Mexico
Phone: +52-55-5208-1264
A.M. Best Europe Rating Services Ltd.
A.M. Best Europe Information Services Ltd.
12 Arthur Street, 6th Floor, London, UK EC4R 9AB
Phone: +44 (0)20 7626-6264
A.M. Best asia-pacific LTD.
Unit 4004 Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
Phone: +852 2827-3400
A.M. Best Asia-Pacific (Singapore) Pte. Ltd.
6 Battery Road, #40-02B, Singapore
Phone: +65 6589 8400
Dubai Office* (MENA, SOUTH & CENTRAL ASIA)
Office 102, Tower 2
Currency House, DIFC
PO Box 506617, Dubai, UAE
Phone: +971 43 752 780
*Regulated by the DFSA as a Representative Office
A Best’s Financial Strength Rating is an independent opinion of an insurer’s financial strength
and ability to meet its ongoing insurance policy and contract obligations. It is based on a comprehensive quantitative and qualitative evaluation of a company’s balance sheet strength, operating performance and business profile. The Financial Strength Rating opinion addresses the
relative ability of an insurer to meet its ongoing insurance policy and contract obligations. These
ratings are not a warranty of an insurer’s current or future ability to meet contractual obligations.
The rating is not assigned to specific insurance policies or contracts and does not address any
other risk, including, but not limited to, an insurer’s claims-payment policies or procedures; the
ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or
fraud; or any specific liability contractually borne by the policy or contract holder. A Financial
Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy,
contract or any other financial obligation issued by an insurer, nor does it address the suitability
of any particular policy or contract for a specific purpose or purchaser.
A Best’s Debt/Issuer Credit Rating is an opinion regarding the relative future credit risk of
an entity, a credit commitment or a debt or debt-like security. It is based on a comprehensive
quantitative and qualitative evaluation of a company’s balance sheet strength, operating
performance and business profile and, where appropriate, the specific nature and details of a
rated debt security. Credit risk is the risk that an entity may not meet its contractual, financial
obligations as they come due. These credit ratings do not address any other risk, including
but not limited to liquidity risk, market value risk or price volatility of rated securities. The rating is not a recommendation to buy, sell or hold any securities, insurance policies, contracts
or any other financial obligations, nor does it address the suitability of any particular financial
obligation for a specific purpose or purchaser.
Any and all ratings, opinions and information contained herein are provided “as is,” without
any expressed or implied warranty. A rating may be changed, suspended or withdrawn at any
time for any reason at the sole discretion of A.M. Best.
In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or
other information provided to it. While this information is believed to be reliable, A.M. Best
does not independently verify the accuracy or reliability of the information.
A.M. Best does not offer consulting or advisory services. A.M. Best is not an Investment
Adviser and does not offer investment advice of any kind, nor does the company or its Rating
Analysts offer any form of structuring or financial advice. A.M. Best does not sell securities.
A.M. Best is compensated for its interactive rating services. These rating fees can vary from
US$ 5,000 to US$ 500,000. In addition, A.M. Best may receive compensation from rated entities for non-rating related services or products offered.
A.M. Best’s Special Reports and any associated spreadsheet data are available, free of
charge, to all Best’s Insurance News & Analysis subscribers. Nonsubscribers can purchase
the full report and spreadsheet data. Special Reports are available through our Web site at
www.ambest.com/research or by calling Customer Service at (908) 439-2200, ext. 5742.
Briefings and some Special Reports are offered to the general public at no cost.
For press inquiries or to contact the authors, please contact James Peavy at (908) 439-2200,
ext. 5644.
SR-2015-017