Swiss Re Q1 Net Income Drops by 45% on Cyclone Debbie Claims

By | May 4, 2017

Swiss Re reported net income of US$656 million during the first quarter of 2017, a 45 percent drop from $1.2 billion reported in the same period last year.

Swiss Re’s Q1 result was hammered by expected claims from natural catastrophe events, especially in Australia with Cyclone Debbie, which could cost the reinsurer $350 million.

“Notwithstanding these claims, which are an inherent part of our business and a reflection of the value we provide to society, as well as continuing challenges of a low-yield environment and pricing pressures, our overall results remain satisfactory, demonstrating the benefits of our diversified portfolios, our continued excellent financial condition and our strong market position,” said Group CFO David Cole in remarks to discuss the Q1 results.

Gross premiums written for the quarter declined 10.5 percent to US$10.2 billion ($11.4 billion in Q1 2016), which the company attributed to “its disciplined underwriting approach and carefully selected the risk pools to which it allocates capital.”

Swiss Re’s P/C combined ratio for the quarter was 95.6 percent, compared with 93.3 percent in Q1 2016. (The company expects a combined ratio of around 100 percent this year).

The group’s annualized return on equity for the first quarter was 7.5 percent, compared with 14.6 percent during the same period last year.

“I am satisfied with our performance in the first quarter, given the challenging market environment. We have responded decisively to the continued pricing pressure across the industry by not accepting unprofitable business, and our top line clearly shows that,” said Christian Mumenthaler, Swiss Re’s group chief executive officer in prepared remarks.

Additional highlights from Swiss Re’s Q1 results include:

  • Property & Casualty Reinsurance. The group’s P&C Re segment’s Q1 net income was $321 million, which included Cyclone Debbie claims of $320 million. Last year’s Q1 net income was $587 million. Gross premiums written for Q1 2017 were $5.8 billion, compared with $7.0 billion last year. The segment’s ROE was 10.8 percent; 19.1 percent in 2016.
  • Corporate Solutions.The segment’s net income was $55 million ($80 million in Q1 2016.) The Q1 2017 net income includes expected claims of nearly $30 million from Cyclone Debbie. Gross premiums written were $717 million ($804 million in Q1 2016). ROE was 10.1 percent in Q1 2017 (13.5 percent in Q1 2016). Corporate Solutions opened a new office in Kuala Lumpur, Malaysia during the quarter.
  • Life & Health Reinsurance. L&H Re’s net income was $193 million, compared with $244 million last year. ROE in Q1 2017 was 11.6 percent (16.1 percent in Q1 2016).
  • Life Capital.Life Capital’s gross cash generation was $336 million, net income was $73 million and ROE was 3.9 percent. Cole said Life Capital “continues to be a good source of cash generation and earnings diversification.”
April Renewals

Commenting on P&C Re’s April renewals, Cole said, Swiss Re maintained underwriting discipline through the renewals when approximately 10-15 percent of the company’s business is up for renewal. “We actively reduced capacities in those areas of the business that did not meet our profit expectations. Premium volume, therefore, decreased by 2 percent.”

Cole mentioned the rationale for Swiss Re planned launch in 2018 of a subsidiary in Singapore, which will become the company’s regional headquarters for its reinsurance operations in Asia.

He said the subsidiary will help the company position itself for the significant growth expected for the region.

“We chose Singapore as a result of proximity to clients, the stability of the legal entity, the regulatory regime and access to good quality talent,” Cole added. It reflects “our strategic intent to make sure we bring our resources and our capabilities closer to our clients.”

Related:

Swiss Re Q1 Net Income Down 15% to $1.23B; New Head of Reinsurance Named

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