Reinsurance News

Swiss Re returns to profit in 2021 despite high nat cat & COVID-19 load

25th February 2022 - Author: Luke Gallin

The “remarkable performance” of Swiss Re’s property and casualty (P&C) businesses in 2021 helped the reinsurer generate net income of $1.4 billion for the year against a loss of $878 million in 2020, despite a heavy burden from natural catastrophes and additional COVID-related losses.

Swiss ReAlongside the turnaround in net income, Swiss Re’s gross premiums written (GPW) spiked 9% to $47 billion in 2021, while premiums earned and fee income increased by 5% to $43 billion.

P&C Re had a solid year, with Swiss Re reporting net income of $2.1 billion in 2021 against a loss of $247 million in 2020, reflecting the improved quality of the portfolio, rate increases, and favourable investment results.

The segment’s GPW jumped by 8%, year-on-year, to $23.3 billion, while premiums earned increased by 5% to $21.9 billion.

During the year, Swiss Re absorbed natural catastrophe losses of $2.4 billion, of which $2.1 billion hit P&C Re, mainly related to Hurricane Ida, the floods in Europe in July, and Winter Storm Uri.

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Despite the catastrophe experience in the year, Swiss Re’s P&C Re unit saw its combined ratio strengthen from 109% in 2020 to a profitable 97.1% in 2021, driven in part by the reduction in COVID-19 claims when compared with the prior year.

At the January 1 renewals, P&C Re renewed business with $8.9 billion in premium volume, representing growth of 6% compared with the business that was up for renewal. The reinsurer notes strong growth in property and specialty lines, with nat cat-related premium volume up by 24%. During the 1/1 reinsurance renewals round, P&C Re achieved a price increase of 4%.

While COVID-19 losses dwindled on the P&C side of the business, Swiss Re’s Life and Health (L&H Re) division incurred substantially higher pandemic-related claims of nearly $2 billion in 2021, which the firm attributes to mortality rates in the US and the general spike in infection rates early in the year and in Q3 and Q4.

As a result, L&H Re has fallen to a net loss of $523 million in 2021 compared with income of $71 million in 2020. GPW in this part of the business increased by 7%, year-on-year, to more than $16 billion, as premiums earned and fee income spiked by 7% to $14.9 billion.

“2021 marked an important turning point for Swiss Re,” said Christian Mumenthaler, Swiss Re’s Group Chief Executive Officer (CEO). “Despite still major COVID-19 impacts and a high occurrence of large natural catastrophe events throughout the year, we rebounded to a USD 1.4 billion profit. We have worked hard to strengthen business performance, with a rigorous focus on portfolio quality and underwriting excellence. Our 2021 results are a testament to these efforts, and we are convinced our performance will continue to improve.”

Turning to Swiss Re Corporate Solutions and the results show that 2021 was a strong year for the business, with net income of $578 million compared with a loss of $467 million in the prior year, driven by the benefits of strategic actions and ongoing price increases.

The business did experience natural catastrophe losses of $345 million in 2021, mainly relating to Winter Storm Uri, Hurricane Ida, and the tornadoes that impacted the central US in December, as well as man-made losses of $249 million.

Net premiums earned at Swiss Re Corporate Solutions increased by 6.5%, year-on-year, to $5.3 billion on the back of further rate increases. The business saw its combined ratio come down from 115.5% in 2020 to 90.6% in 2021, which Swiss Re attributes to disciplined underwriting, strict expense management, continued rate increases and favourable prior-year development.

At iptiQ, Swiss Re notes continued growth in 2021 as it increased its in-force policies by 144% on the previous year to over 1.6 million. GPW for the core business jumped by 95% from 2020 to $723 million, driven by solid contributions across all markets.

Looking ahead across the Group, Swiss Re has reported new ambitious financial targets, which it says are supported by the increased underlying earnings power of the business, favourable market outlook and continued cost discipline.

The company is targeting an increase to its US GAAP Group ROE to 10% in 2022 and to 14% in 2024, as it looks to drive profitable growth across the business.

For the year ahead, Swiss Re expects further improvements in the performance of its P&C Re business as it benefits from a sustained focus on portfolio quality with rising prices. P&C Re targets a normalised combined ratio of less than 94% for 2022 (94.7% in 2021), while Corporate Solutions aims for a reported combined ratio of less than 95% (95% in 2021), says Swiss Re.

Swiss Re expects L&H Re to continue to be impacted by COVID-19 in 2022, and taking this into account, forecasts net income of around $300 million for the year.

“With our sharpened Group strategy and clear business development priorities, we will continue the strong trajectory displayed in these full-year results. The new financial targets for the Group and individual businesses reflect the ambition to drive profitability and create value for our shareholders, clients and employees. While we remain in an uncertain environment with regards to the pandemic, we are confident in the Group’s ability to deliver against these targets, underpinned by our very strong capital position,” said Mumenthaler.

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