The Swiss Solvency Test (SST) ratio of Swiss Reinsurance Company Ltd dropped 34 points from 252% in 2018 to 218% in 2019, according to the company’s latest financial condition report.
At the Group level, Swiss Re’s SST ratio fell from 269% in 2018 to 251% in 2019, driven by further decreases of 23 percentage points for the Swiss Re Corporate Solutions business and 20 points for the Swiss Re Life Capital Reinsurance business.
The SST ratio of Swiss Re Corporate Solutions now stands at 137%, down from 160%, while the SST ratio of Swiss Re Life Capital Reinsurance is now 182%, down from 202%.
Swiss Re reported net income of $421 million for 2018 after being impacted by an estimated $3 billion of natural catastrophe losses.
However, the reinsurer claimed that the overall solvency of the Group remains at “a very strong level” and is comfortably above its target of 220%.
“In a challenging year with large losses Swiss Re was able to generate a positive underwriting contribution,” the company stated in its report.
“This is also reflected in a relative increase of insurance risk in the overall risk profile,” it continued. “Capital repatriation, the redemption of a subordinated instrument and depressed financial markets resulting in negative contribution from investments ultimately lead to a decrease in the overall SST ratio.
Swiss Re explained that its reinsurance unit generated a positive underwriting contribution despite the large losses in 2018, and said that its performance reflected a relative increase in insurance risk and a higher market value margin.
“The dividend payment to the Group, the redemption of a subordinated instrument and depressed financial markets resulting in significantly lower contribution from investments ultimately lead to a decrease in the overall SST ratio,” it stated.
Profitability for the Corporate Solutions business was impacted by underwriting performance, driven by an increase in severity and frequency of large man-made losses as well as unfavourable prior-year developments.
Finally, the main driver behind the SST ratio drop for the Life Capital Reinsurance business is a deduction for the projected dividend to be paid in 2019 to the Group, Swiss Re said.
