Swiss Re is reporting economic earnings of $3.8bn in 2021, compared to a loss of $434 million in 2020.
The reinsurer said that while its life and health reinsurance sector remained impacted by COVID-19 claims last year, the business nevertheless delivered positive economic earnings of $657m.
Swiss Re attributes the significant turnaround in economic profitability to a very strong underwriting performance in Property & Casualty Reinsurance and Corporate Solutions, which produced combined economic earnings of $4.3 billion.
According to the reinsurer: “The improvement in Swiss Re’s profitability in 2021 is evident in the Group’s Economic Value Management (EVM) results. EVM is Swiss Re’s proprietary integrated economic valuation and steering framework, consistently measuring economic performance across all businesses.
“It allows Swiss Re to see the connection between risk-taking and value creation and provides a consistent framework to evaluate the outcome of capital allocation decisions throughout a performance cycle.”
It said this result was primarily driven by new business profits of $1.3bn on the back of increased pricing and a strong transaction pipeline. The reinsurance giant says that its capital position remained very strong with a Group SST ratio of 223% as of 1 January 2022, comfortably in line with the 200–250% target range
Alongside its economic results, Swiss also announced a proposal for the introduction of a 12-year tenure limit for all current and new Board members, as well as the re-election of Chairman Sergio P. Ermotti and the other Board Compensation Committee members for a one-year term.
This is with the exception of Raymond K.F. Ch’ien, who will not stand for re-election due to the newly proposed tenure limit.
“In 2021, Swiss Re demonstrated the embedded earnings power of its business as the strategic actions we have implemented over the past years bear fruit,” said Ermotti. “We are confident that we will continue this positive momentum going forward as we focus on improving profitability and creating value for our shareholders.”
Regarding the departure of Chi’en from the Board, Ermotti added: “On behalf of my colleagues, I would like to thank Raymond K.F. Ch’ien for his great dedication and valuable contribution to Swiss Re over the last 14 years. He played a key role in shaping Swiss Re’s development, and we wish him all the best for his future.“
The Group’s EVM premiums and fees increased by 14.4% year on year to $67.1bn in 2021. All businesses grew their top line, with life and health reporting the strongest growth at 18.3%.
Total economic net worth (ENW) increased to $35.4bn as of 31 December 2021, up from $33.7bn at the end of 2020. ENW per share was $122.42 at the end of 2021. ENW per share growth amounted to 10.7% in 2021, exceeding the target of 10% per annum.
The group’s economic earnings, partially offset by increased capital deployment, fuelled an increase in the Group SST ratio from 215% as of 1 January 2021 to 223% as of 1 January 2022.
There will be some analysis next year on what the impact of Swiss Re ceasing new business in Russia and Belarus will have been, given the current conflict in mainland Europe. This will come against a backdrop of the firm warning of a worsening economic outlook earlier this month, while the group’s CFO has said that its exposures in this area were ‘immaterial to modest’.
