Milli Re 2025 Annual Report

discipline. Mainly driven by strong retained earnings, traditional reinsurance capital increased by USD 36 billion in the first nine months of the year and reached USD 636 billion. Declining global interest rates also played a crucial role, as valuation gains in investment portfolios emerged as another important factor strengthening reinsurers’ capital positions. Meanwhile, the alternative capital market continued to grow as a complementary source of capacity to traditional reinsurance and reached a new record high of USD 124 billion by the end of the third quarter of 2025. Strong investor demand for returns with low-correlation to other financial assets; together with the reinvestment of prior-period earnings stood out as the main drivers of this growth. On the other hand, new capital inflows were predominantly concentrated in catastrophe bonds and with annual issuance of USD 24 billion, the outstanding catastrophe bond market reached a record level of USD 59 billion. In addition, the relatively low level of natural catastrophe losses sustained by the Insurance-Linked Securities (ILS) market in 2025 supported robust profitability of these instruments, further enhancing their attractiveness to investors. As a result of these developments, total traditional and alternative reinsurance capital increased to USD 760 billion by September 2025, compared to USD 715 billion at year-end 2024. While prevailing market softening, coupled with increased competition, limited organic growth opportunities for many players; this led merger and acquisition activities, one of the key drivers of structural change, to gain renewed momentum in 2025. Strong technical results and higher investment returns in recent years strengthened capital positions, while companies’ growing cash reserves further contributed to a market environment conducive to such transactions. In this context, Sompo Holdings’ agreement in August 2025 to acquire Aspen Insurance Holdings Limited for USD 3.5 billion as part of its global growth strategy was one of the most notable transactions of the year. Another deal that attracted market attention was Convex Group Limited’s transition to a new partnership structure, with Onex Corporation and American International Group (AIG) joining as strategic investors. All these developments underlined the increasing interest in M&A activities, with companies placing greater emphasis on creating economies of scale and enhancing capital efficiency. Supported also by favorable market conditions, this trend is expected to gain further momentum in 2026. With relatively lower level of global insured catastrophe losses in 2025 compared to recent years, as well as the increased profitability and strong returns, reinsurer appetite remained strong in January 2026 renewals. As a consequence of abundant capacity, competitive market conditions continued to prevail in favour of GENERAL INFORMATION FINANCIAL RIGHTS PROVIDED TO THE MEMBERS OF THE GOVERNING BODY AND SENIOR EXECUTIVES RISKS AND ASSESSMENT OF THE GOVERNING BODY ACTIVITIES AND MAJOR DEVELOPMENTS RELATED TO ACTIVITIES RESEARCH & DEVELOPMENT ACTIVITIES FINANCIAL STATUS FINANCIAL INFORMATION 69