Swiss Re swings to loss on ‘shock’ of Ukraine war & significant headwinds
Swiss Re, the world's largest reinsurer, swung to a loss in “challenging” first quarter due to higher-than-expected large natural catastrophe claims, financial market volatility and ongoing pandemic-related headwinds, but chiefly because of establishing reserves for potential impacts from the war in Ukraine. Chief executive Christian Mumenthaler (pictured) said it “came as a shock” but struck a tone of optimism noting that he does not anticipate an “outsized exposure” as the situation stands.
The Zurich-based global reinsurer reported a net loss of $248 million for the first quarter of 2022, compared with a net profit of $333 million for the same period last year.
Swiss Re booked $283 million in reserves related to the war in Ukraine, nat cat claims of $524 million across its property and casualty businesses as well as COVID-19 claims of $515 million.
The group grew its net premiums earned and fee income by 4.0% to $10.6 billion compared with the prior-year period. Its return on investments of 0.7% was impacted by equity mark-to-market losses as well as modest losses on Russia-related exposures.
Swiss Re’s all business units painted a similar picture with profits declining in both property/casualty and Corporate Solutions, and losses widening in the life and health (L&H Re) segment.
P&C Re posted a net profit of $85 million for the first quarter, compared with $481 million in the same period in 2021. Its net premiums earned, however, rose by 5.8% to $5.3 billion due to continued price improvements as well as focus on active portfolio management.
L&H Re remained in loss ($230 million) for Q1 2022, compared with a net loss of $193 million for the first quarter of 2021.
Swiss Re Corporate Solutions produced a net profit of $81 million, albeit lower than the $96 million in the prior-year period. The business unit absorbed large natural catastrophe losses of $75 million, mainly driven by the flooding in Australia and the European winter storms in February.
iptiQ grew its gross premiums written by 38% compared with the same period last year to $230 million.
“The first quarter turned out to be a challenging one,” said Swiss Re's group CEO Mumenthaler. “Russia's invasion of Ukraine came as a shock, and our thoughts are with everyone impacted. While the situation remains highly uncertain and we do not believe we have an outsized exposure, we decided to take a proactive and cautious approach to establishing reserves for potential impacts from the war. Despite this and other headwinds in the quarter, Swiss Re's property and casualty businesses delivered robust underwriting results, and we remain focused on delivering on our financial targets for the year.”
Swiss Re's group chief financial officer John Dacey, added: "While the first quarter was impacted by negative equity mark-to-market movements, the recurring income yield remained stable at 2.1%. We expect our investment results to benefit from rising interest rates in the medium term. At the same time, the Group maintained its very strong capital position, enabling us to capture profitable growth opportunities in a supportive pricing environment."
Commenting on the outlook for the rest of the year, Mumenthaler said: "While the first quarter of 2022 presented significant headwinds for the re/insurance industry and Swiss Re, we are confident in the Group's ability to navigate the challenges. Thanks to the actions we have taken over the past years, our businesses have all the necessary levers in place to drive profitability and deliver against our financial targets for 2022."
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