Reinsurance giant Swiss Re is hoping that pricing conditions will improve in both property & casualty reinsurance and its commercial insurance arm in wake of recent catastrophe losses, which drove the firm to a net loss of $468 million for the first nine months of 2017.
Swiss Re suffered most in P&C reinsurance and its Corporate Solutions commercial arm, with the $3.6 billion of large losses from recent hurricanes Harvey, Irma and Maria, as well as the Mexico earthquakes, driving both units to significant losses.
Overall, Swiss Re reported $4 billion of natural catastrophe losses for the first three-quarters of the year.
Swiss Re’s Group Chief Executive Officer, Christian Mumenthaler, commented, “The severe natural catastrophes we have experienced so far this year have clearly impacted our results. At the same time, we are able to absorb these losses and join forces with our clients to help affected people and businesses in getting back on their feet. This shows that our strategy to ensure superior capitalisation at all times is paying off. We believe we have the financial strength to respond to potential market developments and we continue to stay committed to creating long-term shareholder value.”
Swiss Re’s P&C reinsurance division reported a $652 million net loss and its Corporate Solutions unit a $762 million net loss, while its Life & Health reinsurance unit generated strong results and Life Capital delivered strong gross cash generation, with L&H Re net income of $741 million reported.
For the Corporate Solutions commercial insurance arm Swiss Re has had to inject $1 billion of capital, to help the unit come out of these losses with a strong capital base.
The company said that the capital injection underlines its, “Commitment to this business, given the attractiveness of the commercial insurance market and the confidence in the Business Unit’s long-term strategy.”
Group Chief Financial Officer, David Cole, said, “Even after such a string of severe natural disasters, we demonstrate the strength of our capital position and financial flexibility by supporting our clients, responding to market developments and strengthening Corporate Solutions’ capital position, while continuing to repatriate excess capital to our shareholders – as shown by the upcoming launch of our share buyback-programme.”
Swiss Re continued to be disciplined and actually pulled back in terms of premiums written over the first nine months of this year.
Across the group premiums written dropped by 5.1%, but this was most apparent in P&C reinsurance where the firm pulled back by a huge 12.6% on a gross premium basis.
With a combined ratio of 114.1% in P&C reinsurance, you have to wonder how much higher that could have been had the company not been reducing its portfolio due to what it considers inadequate pricing.
The Corporate Solutions combined ratio was 142.6%, as the firm took large losses from recent catastrophes in its commercial insurance unit where it is a provider of excess layers and net capacity.
Of note though, is that despite these losses, Swiss Re remains over-capitalised, as signified by the fact the reinsurer has is beginning another share buyback program this month.
The firm intends to buy-back up to CHF 1.0 billion of shares, which it says is, “returning capital to shareholders when excess capital is available and other business opportunities do not meet its profitability requirements.”
With excess capital still available to the major reinsurers you have to wonder how much upwards pressure on pricing they will be able to place.
Swiss Re, like the rest of the industry, is determined to push for higher pricing in the wake of recent catastrophe losses.
CEO Mumenthaler explained the reinsurers position, “The entire re/insurance industry is now required to demonstrate its critical role and responsibility subsequent to the tragic natural catastrophes of the recent months. In my view, many lines of business have been operating in an unsustainable environment. We expect pricing conditions to improve going forward – not only in reinsurance but also in commercial insurance.
“In addition, we are strongly positioned to work with our partners to capture market opportunities when they arise – as they often do after such events – and continue to tackle protection gaps around the world. We will continue to focus on our disciplined underwriting strategy as it has proven right over recent years and has provided us with a strong base for our future.”
Can an industry still awash in capital, even after such significant losses, get the price rises it seeks?
The full results from Swiss Re can be found here.