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Swiss Re’s P&C Re combined ratio deteriorates to 115.8% on COVID-19 losses

31st July 2020 - Author: Luke Gallin

Global reinsurance giant Swiss Re has reported a net loss of $1.1 billion for the first half of 2020 and a Property & Casualty Reinsurance (P&C Re) net loss of $519 million, driven by claims and reserves related to the ongoing COVID-19 pandemic.

Swiss ReThe reinsurer warned previously of a $1.1 billion loss in the period on the back of COVID-19 related claims and reserves of a significant $2.5 billion. The net loss compares with net income of $953 million in H1 2019, and excluding COVID-19, Swiss Re’s H1 2020 net income would have totalled $865 million.

The firm’s P&C Re segment’s net loss of $519 million compares with net income of $771 million in H1 2019, as the combined ratio jumped by more than 15 percentage points to 115.8%.

Claims and reserves related to COVID-19 impacted the segment by $1.5 billion, which Swiss Re says reflects affirmative non-damage business interruption, cancelled or postponed events, casualty and credit & surety losses.

Despite the negative impacts of the pandemic, Swiss Re took advantage of the improved rate environment during the period, increasing P&C Re net earned premiums by 10% to $9.6 billion.

Commenting on the renewals, the reinsurer reveals that P&C Re treaty premium volume jumped 6% to $17 billion as at the end of H1 2020, with a nominal price increase of 6%.

Swiss Re’s Chief Executive Officer (CEO), Christian Mumenthaler, commented: “As the extraordinary crisis caused by COVID-19 unfolds across the globe, we share our sympathies with those who have suffered personal loss and financial uncertainty. Swiss Re is doing its part to facilitate recovery from this crisis, and we are working with many stakeholders around the world on improving resilience to future large systemic risks.

“Based on current information and a prudent analysis of our businesses, and recognising the inherent uncertainty of the ongoing pandemic, we expect the claims and reserves we have booked in the first half of 2020 to cover the majority of our ultimate COVID-19 losses. While the impact on our earnings is significant, it remains manageable as our operations continue uninterrupted, all our businesses are performing well and our capital position allows us to take advantage of attractive opportunities in an improving market.”

Turning to the firm’s Life and Health Reinsurance (L&H Re) segment, and Swiss Re has reported net income of $74 million, compared with net income of $459 million a year earlier. According to Swiss Re, excluding the impacts of the COVID-19 pandemic, L&H Re’s net income would have been $516 million.

Within L&H Re, COVID-19 related claims and reserves reached $548 million in H1 2020, driven mostly by higher mortality claims in the U.S. and the UK against expected levels. Net premiums earned and fee income in H1 2020 jumped by 6.2% to $6.7 billion.

“Although the COVID-19 crisis is still evolving, we took a prudent approach to build substantial reserves for the Group’s exposures already in the first half of this year. This gives us more certainty in the outlook for the remainder of 2020 and beyond. Thanks to our disciplined long-term approach to capital management and the decisive actions taken early in the crisis to protect our balance sheet, our capital position remains very strong,” said John Dacey, Swiss Re’s Chief Financial Officer (CFO).

The firm’s commercial insurance arm, Swiss Re Corporate Solutions, fell to a net loss of $301 million in H1 2020 compared with a net loss of $403 million in H1 2019. The unit reported a combined ratio of 122.6% against 132.8% in H1 2019.

At the same time, Swiss Re’s Life Capital segment recorded a net loss of $217 million in H1 2020 compared with net income of $5 million in H1 2019.

“We are encouraged by the good progress we see in all of Swiss Re’s businesses so far this year. While some degree of uncertainty remains with regards to future COVID-19 losses, we are confident in the outlook for our Group. Thanks to our disciplined capital management, we are in a strong position to continue to support our clients and deploy capital for business growth in improving pricing conditions,” said Mumenthaler.

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