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Swiss Re’s net income up but catastrophes hit underwriting result

31st October 2019 - Author: Luke Gallin

Global reinsurance giant Swiss Re has reported group net income of $1.3 billion for the first nine months of the year, supported by growth in reinsurance. However, a $1.7 billion hit from natural catastrophes and man-made disasters resulted in a combined ratio of 101.4% in property and casualty reinsurance (P&C Re).

swiss reSwiss Re’s group net income for the period increased from the $1.1 billion recorded in the same period last year, which the firm says was supported by growth in reinsurance and a strong investment result.

Overall, net earned premiums and fee income increased by 10% to $28.4 billion, driven mostly by growth in P&C Re premiums of 17% to $14.2 billion, which Swiss Re attributes to large transactions as well as growth in natural catastrophe business.

The firm’s P&C Re segment recorded a 39% increase in net income to $880 million. However, the underwriting performance was adversely impacted by $1.1 billion of large claims from catastrophe events in the period, including $460 million from Typhoon Faxai, and $300 million from Hurricane Dorian.

At the same time, estimated claims from man-made events totalled approximately $310 million for the firm in 2019, and includes losses from the Ethiopian Airlines crash. Furthermore, loss creep from Typhoon Jebi also hit Swiss Re’s underwriting performance in the period.

In light of the impact on the underwriting performance of the P&C Re segment, Swiss Re has posted a nine-month P&C Re combined ratio of 101.4%, compared with 99.5% a year earlier, while the firm says it is on track to deliver a normalised combined ratio of 98% in 2019.

The reinsurer’s Group Chief Executive Officer (CEO), Christian Mumenthaler, commented: “The strength of our business with its global reach, diversification and very strong capitalisation enabled us to react fast and support our clients and their customers affected by the large natural catastrophes and man-made events in the first nine months. Our Reinsurance Business Unit achieved profitable growth in a challenging market environment.

“The transformation of Corporate Solutions is underway, and we continue to benefit from robust gross cash generation in Life Capital. Our leading market position and positive rate dynamics year to date give us confidence for the upcoming renewal season.”

In L&H Re, Swiss Re has announced stable income of $651 million for the period, driven mostly by active portfolio management actions and also improved mortality developments in the Americas. Net premiums earned and fee income also remained stable at $9.5 billion.

The reinsurer’s Corporate Solutions arm has struggled in recent times, and in light of management decisions and also medium-sized and large man-made and natural catastrophe claims, the unit recorded a net loss of $441 million and a combined ratio of 127%. Losses in the period that hit the segment include Hurricane Dorian and the compulsory liquidation of Thomas Cook.

In Life Capital Swiss Re has announced net income of $40 million for the first nine months of the year, while net earned premiums and fee income increased to $1.6 billion.

Looking forward, Mumenthaler said: “So far in 2019 we have seen severe storms in both the Atlantic and the Pacific, causing heavy damage to local communities. Our deepest sympathies go to all those affected by disasters. They act as a constant reminder of the need to have access to effective insurance protection around the world.

“We continue to focus on fostering partnerships to develop affordable, innovative, technology-based solutions that help close protection gaps, leverage our risk expertise and tap into new sources of growth.”

The Group’s ROE hit 6% in the nine month period versus 4.7% a year earlier, while its ROI reached 4.3%, up from the 2.8% recorded a year earlier.

Interestingly, the reinsurer notes that in light of the capital deployment into profitable growth, significant cat losses and also the decision to suspend the IPO of ReAssure, the firm’s Board of Directors has decided to cancel the launch of the second tranche of the public share buy-back programme.

Swiss Re’s Group Chief Financial Officer (CFO), John Dacey, added: “The Group’s results in the first nine months underline the strength of our franchise. Despite multiple large natural catastrophe and man-made claims affecting the business, our capital position remains very strong, allowing us to take advantage of growth opportunities in an improving pricing environment.”

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