Swiss Re slips into red on big losses, CEO ‘disappointed’ on target miss
Global reinsurer Swiss Re has clocked losses in the first nine months, turning around the $1.3 billion profit earned in the same period of 2021, driven by an unprecedented confluence of headwinds that significantly battered its P&C Re results, despite positive momentum in Corporate Solutions and L&H Re business. Its chief executive Christian Mumenthaler (Pictured) expressed disappointment that the business will not meet its target this year but cited strong capital position and rising recurring investment income as cause for optimism for its mid-term outlook.
Swiss Re plunged to a net loss of $285 million and a return on equity ROE of –2.1% for the first nine months of 2022, driven by a $442 million net loss in the third quarter. The decline was mainly driven by “significantly lower investment results”, large natural catastrophe claims of $2.7 billion as well as first-quarter reserves of $283 million related to the war in Ukraine.
Net premiums earned and fee income for the group rose 1.3% to $32.4 billion in the 9M of 2022, compared with the same period last year. Growth was negatively affected by adverse foreign exchange developments, while at stable foreign exchange rates, the increase amounts to 5.2%.
Its core property/casualty reinsurance (P&C Re) business was impacted by Hurricane Ian and an increase in small- and mid-sized claims in the third quarter.
P&C Re saw a net loss of $283 million and combined ratio of 106.1% for the 9M of 2022, compared with net profit of $1.5 billion in the same period in 2021. Its net premiums earned, however, increased slightly to $16.6 billion, supported by continued price improvements.
Swiss Re noted that large natural catastrophe claims of $2.5 billion in P&C Re during this period were “higher than expected”, mainly related to Hurricane Ian, floods in Australia and South Africa, hailstorms in France as well as a series of other smaller events around the world.
Swiss Re Corporate Solutions produced a net profit of $356 million in the first nine months of the year, compared with $425 million in the prior-year period. It was achieved despite reserves related to the Ukraine war and large natural catastrophe losses of $187 million, mainly relating to Ian and flooding in Australia.
Finally, L&H Re reported a net profit of $221 million for 9M of 2022, compared with a net loss of $32 million in the prior-year period, as COVID-19-related claims decreased from $1.2 billion to $608 million.
Swiss Re reiterated its early indication that the group is unlikely to reach its ROE target of 10% in 2022, but remains confident in the mid-term outlook.
The reinsurer’s chief financial officer John Dacey stated that the group's reserves have been bolstered by $0.7 billion over the past 12 months to address the impact of economic inflation. “Rising interest rates are already helping to compensate for this impact, with the recurring contribution from our fixed-income portfolio rising by around $100 million in the third quarter alone. Most importantly, despite the challenges this year, we have maintained our very strong capital position and remain committed to our capital management priorities,” he noted.
Mumenthaler said: “The first nine months of this year were marked by a confluence of events affecting Swiss Re's financial performance: from turbulence in the financial markets, to an increase in natural catastrophe claims, surging inflation and the war in Ukraine.
“While P&C Re has been significantly affected by these headwinds, all other businesses are performing well and are on track to reach their 2022 financial targets.”
He added: “While we are disappointed that the Group ROE target is unlikely to be reached this year, we remain confident in our mid-term outlook. In this volatile environment, risk aversion and the need for protection will continue to increase.
“Our strategy and very strong capitalisation put us in a favourable position for the upcoming renewals amid rising prices and constrained market capacity. We remain committed to drive profitability and create value for our shareholders, clients and employees, as reflected in our 2024 financial targets.”
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