Reinsurers Good Fortune, But Is It Sustainable?

April 16, 2016

Stock prices for publicly traded reinsurance companies increased moderately during 2015 and remained well above the overall market with just two of these 18 companies experiencing negative stock price movement, according to a new A.M. Best report focused on reinsurance companies’ stock performance in fourth-quarter 2015.

The Best’s Special Report, titled, “Reinsurers Enjoy Good Fortune, But Is It Sustainable?” states that the group’s largely favorable share price movement was driven by the strong performance of several reinsurers, including the four large European players – Hannover Re, SCOR Re, Munich Re and Swiss Re. These gains materialized despite global financial market volatility in the second half of 2015, which included an August market correction that led to a 10% dip in U.S. stock market value.

“Considerable fourth quarter stock price increases for Hannover Re, SCOR Re, Partner Re, Arch Capital Group, Maiden Holdings, and Renaissance Re contributed to the publicly traded reinsurance companies, on average, outperforming the S&P 500, according to the report,” A.M.Best said.

“Outside of a small dip in the share price of Allied World during the quarter, hedge-fund-backed Greenlight Re was the only reinsurer followed in this A.M. Best report to suffer a decline in stock price for 2015. The company suffered a more than 40% decline in the fourth quarter following a 23.6% decline during the third quarter.

“As of Dec. 31, 2015, the global reinsurance industry’s [including Bermuda and the aforementioned four large European reinsurers] average price/book value was approximately 110%, which is still lower than the industry’s historical average of about 116%.

“The report also notes that as a group, reinsurers maintained a strong level of capital through the end of 2015 and into 2016, helped by the lack of significant catastrophe activity in recent years and the availability of substantial capital market capacity.”

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