Swiss Re bets on growth in Asia but struggles elsewhere

Swiss Re expects to benefit from “very significant growth” potential by setting up a new hub in Singapore but is shrinking the business elsewhere to protect profitability.

Swiss Re is establishing a dedicated regional legal entity in Singapore for its reinsurance business unit. The entity will also house the regional headquarters for Swiss Re’s network of reinsurance operations in Asia. The Singapore-based entity and regional headquarters is expected to be established in 2018.

“We’ve been thinking quite some time about how we wish to position ourselves for the very significant growth that has occurred in Asia and also we expect to continue to develop in Asia,” said CFO David Cole during a May 4 press conference call.

“We chose Singapore as a result of proximity to clients, the stability of the legal and regulatory regimes, access to good quality talent. […] This is about increasing our present in Asia,” Cole noted.

In China, for example, the insurance sector recorded a 32 percent year-on-year increase in premium income to 1.59 trillion yuan ($230.7 billion) in the first quarter of 2017, Reuters reported May 3 citing an online statement by the country's insurance regulator.

Otherwise, however, growth opportunities remain scarce for Swiss Re.

Gross premiums written declined to $10.20 billion in the first quarter of 2017 compared to $11.40 billion in the same period a year ago. Net income plummeted to $656 million from $1.23 billion over the period, partially due to expected $350 million insurance claims from Cyclone Debbie.

“We want to invest in our businesses, we want to maintain our regular dividend,” Cole said. “But of course, we are not just interested in top-line growth or short-term impact, we are interested in long-term growth,” he noted. “What we are demonstrating here is that we are willing to be disciplined, that we are willing to deploy our capital into situations where we can also earn an attractive return.”

The insurance sector is currently facing a soft market, particularly in property/casualty, driven by excess capacity. For Swiss Re, gross premiums written in property/casualty dropped to $5.78 billion in the first quarter of 2017 compared to $7.01 billion a year ago. Net income of the segment declined to $321 million from $587 million over the period.

In life and health reinsurance, gross premiums written declined to $3.25 billion in the first quarter from $3.41 billion a year ago. Net income in the segment shrank to $193 million from $244 million over the period.

“We continue to deploy capital into the business although we’ve been trimming some exposures in other areas,” Cole noted. Swiss Re’s growth initiatives are focusing on large transactions, on open life book business in its primary life and health unit Life Capital, as well as corporate solutions, its commercial insurance arm.

In Life Capital, “we continue to maintain focus on the UK and the close life business,” Cole explained. “In open life business, we continue to operating in Europe and recently started in the US but it’s just a matter of time before we’ll also expand it into Asia.

“There remains a very significant protection gap across the world both in the developing as well as in the developed world, both in the P&C side and in the life and health side,” Cole noted.

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