Solid growth yet profits dip at Swiss Re driven by P/C book

A series of agricultural losses, softening market conditions and negative prior year development, hit profits in Swiss Re’s property/casualty (P&C) reinsurance segment in the third quarter of 2016, despite solid growth in the unit.

Swiss Re's overall net income in the third quarter was $1.2 billion, compared with $1.4 billion in the same period a year earlier. The biggest decline came in the firm’s P&C reinsurance segment in which profits were $678 million, down 33.5 percent compared with the $1 billion it made a year earlier.

It attributed the loss to a series of agricultural losses in Europe, lower prior-year development and softening market conditions.

The company’s life/health segment's net income was $218 million, down from $272 million a year earlier.

Swiss Re's overall combined ratio for the third quarter was 88.9 percent, up 9.2 percentage points. Its P&C segment's combined ratio was 87.9, up 10.2 percent points.

Its corporate solutions and life capital segments did increase profits compared with the year before, especially life capital which increased its net income to $157 million compared with $23 million a year earlier.

But despite the dip in profits, the company enjoyed solid growth in the third quarter, its premiums earned for the three-month period reaching $8.6 billion, up from $7.8 billion year-on-year.

Swiss Re's property/casualty (P&C) reinsurance segment reported premiums earned of $4.6 billion in the three-month period, up from $4.1 billion.

The company's life/health reinsurance segment reported premiums earned of $2.8 billion, up from $2.7 billion.

David Cole, chief financial officer at Swiss Re Group, said: "Despite continuous market pressures, we reported a strong net income in the third quarter, driven by investment income and solid underwriting. This shows how our differentiation – driven by our very strong capitalisation and excellent client relationships – contributes to our profitability and value creation. Even in this difficult environment, we continue to invest in our business and our research and development.”