Swiss Re reports loss in P&C, corporate solutions for 2017
Swiss Re has posted a loss in property/casualty reinsurance and corporate solutions, with life & health helping to prevent a group loss in 2017.
The group net income plummeted to $331 million in 2017 compared to $3.56 billion in 2016, according to a Feb. 23 press release. Gross premiums written shrank to $34.78 billion from $35.62 billion over the period.
P&C Re posted a net loss of $413 million for 2017 after a net income of $2.10 billion in 2016.
Estimated combined claims of $3.7 billion from 2017’s large natural catastrophes led to the “strong decline” in P&C Re’s results. After Cyclone Debbie in March, hurricanes Harvey, Irma, and Maria and the Mexican earthquakes caused considerable damage during the third quarter of 2017. During the last quarter of the year, wildfires in California resulted in additional estimated insurance claims for Swiss Re of $0.4 billion. In total, the estimated combined claims from natural catastrophes were $4.7 billion in 2017, according to Swiss Re.
The combined ratio of P&C Re deteriorated to 111.5 percent in 2017 from 93.5 percent in 2016. P&C Re continued to experience positive prior-year development in 2017. An “active reduction” in capacity resulted in an 8.8 percent decline in gross premiums written to $16.5 billion in 2017 in the P&C Re.
The outlook for P&C Re improved following January 2018 treaty renewals. Swiss Re renewed $8.1 billion compared to the $7.5 billion premium volume up for renewal on 1 January 2018. This represents an increase of 8 percent, driven by higher rates across all major lines of business and regions and new large transactions. Prices increased by 2 percent. Improvements were most pronounced in the loss-affected property lines and were more moderate in other lines. Risk-adjusted price quality increased to 103 percent. The majority of the loss-affected US property business will be up for renewal later in the year.
“2017 was clearly a challenging year for the industry – and Swiss Re,” group CEO Christian Mumenthaler said. “However, we believe the outlook for our industry is now more positive than it has been during the last four years. Changes in the market environment, such as adjusting property and casualty price levels and increases in interest rates, are expected to be beneficial for our business.”
Corporate Solutions’ results were also “significantly” impacted by natural catastrophes, reporting a net loss of $741 million in 2017 after a net income of $135 million in 2016. The combined ratio in the business segment deteriorated to 133.4 percent from 101.1 percent over the period.
Corporate Solutions is Swiss Re’s platform to access the “large” pool of commercial risks. During the fourth quarter, the group strengthened Corporate Solutions’ capital position, equipping the unit with financial flexibility to write future profitable business. The outlook for the commercial insurance market has improved following the recent natural catastrophes, according to Swiss Re.
In 2017, Corporate Solutions invested into its primary lead capabilities, opening offices in Kuala Lumpur and Manchester, UK. Swiss Re also started a joint venture in Brazil with Bradesco.
Life & Health Reinsurance (L&H Re) increased net income to $1.10 billion in 2017 from $807 million in 2017, driven by a stable underwriting result and strong investment performance, according to the press release. Gross premiums written for 2017 increased by 4.0 percent to $13.3 billion, mainly due to new business wins and growth in all markets, including a number of large transactions in the US and Asia.
“The 2017 results clearly show the strength of our diversified business model,” said Swiss Re chief financial officer, David Cole. “The losses in our P&C businesses were offset by strong results in our life and health businesses, further supported by our investment performance. Our capital position remains very strong and we continue to have ample financial flexibility to invest in future growth and business opportunities as they arise,” he added.
Swiss Re is engaged in preliminary discussions with SoftBank Group regarding a potential partnership and minority investment in the reinsurer. Swiss Re stressed that its capital position remains “very strong” and that the issuance of new capital is not under consideration.
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