Swiss Re reports $762m loss at Corporate Solutions and $1bn capital injection
Swiss Re has reported a loss of $468m for the first nine months of this year including a $762m loss at its Corporate Solutions business, which has needed a $1bn capital injection. Swiss Re said the capital injection underlines its commitment to Corporate Solutions and believes rate increases are on the way for both primary insurance and reinsurance buyers.
Swiss Re Group’s net $468m loss for the first nine months of this year compares to a $3bn profit in the same period of 2016. The numbers were greatly impacted by expected $3.6bn of claims for hurricanes Harvey, Irma and Maria, as well as the recent Mexican earthquakes.
Swiss Re Group expects overall nat cat claims for the first nine months – including Cyclone Debbie in Australia and Peru floods – to reach approximately $4bn. About $3bn will be suffered by its P&C Re unit and about $1bn by Corporate Solutions.
Corporate Solutions’ nine-month result was “significantly” impacted by natural catastrophe events in its largest market the US, as well as the Caribbean and Mexico, said Swiss Re. The business unit expects to incur approximately $975m of nat at claims.
Corporate Solutions’ combined ratio for the first nine months of 2017 was a worrying 142.6%, compared with 99.3% in the same period of last year. The unit’s unnualised return on equity (ROE) was -56%, while gross written premiums increased 1.9% to $2.9bn.
Swiss Re said its strengthening of Corporate Solutions’ capital position underlines its commitment to this business and its long-term strategy. Swiss Re predicts that both Corporate Solutions and P&C Re will benefit from rate rises going forward, on the back of industry-wide market losses.
“With Corporate Solutions, Swiss Re has built a unique platform to access the large pool of commercial risks. The business unit is expected to benefit from pricing improvements following the recent natural catastrophe events,” said the group.
Its CEO Christian Mumenthaler said: “In my view, many lines of business have been operating in an unsustainable environment. We expect pricing conditions to improve going forward – not only in reinsurance but also in commercial insurance. In addition, we are strongly positioned to work with our partners to capture market opportunities when they arise – as they often do after such events – and continue to tackle protection gaps around the world.”
Mr Mumenthaler added that the severe natural catastrophes in 2017 have clearly impacted the group’s results.
“At the same time, we are able to absorb these losses and join forces with our clients to help affected people and businesses in getting back on their feet. This shows that our strategy to ensure superior capitalisation at all times is paying off. We believe we have the financial strength to respond to potential market developments,” he continued.
Swiss Re’s P&C Re unit posted a loss of $652m in the first nine months of 2017 on the back of heavy nat cat losses, down from a profit of $1.55bn in the same period of last year. P&C Re expects losses from Hurricanes Harvey, Irma, Maria and the Mexican earthquakes to amount to $2.65bn. Its combined ratio for the first nine months jumped to 114.1% from 93.8%. Its annualised ROE was -7.5%. P&C Re continued to experience positive prior-year development during the first nine months of 2017.
P&C Re’s gross written premiums fell 12.6% to $13.4bn in the first nine months of this year. Swiss Re said this is because it maintained its “strict disciplined underwriting approach, ensuring it receives an adequate price for the protection it provides”.
Swiss Re’s life and health reinsurance business delivered strong net income of $741m in the first nine months, driven by a good underwriting result and investment performance. Life Capital’s gross cash generation amounted to $789m.
Swiss Re Group’s gross premiums written for the first nine months declined 5.1% to $26.7bn. The reinsurer said this was a result of a disciplined underwriting approach in challenging market conditions. Measured at constant foreign exchange rates, the decline would have been 4.2%. Swiss Re generated an annualised ROE of -1.9% in the first nine months.
