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Global ReinsuranceResults and Trends
Discussion Outline
Global Reinsurance Results, Trends and Outlook
Global Reinsurance Market Capacity
Global Reinsurance Market Evolution
2
Segment Outlook – Global Reinsurance
3
Headwinds TailwindsIntense competition Cession rates increasingIncreasing interest from third-party capital
Cat losses temporarily stabilise rates
Earnings stabilise but remain under pressure
Favourable reserve development,but waning
Excess capacity hinders further improvement
Strong risk-adjusted capital
Potential for increased inflation Increase in interest ratesM&A
Although capitalisation remains strong and rate deterioration temporarily halted, pressure on margins continues. Over the intermediate term, returns for some reinsurers will fall short on a risk-adjusted basis. Maintain negative market outlook.
Central Bank Base Lending Rates
-1
0
1
2
3
4
5
6
7
8
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
(%)
China
ECB
Japan
UK
US
4
Global GDP Growth – Major Economies
-6
-4
-2
0
2
4
6
8
10
12
14
16
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
(%)
China France Germany Japan United Kingdom United States *Forecast
5
2017 represented the most significant year for catastrophe losses since 2011
Hurricane Harvey, Irma, Maria combined with Earthquake in Mexico and Wildfire in California produced industry losses in the range of USD 80 to 100 billion
Despite timing of these events, negative reserve surprises have been limited thus far
6
Global Reinsurance Market Trends
Global Reinsurance Market TrendsOverall 2017 catastrophes amounted to an earnings events as rated balance sheets emerged flat for the year
Alternative capital did participate in the events in a meaningful way resulting in collateral locks prior and through the 1/1 and mid year renewal periods
Alternative capital investors were NOT hindered by the losses and brought additional capacity to the market for the renewals
7
Global Reinsurance Market TrendsOptimism
that followed quickly faded
as January renewal
negations progressed.
Significant push back from Clients not impacted by
losses. But hope lingered into the
June / July renewal.
Overall, reinsurance pricing stabilized. More
pronounced improvement in
underlying business.
As a result pricing is not optimal for certain classes and structures but there are opportunities out there...
8
Total Economic and Insured Losses (USD billions)
9
Source: Swiss Re Institute
2017 2016 Annual Change (%)
10-YearAverage
% of 10-Year Average
Economic Losses
Economic LossesNatural Catastrophe 300 178 69% 178Man-made 6 10 -42% 12
Total 306 188 63% 190
Insured Losses
Natural Catastrophe 131 56 133% 51 29%Man-made 5 8 -45% 7 58%
Total 136 65 110% 58 31%
Global Reinsurance Market Trends
55.9% 56.2% 56.2% 60.6%
76.5%
60.6%
61.1%
31.9%33.5%
34.2% 34.7%
33.6%
33.9% 33.6%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
20%
40%
60%
80%
100%
120%
2013 2014 2015 2016 2017 2018 H1 5yr Avg
Expense Ratio
Loss Ratio
Loss ReserveDevelopment
Source: A.M. Best data and research
Global Reinsurance Sector – Combined Ratio
10
86.8% 88.1% 90.0%97.9%
114.0%
95.0%
2013 2014 2015 2016 2017 2018Q2
Combined Ratio by Reinsurance Sector
11
European “Big Four” U.S. & Bermuda Lloyd’s
86.6% 87.4% 90.7% 92.5%
109.0%
92.9%
2013 2014 2015 2016 2017 2018Q2
Loss Ratio Expense Ratio
89.3% 92.4% 91.8% 96.3%109.0%
95.0%
0%
20%
40%
60%
80%
100%
120%
2013 2014 2015 2016 2017 2018 Q2
Global Reinsurance Market Trends
13.0%
11.6%
9.5%8.3%
-0.3%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2013 2014 2015 2016 2017
Return on Equity Five-Year Average
Source: A.M. Best data and research
Return on Equity (2013 to present) and Five-Year Average
12
Global Reinsurance Market Trends
European “Big Four” U.S. & Bermuda Lloyd’s
Return on Equity by Reinsurance Sector
Five-Year AverageSource: A.M. Best data and research
2017
13
13.1%11.0% 11.5%
9.7%
2.7%
9.3%
2013 2014 2015 2016 2017 2018 Q2
11.4% 10.9%
7.5% 6.8%
-0.5%
6.0%
2013 2014 2015 2016 2017 2018 Q2
16.2%14.7%
8.9% 8.1%
-7.3%
4.3%
2013 2014 2015 2016 2017 2018 Q22017
Global Reinsurance Market TrendsGlobal Reinsurance Market
5 Year Average Return on Equity Less Reserve Development
Source: A.M. Best data and research
10.9%
8.3%
6.8%
4.5%
Composite at YE2016 Composite at YE2017
5 Year Average Return on Equity5 Year Average Return on Equity excluding Loss Reserve Development
14
Global ReinsuranceMarket Capacity
15
Global Reinsurance Market Capacity
Top 10 Global Reinsurance Groups –Non-Life
Top 10 Global Reinsurance Groups –Life
Munich Reinsurance Company
Swiss Re Ltd.
Berkshire Hathaway Inc.
Lloyd’s
Hannover Ruck SE
SCOR S.E.
Everest Re Group Ltd.
XL Group plc
Transatlantic Holdings, Inc.
PartnerRe Ltd.
Munich Reinsurance Company
Swiss Re Ltd.
Reinsurance Group of America Inc.
SCOR S.E.
Hannover Ruck SE
Great West Lifeco
Berkshire Hathaway Inc.
Pacific LifeCorp
PartnerRe Ltd.
Assicurazioni Generali SpA
Source: A.M. Best data and research. Ranked by unaffiliated gross premium written in 2017
16
Global Reinsurance Market Capacity
Rank 1-1070.2%
Rank 11-2015.5%
Rank 21-307.2%
Rank 31-404.6%
Rank 41-502.5%
Life and Non-Life Reinsurance GPW Distribution by Ranking
17
Global Reinsurance Market Capital
292 320 340 332 345 345 362
19
48 60 68
75 87 100
2012 2013 2014 2015 2016 2017 2018E
Convergence Capital
Traditional Capital
Estimate for Total Dedicated Reinsurance Capital (USD billions)
Notes and Sources: Estimates by Guy Carpenter and A.M. Best
18
Global Market TrendsConvergence Capacity
(2018 estimated) (USD billions)
19
71
23
6
0
10
20
30
40
50
60
70
80
90
100
Direct Institutional Investors
Reinsurance Sponsored Managers
Dedicated Insurance-linked securities (ILS)Managers
Source: Guy Carpenter and A.M. Best
Global Market Evolution
20
“Global” Franchises
• Arch• Aspen• AXIS• Everest Re• Hannover Re• Lloyd’s• Munich Re• RenaissanceRe• SCOR Re• Swiss Re
ShelteredFranchises
• Allied World• Endurance(Sompo Intl)• General Re• MS Amlin• Odyssey Re• National Indemnity• Partner Re• Tokio Millennium Re• TransRe• Validus• XL Catlin
Franchises That Are Gone
• Ariel Re• Flagstone• Harbor Point / Max (Alterra)• IPC Re• Montpellier • New Castle Re• Paris Re• Platinum Re
What Does The Future Hold?
• Fidelis• Greenlight Re• Hamilton• Harrington Re• Humboldt Re• Kelvin Re• Lumen Re• Maiden Re• Third Point Re• Watford Re
Market Landscape ~10 Years In Time
21
The Case for M&A
22
Broader product capability
Broader geographic reach
Greater influence
Greater attractiveness to alternative capital
Opportunity for growth
Alternatively…M&A is the result of a strategic
opportunity
Alternative Capital
23
Market is still largely
influenced by global leaders
M&A will continue
Alternative capital is driving change
Alternative capital is driving a great deal of structural change in the market
However, the market continues to be heavily influenced by the global reinsurance leaders
The Drive for Efficiency
24
The market will
continue to become
more efficient as all
players strive to
become closer to
the client
Global Market Trends
Traditional Dual Platform
Controlthe client
Build primary business
Alternative Capital Platform
Manage or have a relationship with
alternative capital
Build fee income stream
Mergers &Acquisitions
Relevanceand size
Ability to be small and nimble with parental
protection
Strategy Evolution
25
Q & A
26
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