For Swiss Re, COVID-19-related losses in its P&C Reinsurance segment were muted for the first-quarter of 2021, but that doesn’t mean the business is “all clear for the rest of the year,” according to Group Chief Financial Officer (CFO), John Dacey.
Early this morning, Swiss Re announced COVID-19 losses of $643 million for Q1 2021, driven mostly by $585 million of mortality claims and reserves in its Life & Health Reinsurance segment.
The remaining pandemic losses impacted its P&C Re and Corporate Solutions arm.
For 2020, the reinsurance giant announced P&C Re COVID-19 losses of $1.9 billion, of which around 80% represent IBNR reserves for affirmative non-damage business interruption, cancelled or postponed events, casualty, and credit & surety losses.
In comparison, L&H Re reported total pandemic losses of $999 million for the full year 2020, while Corporate Solutions took a hit of $943 million from the crisis.
So, it’s clear that during last year, the majority of Swiss Re’s COVID-19 pandemic exposure related to its P&C Re arm, with a similar impact seen in both L&H Re and Corporate Solutions.
Now, however, the situation has changed somewhat with the reinsurer noting minor costs in both P&C Re and Corporate Solutions from the event, and a much larger hit on the life and health side of the business.
When announcing its 2020 financials, Swiss Re said that during the course of 2021 it expected additional claims and reserves related to the pandemic in P&C Re of less than $500 million, based on current information.
However, given its experience during the opening quarter of the year, it might seem unlikely that P&C Re pandemic losses approach the $500 million figure noted previously by Swiss Re. That is, of course, absent any adverse changes in the efficacy of the ongoing global vaccination effort.
Speaking this afternoon during an investor and analysts call, Group CFO, John Dacey, addressed the reinsurer’s COVID-19 experience in the first quarter and what it means for the rest of the year.
“P&C losses were probably below where we might have expected them. I don’t think that means we’re all clear for the rest of the year. We think there may be some event cancellation charges which still come through. There may be, in certain geographies, some credit and surety losses otherwise popping up,” said Dacey.
“What we feel comfortable about is that, at least with everything we know, we believe our BI portfolio in property is well reserved. We maintain IBNRs for both property and for casualty in the P&C Re business above 80%. So, we’ll continue to work with our primary clients to sort out what the actual losses really are there and book them accordingly.
“But I wouldn’t say that there’s nothing coming on P&C Re. I think we’re probably a little more optimistic today than we might have been three months ago,” he continued.
With respect to L&H Re, Dacey said that the curve has been “bending down hard” in the UK first, and more recently in the U.S., where daily deaths were extremely high December 2020 through March 2021.
“The vaccination efforts clearly are being rolled out and being effective in reducing deaths and the overloads that you saw in those Q1 months, with respect to hospitals and health systems more broadly,” said Dacey.
As a result of the vaccination effort, he does believe that losses within L&H Re will come down, but stressed that it’s not going to hit zero.
“There will be a continuation of COVID-related deaths in the United States for some period of time, as the vaccines reach some equilibrium level of the people that want it, got it, but some people just are not going to.
“So, I don’t expect it to be zero, but I think you should expect sometime towards the end of this year that we will stop talking about it is a separate event, assuming we continue in the current path, and that there are no new variants which are overwhelming the current vaccination efforts,” said Dacey.
Despite L&H Re falling to a net loss for Q1 2021, a solid performance elsewhere saw the company produce net income of $333 million for the quarter, compared to a net loss of $225 million for the same period in the prior year.