NU Online News Service, March 31, 2:32 p.m. EDT
A reinsurance brokerage said net income for the reinsurers it follows dropped $22.4 billion year-over-year to a loss of $7.5 billion for full-year 2008.
Guy Carpenter said by comparison in 2007 its European Reinsurance Composite of companies had posted aggregate net income of $14.9 billion. Total return on equity fell to minus-9 percent.
The report on the GCCapitalIdeas.com site from Christopher Klein, Guy Carpenter managing director and head of global business intelligence, said the results were
consistent with trends evident in other parts of the world.
It labeled unrealized investment losses as the major culprit for the profit drop, at an aggregate loss of $14.7 billion last year (from a loss of $600 million the year before).
Mr. Klein noted that realized investment losses mounted as well. "The carnage in financial markets around the world eradicated 2007′s realized investment gain of $3.7 billion and returned a $8.6 billion loss for 2008."
The report said underwriting profits fared much better with a 59 percent drop year-over-year indicating that some profit, overall, remained last year.
It was noted that only one company in the European Reinsurance Composite posted an underwriting loss. The decline in underwriting profits, said Guy Carpenter, resulted largely from Hurricanes Gustav and Ike. as well as large individual losses early in the year.
The brokerage said earlier that its European Reinsurance Composite's aggregate shareholders' funds fell 21 percent year-over-year.
Excluding Swiss Re's capital increase, guy Carpenter said aggregate shareholders' fund it would have been down 23 percent.
Several drivers led to the $20 billion drop in total shareholders' funds ($93 billion to $73 billion), the firm reported, with unrealized losses accounting for 60 percent of the decrease.
European reinsurers on average had greater exposure to equity assets than reinsurers in other regions, but their property-catastrophe exposure was not as large in relation to their underwriting portfolios, said Guy Carpenter.
The firm reported that technical earnings counteracted some of the losses that resulted from investment asset impairment. Several companies in the European Reinsurance Composite sold substantial portions of their equity asset holdings, while others tried to hedge some of the more volatile asset classes, Guy Carpenter reported.
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