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Swiss Re expects P&C Re underwriting performance to improve in 2021

20th November 2020 - Author: Luke Gallin

Global reinsurance giant Swiss Re has said that it expects its property and casualty reinsurance (P&C Re) normalised combined ratio to improve to 96% or less in 2021, as the firm pursues targeted growth in a hardening marketplace.

Swiss ReThe Switzerland-based reinsurer is holding its Investor Day today, during which the company is set to confirm its over-the-cycle financial targets and deliver a positive outlook, driven by improving market conditions and targeted growth opportunities.

Swiss Re highlights its reinsurance business as a “powerful franchise” with solid earnings momentum. Within P&C Re, the firm is targeting growth in the firming reinsurance market and is focused on expanding underwriting margins, in part to offset the low interest rate environment.

In 2021, Swiss Re’s P&C Re operation is expected to improve its normalised combined ratio to less than or equal to 96%.

For the first nine months of the year, Swiss Re reported an overall net loss of $691 million, with its P&C Re segment posting a loss of $201 million and a combined ratio of 110.3%. Throughout the year, the reinsurer’s performance has been heavily impacted by the COVID-19 pandemic.

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For 9M 2020, Swiss Re reported that its life and health reinsurance (L&H Re) operation recorded net income of $72 million. Today, the reinsurer notes that L&H Re has maintained its successful track record in spite of the impacts of the pandemic.

The unit has achieved strong new business generation, notes the firm, and together with its active management of in-force business, lays the foundation for future underlying earnings growth.

Away from its reinsurance businesses, Swiss Re notes that management actions announced last year at its Corporate Solutions arm is driving the successful turnaround of the business. As a result, Swiss Re expects the business to achieve a normalised combined ratio that is less than or equal to its 98% target in 2021.

The firm highlights the pronounced hard market landscape, noting that this offers the unit opportunities for profitable growth in areas it has a competitive advantage.

Of course, the ongoing COVID-19 pandemic has also hit the asset side of insurer and reinsurer balance sheets. For Swiss Re, proactive management has helped it to navigate the market volatility in 2020, with the Group’s return on investment remaining strong despite the lower for longer interest rate environment. Swiss Re says that this has been supported by its commitment to Environmental, Social and Governance (ESG) principles.

Additionally, Swiss Re feels that the defensive positioning of its asset management portfolio, coupled with the significantly reduced financial market risk profile of Swiss Re following the sale of ReAssure, provides it with opportunities to enhance investment returns in the future.

Swiss Re Group’s Chief Executive Officer (CEO), Christian Mumenthaler, commented: “We are optimistic on the outlook for all of our businesses as we see positive momentum in the underlying earnings power of the Group. Our confidence is underpinned by Swiss Re’s capital strength and the proactive approach we have taken to the Group’s COVID-19 reserves. We expect that COVID-19 will remain an earnings and not a capital event for the Group, with declining exposures going forward.

“We are focused on delivering on our financial targets and capital management priorities. At the same time, our strategy positions Swiss Re for long-term success.”

The global reinsurer also highlights its pursuit of risk partnerships to open up new long-term opportunities, noting that its white-label digital insurance platform, iptiQ, continues to expand. Based on the segment’s current growth trajectory and peer valuations, iptiQ’s market-implied valuation has increased to around $2 billion.

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