Cyclone Debbie, Other Weather Events Hammer Swiss Re’s Q1 Net Income

May 4, 2017 by L.S. Howard

Swiss Re reported net income of $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 $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:

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 clie

*This story appeared previously in our sister publication Insurance Journal.