Swiss Re has confirmed that there is potential for its previously announced share buyback to be delayed, owing to the ongoing uncertainty around the financial market due to COVID-19.
The reinsurer said that it will still seek authorisation for the CHF 1 billion public share buyback program at its annual general meeting next month.
However, it added that “in light of the recent volatility in the financial markets, the Board will evaluate the appropriateness of launching the share buyback programme in the second half of 2020.”
The announcement follows recent comments from analysts at JP Morgan, who said there was a substantial risk that the buyback would not be launched following the AGM.
The firm noted that Swiss Re’s solvency levels are sensitive to both interest rates and credit spreads, and may have been heavily impacted by market movements in recent weeks.
JP Morgan believes Swiss Re’s solvency ratio is in the region of 200% and therefore well below the reinsurer’s 220% targets, possibly undermining the logic for continuing to return ‘surplus’ capital.
But Swiss Re has also said that it will propose an increased dividend of CHF 5.90 per share, based on its strong solvency ratio of 232% at January 2020, as well as its confidence in long term capital generation prospects.
The company further reported a total contribution to economic net worth (ENW) of US $2.9 billion in 2019, including an economic value management (EVM) loss of $19 million for the year.
The EVM loss reflected the impact of large natural catastrophe and man-made losses as well as proactive measures to address ongoing trends in US casualty business and an update to capital costs.
These losses were partly offset by Swiss Re’s investment result, as well as the performance of its Life & Health Reinsurance segment and an EVM profit on the agreement to sell ReAssure.
Swiss Re’s ENW increased to $36.1 billion in 2019, compared to $36.0 billion in the previous year. This was driven by the total contribution $2.9 billion, partly offset by the $2.6 billion impact from dividend payments and the share buyback program.
ENW per share increased to $124.33 (CHF 120.41) at the end of 2019, up from $119.96 (CHF 118.20) previously. ENW per share growth amounted to 8.2% in 2019, below the over-the-cycle target of 10%.