Aon study shows insurers and reinsurers earnings least volatile (July 01, 2005)

Aon (NYSE: AOC) recently announced the results of its 2004 Insurance Earnings Volatility Study, which reports that insurers and reinsurers exhibit the least volatile earnings.

“Investors place a large amount of emphasis on earnings growth and earnings volatility … when evaluating investment opportunities,” Michael Bungert, president of Aon Re Global, says. He elaborates that less volatile earnings will contribute to increased shareholder value.

Disciplined underwriting and investment gains led to strong earnings for the property and casualty industry segment despite hurricane catastrophe losses. The first industry-wide underwriting gain since 1978 was marked by the industry’s combined ratio that improved to 98% in 2004. Net investment income increased more than 2% to US$40 billion and capital gains were nearly US$9 billion, up US$2.5 billion from 2003.

Volatility for all participants was on a-year-over-year basis earnings, an average of 21% lower in 2004 than 2003.

Within the property and casualty sectors, earnings volatility in 2004 was the lowest, or second lowest, in specialty lines whereas personal lines under-performed in 2004 due to hurricane catastrophe losses.