Swiss Re Insurance-Linked Fund Management

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Swiss Re reports $3.9bn of COVID, $1.7bn of catastrophe losses in 2020


Global reinsurance giant Swiss Re reported its full-year 2020 results this morning, highlighting $3.9 billion of losses from the COVID-19 pandemic and $1.7 billion from what it called a higher frequency of natural catastrophe events.

swiss-re-building-logo-newSwiss Re also provided a forecast for a further up to $500 million of pandemic related claims in 2021, suggesting it believes its total COVID-19 claims and reserves by the end of this year could be $4.4 billion.

Ultimately, the claims and losses drove Swiss Re to a net loss of $878m for 2020.

But excluding the impact of COVID-19, the results tell a different picture, with group net income coming out at $2.2 billion for 2020, well up on 2019’s $727m.

Property and casualty reinsurance underwriting saw a net loss of $243m, but excluding COVID a net profit of $1.3 billion and return on equity of 13.2%.

The reinsurer noted nominal price increases of 6.5% achieved across its January renewal book in P&C reinsurance, while it said that a focus on portfolio quality means it now has a lower combined ratio target of less than 95% for 2021.

The Corporate Solutions business would also have been positive absent losses from the pandemic, with net income of $393m and an RoE of 16.5%, which is a much improved result for Swiss Re in that important commercial risk underwriting segment.

Swiss Re’s Group Chief Executive Officer Christian Mumenthaler commented, “The COVID-19 pandemic continues to affect communities and businesses across the globe. The start of vaccination efforts brings hope that the situation will improve soon. Our Group has gone through this crisis with confidence and strength, and in our role as a shock absorber we are doing our part to help mitigate the challenges of the pandemic and improve resilience to future systemic risks.

“From the start of the pandemic, we took a disciplined and prudent approach to building reserves as actual claims have been slow to come in. While some further COVID-19 losses are expected in 2021, we have dramatically reduced relevant exposures in P&C lines. I am very encouraged by broad- based improvements in portfolio quality and underwriting margins in P&C Re and Corporate Solutions, including in the January renewals.“

While Swiss Re forecasts $500m of additional COVID-19 pandemic claims for 2021, it does note the high degree of uncertainty in this figure.

Swiss Re’s Group Chief Financial Officer John Dacey added, “Our capital position remained very strong throughout 2020, despite the unprecedented impact from COVID-19 and an unusually high frequency of natural catastrophes. Swiss Re’s businesses continued to run without disruptions, delivering a strong underlying performance. Together with a positive outlook, this allows us to propose a stable dividend payment to our shareholders even in these challenging times.“

The P&C reinsurance result of $1.3 billion, excluding COVID impacts, is well up on 2019’s $396m.

Natural catastrophe losses of $1.7 billion were largely driven bu the US hurricanes, and numerous events from so-called secondary perils around the world, Swiss Re said.

Normalised, the combined ratio for P&C reinsurance came in under target at 96.9%, the target was 97%. Including the COVID-19 impacts, the P&C combined ratio was 109%.

Interestingly, Swiss Re decreased its premium volumes at the key January reinsurance renewals, renewing $7.8 billion of premiums, which is 11% down compared with the business that was up for renewal.

However, the reinsurer explained that this is due to a focus on underwriting quality and improved terms and conditions, as Swiss Re tries to make its portfolio more resilient for the year ahead.

The 6.5% of nominal price increases across the P&C reinsurance book more than offset lower interest rates and higher loss assumptions, Swiss Re said.

Looking ahead, CEO Christian Mumenthaler explained, “We are confident in the outlook for 2021 with COVID-19 losses mostly behind us. We look forward to improving profitability in the P&C Re business as a result of our focus on portfolio quality and the favourable market environment. Our L&H Re client franchise is very strong, positioning us to grow, especially through tailored transactions. On Corporate Solutions, we are well ahead of the turnaround we set for 2021. iptiQ is delivering impressive growth, creating new partnerships and underlining our position as a technology-driven risk knowledge company.“

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