Reinsurance News

Swiss Re falls to net loss for 2020 as COVID claims & reserves hit $3.9bn

19th February 2021 - Author: Luke Gallin

Global reinsurance giant Swiss Re has reported a Group net loss of $878 million for 2020 as COVID-19 claims and reserves increased to $3.9 billion across the business.

Swiss ReExcluding the impacts of the pandemic, and Swiss Re’s net income amounted to $2.2 billion for the year, which is a significant increase on the $727 million reported last year.

In P&C Re, claims and reserves related to the pandemic totalled $1.9 billion for 2020, resulting in the segment recording a net loss of $247 million.

Swiss Re explains that around 80% of P&C Re’s pandemic losses represent IBNR reserves for affirmative non-damage business interruption, cancelled or postponed events, casualty, and credit & surety losses.

Additionally, P&C Re’s performance was impacted by $1.7 billion of natural catastrophe losses in 2020, driven largely by the extremely active Atlantic hurricane season.

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All in all, Swiss Re’s P&C Re segment has recorded a combined ratio of 109% in 2020, and a normalised combined ratio of 96.9%.

Looking forward, Swiss Re expects additional claims and reserves related to the pandemic in its P&C business of less than $500 million in 2021, based on current information.

The reinsurer has also updated on its experience at the important January 1st, 2021 reinsurance renewals, during which P&C Re renewed contracts with $7.8 billion in premium volume.

This represents an 11% volume decrease compared with what was actually up for renewal, which reflects the firm’s focus on underwriting quality and improved terms and conditions.

P&C Re achieved a nominal price increase of 6.5% at the 1/1 renewals, which Swiss Re says more than offsets lower interest rates and higher loss assumptions.

In the company’s L&H Re arm, COVID-19 losses totalled $999 million in 2020, reflecting increased mortality rates in the US and the UK. Including these losses, the unit reported net income of $71 million for the year, although excluding the pandemic, this was $855 million.

Within L&H Re, Swiss Re has reported that net premiums earned and fee income in 2020 jumped by almost 7% to $13.9 billion, support by large transactions.

Swiss Re’s Chief Executive Officer (CEO), Christian Mumenthaler, commented: “The COVID-19 pandemic continues to affect communities and businesses across the globe. The start of vaccination efforts brings hope that the situation will improve soon. Our Group has gone through this crisis with confidence and strength, and in our role as a shock absorber we are doing our part to help mitigate the challenges of the pandemic and improve resilience to future systemic risks.

“From the start of the pandemic, we took a disciplined and prudent approach to building reserves as actual claims have been slow to come in. While some further COVID-19 losses are expected in 2021, we have dramatically reduced relevant exposures in P&C lines. I am very encouraged by broad-based improvements in portfolio quality and underwriting margins in P&C Re and Corporate Solutions, including in the January renewals.”

In Corporate Solutions, the pandemic also had a negative impact throughout the year, with claims and reserves related to the crisis reaching $943 million for 2020, resulting in a net loss of $350 million.

Roughly 40% of the losses were reserves for anticipated claims related to event cancellations, a line of business which Corporate Solutions exited in 2019, one third from business interruption losses, and the remainder coming mainly from credit & surety claims.

In Life Capital, Swiss Re highlights the sale of ReAssure to Phoenix Group which closed in July, and which allowed the segment to pay a dividend to the Swiss Re Group of $1.5 billion.

However, the segment did produce a loss of $265 million for the year, driven mostly by continued investments into the open-books businesses. Losses related to COVID-19 were modest at $27 million.

“Our capital position remained very strong throughout 2020, despite the unprecedented impact from COVID-19 and an unusually high frequency of natural catastrophes. Swiss Re’s businesses continued to run without disruptions, delivering a strong underlying performance. Together with a positive outlook, this allows us to propose a stable dividend payment to our shareholders even in these challenging times,” said John Dacey, Swiss Re’s Chief Financial Officer (CFO).

Mumenthaler added: “We are confident in the outlook for 2021 with COVID-19 losses mostly behind us. We look forward to improving profitability in the P&C Re business as a result of our focus on portfolio quality and the favourable market environment. Our L&H Re client franchise is very strong, positioning us to grow, especially through tailored transactions. On Corporate Solutions, we are well ahead of the turnaround we set for 2021. iptiQ is delivering impressive growth, creating new partnerships and underlining our position as a technology-driven risk knowledge company.”

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