Reinsurance News

Large claims bill dents Swiss Re’s 2018 net income

21st February 2019 - Author: Luke Gallin

Global reinsurance giant Swiss Re has reported Group net income of $421 million for the full-year 2018, as estimated large claims of $3 billion significantly impacted the performance of both its property and casualty reinsurance (P&C Re) and Corporate Solutions’ units.

Swiss ReAs well as the hit from catastrophe events in 2018, which, according to the Swiss Re Institute was the fourth costliest year for the insurance industry, the reinsurer’s 2018 net income was also impacted by an estimated $599 million, pre-tax, related to a change in US GAAP accounting guidance.

$2.2 billion of the firm’s large claims bill for the year came from natural catastrophe events, including typhoons Jebi and Trami in Japan, hurricanes Florence and Michael, the Camp and Woolsey wildfires in the U.S., a windstorm in Canada, and also a hailstorm in Australia. The remaining $800 million came from man-made losses.

Despite the significant hit from large claims, Swiss Re’s net income in 2018 grew to $421 million, compared with $331 million a year earlier. Excluding for the impact of the above mentioned change in US GAAP accounting guidance, and Swiss Re’s 2018 net income would have reached $894 million.

The reinsurance giant’s gross premiums written (GWP) increased by almost 5% in 2018, hitting $36.4 billion, which was mainly driven by premium growth across its life and health businesses.

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Swiss Re Group Chief Executive Officer (CEO), Christian Mumenthaler, commented: “There was no respite from large nat cat events and man-made disasters in 2018. Our financial strength enabled us to support our clients in these tough times. It was the second challenging year in a row for the industry and us.

“Our P&C businesses were heavily impacted by the events. Corporate Solutions’ results were disappointing. But even in challenging conditions, I am optimistic about Swiss Re’s future. In the January renewals of our P&C Re business, we were able to grow while keeping our running costs flat. We expect further price improvements in the renewals later this year, especially in the loss-affected markets.”

By segment, the reinsurer’s P&C Re unit, which was substantially hit by large claims, recorded net income of $370 million in 2018, with a return on equity (RoE) of 3.7% and a combined ratio of 104%.

Corporate Solutions, which was also hit by the firm’s large claims bill, fell to a net loss of $405 million in 2018, recorded an RoE of -19.4% and a combined ratio of 117.5%.

Swiss Re’s Life and Health unit recorded net income of $761 million in 2018, driven mostly by large transactions in Canada and New Zealand and solid performance in Asia and EMEA. The unit recorded an RoE of 11.1% for the year, and GPW of $14.5 billion.

Interestingly, the firm also comments on its experience at the January 1st 2019 renewals, underlining a strong outcome of its P&C Re renewals supported by large transactions. The firm renewed $10 billion compared to $8.4 billion a year earlier, while price quality increased by 1% with improvements most pronounced in the loss-affected property and casualty lines. The reinsurer expects further rate improvements at the forthcoming 2019 renewals.

John Dacey, Swiss Re’s Group Chief Financial Officer (CFO), said: “We fared well in an environment of challenging insurance and investment risks. Our diversified business model helped to mitigate the associated losses. Most important, our capital position and confidence in our long-term sustainable capital generation remain very strong and they support our attractive capital management actions.”

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