By: Swiss Re
Swiss Re first quarter 2019 net income reflects excellent Life & Health Reinsurance performance and a very strong investment result, partly offset by large losses
- Group net income of USD 429 million in the first quarter 2019, reflecting excellent performance in Life & Health Reinsurance (L&H Re) and a very strong investment result, while large losses impacted property and casualty businesses
- Property & Casualty Reinsurance (P&C Re) net income USD 13 million and return on equity (ROE) 0.6%, affected by large losses
- Strong April P&C Re renewals supported by improved pricing, particularly in Japan
- L&H Re posted record first-quarter net income of USD 328 million; ROE 19.6%
- Corporate Solutions net loss of USD 55 million
- Life Capital reported gross cash generation of USD 300 million
- Very strong return on investments (ROI) of 4.5%; running yield at 2.9%
- First tranche of the public share buy-back programme of up to CHF 1 billion purchase value to be launched on 6 May 2019
Swiss Re reported a net income of USD 429 million for the first quarter of 2019, reflecting excellent L&H Re performance and a very strong investment result, while large losses impacted the property and casualty businesses. Net premiums earned increased by 5.5% to USD 8.8 billion, reflecting growth across all Business Units. ROI increased to 4.5% from 2.2% in the first quarter of 2018. The Group ROE was 5.9%. Swiss Re is set to launch the first tranche of its public share buy-back programme of up to CHF 1 billion purchase value on 6 May 2019, highlighting the Group’s strong capital position and high financial flexibility.
Swiss Re’s Group Chief Executive Officer Christian Mumenthaler said: “While our property and casualty businesses were affected by significant large losses, Life & Health Re continued on its successful and steady path – a sign of the strength of our diversified business model. Another encouraging sign was the ongoing and accelerating improvement in the overall pricing environment for the property and casualty businesses, especially in loss affected markets. This continued positive momentum in renewals gives us confidence in our outlook.”
First-quarter net income reflected excellent L&H Re performance and a very strong investment result, impacted by claims from large losses
Swiss Re reported net income of USD 429 million for the first quarter of 2019, supported by the excellent performance delivered by L&H Re and a very strong investment result. Claims from large natural catastrophes and man-made losses included the North Queensland floods in Australia, Cyclone Idai in Mozambique, the Ethiopian Airlines crash and the subsequent grounding of the Boeing 737 MAX fleet. In addition, a significant amount of late claims from prior-year events, mainly from Typhoon Jebi, also adversely impacted the result for the quarter.
Swiss Re’s investment portfolio generated a very strong ROI of 4.5%, driven by significant market value gains from equity securities. This compares to an ROI of 2.2% for the first quarter of 2018. The fixed income running yield was 2.9%.
Net premiums earned for the first quarter of 2019 increased by 5.5% to USD 8.8 billion year-on-year, reflecting growth in all Business Units. At constant exchange rates, the increase was 9.4%.
Swiss Re’s Group Chief Financial Officer John Dacey said: ”We are pleased with our premium growth and the very strong investment result in the first quarter of 2019. We continue to have an industry-leading capital position, providing us with the high financial flexibility to support profitable growth. On Monday, we will start to return excess capital to our shareholders through the first tranche of our share buy-back programme – a clear commitment to our capital management priorities.“
P&C Re increase in premiums supported by large transactions; result impacted by claims from large losses
P&C Re net income of USD 13 million and a combined ratio of 110.3% in the first quarter of 2019 were impacted by claims from large losses. This included claims of around USD 210 million from the North Queensland floods in Australia and around USD 90 million from the Ethiopian Airlines crash and the subsequent grounding of the Boeing 737 MAX fleet. Results reflected the significant impact from prior-year events, with the vast majority being driven by the increase in the loss estimate for Typhoon Jebi, in line with a material increase in the total market loss.
Net premiums earned increased by 10.9% to USD 4.2 billion, supported by large transactions.
Enhanced P&C Re portfolio through April renewals
In the April renewals, treaty premium volumes overall increased by 18%, and the price-quality improved by 1%. This reflects the successful outcome of the Japan renewals, where Swiss Re could reinforce its strong position, often at preferential terms, increasing premium volume by 10% and improving price quality by 7%.
L&H Re delivered an excellent result
L&H Re reported record first-quarter net income of USD 328 million with an ROE of 19.6%. The Business Unit delivered an excellent performance, driven by active portfolio management, improved mortality developments in the Americas and a very strong investment result.
Net premiums earned decreased by 6.0% to USD 3.1 billion, driven by unfavourable foreign exchange movements and the termination of an intragroup retrocession agreement with Life Capital.
Corporate Solutions results adversely affected by prior-year events
Corporate Solutions reported a net loss of USD 55 million in the first quarter of 2019. The result was heavily impacted by large and medium-sized man-made losses, in particular from prior-year events. The combined ratio increased to 116.3%, and the ROE was –12.1%. The Business Unit is currently undertaking a comprehensive review of all business lines and reserve positions.
Net premiums earned increased by 12.3% to USD 1.0 billion. The active pruning of the US General Liability portfolio was successfully offset by growth in Credit and Property as well as rate increases. Swiss Re expects the positive momentum in commercial insurance rates to accelerate during 2019, after a broad-based 5% rate increase in the first quarter of 2019.
Life Capital delivered a gross cash generation of USD 300 million
Life Capital delivered gross cash generation of USD 300 million in the first quarter of 2019, including proceeds from the sale of a further 10% stake in ReAssure to MS&AD Insurance Group Holdings Inc (MS&AD), as announced in December 2018 and completed on 20 February 2019. MS&AD’s total shareholding in ReAssure is now 25%.
The Business Unit’s net income was USD 7 million, supported by the favourable UK investment market performance, offset by ongoing investments in its open book business.
Net premiums earned rose to USD 426 million, mainly driven by the termination of an intra-group retrocession agreement with L&H Re. When measured in terms of gross premiums written and at constant exchange rates, the open book business reported strong growth of 14% year-on-year in the first quarter of 2019.
Swiss Re continues to explore a potential initial public offering (IPO) of the ReAssure closed book business in 2019.1 As Swiss Re has previously communicated and demonstrated by the investment of MS&AD in ReAssure, securing third-party capital is an important part of the strategy to enable further growth of the closed book business.
First tranche of public share buy-back programme to be launched on 6 May 2019
Swiss Re will launch the first tranche of its public share buy-back programme of up to CHF 1 billion purchase value on 6 May 2019 having received Board and all required regulatory approvals. The programme was authorised by Swiss Re’s shareholders at the Annual General Meeting on 17 April 2019 and underlines the Group’s policy of returning capital to shareholders when excess capital is available, in line with the company’s capital management priorities.
For further details on the share buy-back programme, please visit: https://www.swissre.com/investors/shares/share-buy-back.html
Strengthening the Group Executive Committee and outlook
Swiss Re announced today that Nigel Fretwell, Chief Human Resource Officer, and Hermann Geiger, Head Legal & Compliance and Group Chief Legal Officer, will become members of the Group Executive Committee as of 1 July 2019. The addition of these two senior executives underscores the importance of the human capital agenda as well as law and compliance at Swiss Re.
Swiss Re’s Group Chief Executive Officer Christian Mumenthaler said: “Based on the successful year-to-date renewals, we remain optimistic for P&C Re, while L&H Re continues to perform strongly. In Life Capital, we are focusing on preparing the potential IPO of ReAssure in 2019. Corporate Solutions continues to present challenges, and we are taking decisive measures to address recent performance issues. In this context, we are conducting a thorough review of the Business Unit, led by the new Corporate Solutions CEO Andreas Berger, which will be completed in the second quarter.“