Swiss Re income slips in the face of natural catastrophes

Figures fall back from US$3.6 billion in 2016 to just US$331 million in 2017

Swiss Re income slips in the face of natural catastrophes

Insurance News

By Paul Lucas

“The severe natural disasters of 2017 are not only loss events, they are above all human tragedies.”

Those were the sobering words of Swiss Re group CEO Christian Mumenthaler as he revealed the company’s annual results for 2017 which saw a significant fall in income – from US$3.6 billion in 2016 to just US$331 million this time around. For Mumenthaler, the fact that the company was able to achieve any positive income results in such difficult circumstances, however, was, in itself, an achievement.

“In times like these we demonstrate the critical role re/insurance plays in enabling people and economies to recover,” he elaborated. “I am proud that Swiss Re, also through our clients, will be supporting people and businesses affected with estimated payouts of US$4.7 billion. 2017 proved how our strategy to maintain a superior capital position and pursue disciplined underwriting continues to be the right approach.”

2017 was indeed dominated by natural catastrophes. After Cyclone Debbie in March, hurricanes Harvey, Irma, and Maria, along with the Mexican earthquakes and the wildfires in California and British Columbia, caused havoc in the third quarter. All of these events left Swiss Re with US$4.7 billion in combined estimated claims from large catastrophes. Overall, its property and casualty reinsurance division suffered a net loss of US$413 million, with US$3.7 billion in catastrophe insurance claims the largest contributor to that fall. Its corporate solutions division also suffered a net loss of US$741 million, with catastrophes again accounting for US$1 billion in claims in this area.

There were some brighter sparks for the company, however. In particular it can point to its strong life and health reinsurance net income which stood at US$1.1 billion for the year representing ROE of 15.3%. Overall, however, gross written premiums were down for the group.

Looking forward the company shed some light on its discussions with Softbank about a possible investment.

“On February 07, 2018, Swiss Re confirmed that it is engaged in preliminary discussions with SoftBank Group Corp., which approached Swiss Re regarding a potential partnership and minority investment. Swiss Re’s board of directors is carefully assessing the strategic and financial implications of such a partnership, having in mind the best interests of the company and its shareholders,” it stated in a release. “Swiss Re’s capital position remains very strong; the issuance of new capital is not under consideration. There is no certainty that any transaction will be agreed, nor as to the terms, timing, or form of any transaction.”

“2017 was clearly a challenging year for the industry – and Swiss Re,” concluded Mumenthaler. “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. In addition, the catastrophes are a reminder of the relevance of large global re/insurers and their role in tackling the large worldwide insurance protection gap. It visibly shows that the need for insurance is increasing due to developments such as population growth and the concentration of assets in catastrophe-prone regions.”


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