Swiss Re Reports Net Loss Of 9M 2022 As P&C Sees Large Nat Cat Claims

Swiss Re Reports Net Loss Of 9M 2022 As P&C Sees Large Nat Cat Claims

A major global reinsurance company, Swiss Re reported a net loss of $285 million for the first nine months of 2022, with a loss of $442 million in the third quarter due to poor investment performance and high natural disaster claims.

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In contrast to the net income of $1.3 billion and the ROE of 6.6% for the 9M 2021, the net loss of $285 million and the ROE of -2.1% for the 9M 2022 period.

Swiss Re places the blame for the abrupt shift on poorer investment performance, significant nat cat claims totaling $2.7 billion, and first-quarter reserves of $283 million relating to Russia’s ongoing assault of Ukraine.

Additionally, Group Chief Financial Officer (CFO), John Dacey, explained that Swiss Re has bolstered reserves by $700 million over the past year to address the impact of economic inflation, which suggests other players will likely need to take similar actions.

Swiss Re Reports Net Loss Of 9M 2022 As P&C Sees Large Nat Cat Claims

“Rising interest rates are already helping to compensate for this impact, with the recurring contribution from our fixed-income portfolio rising by around USD 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,” said Dacey.

Starting with the firm’s property and casualty (P&C) reinsurance division, this part of the business fell to a net loss of $283 million for 9M 2022, down from the $1.5 billion profit for the same period last year.

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Swiss Re says that at $2.5 billion, large natural catastrophe claims were higher than expected for the period and mainly relate to Hurricane Ian, floods in Australia and South Africa, and hailstorms in France, alongside a series of other smaller events around the world.

Prior-year events also had a negative impact on the P&C reinsurance result, driven by reserving actions on economic inflation, and a large prior-year loss in the specialty. Moderate strengthening in the liability segment was in line with the previous year and mostly offset by redundancies in other areas, explains Swiss Re.

Swiss Re Reports Net Loss Of 9M 2022 As P&C Sees Large Nat Cat Claims

Within P&C reinsurance, net premiums earned increased to $16.6 billion from $16.4 billion, supported by continued price improvements.

However, the P&C reinsurance combined ratio deteriorated from 97.5% in 9M 2021 to 106.1% in 9M 2022 on the back of the elevated nat cat experience and the impact of economic inflation.

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Swiss Re warns that as a result of the increase in small and mid-sized claims, mostly as a result of economic inflation, P&C reinsurance is unlikely to reach its normalized combined ratio target of less than 94% in 2022. For 9M 2022, the normalized combined ratio was 96.2%.

In contrast, Swiss Re’s Life and Health (L&H) reinsurance business has seen a return to profitability in 2022, recording 9M 2022 net income of $221 million, compared with a loss of $32 million a year earlier, as claims related to COVID-19 fell from $1.2 billion to $608 million.

Swiss Re Reports Net Loss Of 9M 2022 As P&C Sees Large Nat Cat Claims

“While the first quarter of 2022 was still strongly impacted by COVID-19-related claims, the business returned to profitability in the second and third quarters, supported by a large transaction and despite significantly lower investment results this year,” notes the reinsurer.

Within L&H reinsurance, net premiums earned and fee income was largely unchanged at $11.2 billion for 9M 2022, with the division on track to reach its net income target of roughly $300 million for the full year.

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In Corporate Solutions, Swiss Re has reported 9M 2022 net income of $356 million, down from $425 million in the prior year period. The segment’s result remained resilient despite reserves related to the war in Ukraine and large nat cat losses of $187 million, mainly related to Ian and the flooding in Australia.

Year-on-year, Corporate Solutions benefited significantly less from favorable prior-year reserve development and also absorbed less investment income when compared with the previous year.

Swiss Re Reports Net Loss Of 9M 2022 As P&C Sees Large Nat Cat Claims

Still, net premiums earned increased by more than 4% to $4.1 billion for 9M 2022, driven by new business growth in selected focus portfolios along with continuous earn-through of previously realized rate increase.

Corporate Solutions has recorded a combined ratio of 93.1% for 9M 2022, with the business unit on track to meet its full-year target of less than 95%.

Lastly, Swiss Re’s iptiQ entity continued to grow in 9M 2022, with gross written premiums increasing by 25% to $650 million.

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On the asset side of the balance sheet, Swiss Re has revealed that its return on investment in 9M 2022 of 1.6% was hit by negative mark-to-market impacts on listed equity investments.

Swiss Re’s Group Chief Executive Officer (CEO) Christian 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.”

Swiss Re Reports Net Loss Of 9M 2022 As P&C Sees Large Nat Cat Claims

Looking forward, Swiss Re says that it is unlikely to reach its Group ROE target of 10% in 2022, but remains confident in the mid-term outlook and is committed to its goal of boosting US GAAP ROE to 14% in 2024.

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“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 capitalization put us in a favorable position for the upcoming renewals amid rising prices and constrained market capacity. We remain committed to driving profitability and creating value for our shareholders, clients, and employees, as reflected in our 2024 financial targets,” added Mumenthaler.

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