With $1bn H1 profit Swiss Re reaps the reward of 'decisive actions'

Global reinsurer  Swiss Re is reaping the reward of "decisive actions" and "disciplined underwriting" as it turned its  $1.1 billion loss of last year into a solid profit in the first half of 2021. Its chief executive Christian Mumenthaler (pictured) confirmed that its Corporate Solutions business is now "back on track" following a  strategic turnaround late last year.

The Zurich-based reinsurer reported a net profit of $1 billion in half year 2021, citing "very strong performance" in the property and casualty businesses, supported by diminishing COVID-19-related impacts and continued price improvements. Same time last year, the company suffered a net loss of $1.1 billion due to the impact of COVID-19 losses.

Its property & casualty reinsurance (P&C Re) business reported a net profit of $1.2 billion in the first half of 2021, compared with a net loss of $519 million in the same period last year. The P&C Re profit was offset by a net loss of $119 million in the life & health (L&H Re) segment, which suffered continued COVID-19-related losses of $810 million during this period.

Swiss's Corporate Solutions produced a net profit of $262 million in the first half of 2021, following the "successful turnaround" in 2020. This reflects a significant improvement compared with a COVID-19-driven net loss of $312 million in the prior-year period and was achieved in spite of large natural catastrophe losses of $155 million, relating to US winter storm Uri in the first quarter.

The combined ratio of P&C Re improved to 94.4 percent from 115.8 percent in the first half of 2020. Swiss Re said as a result of disciplined underwriting and improving margins, P&C Re is on track to achieve its normalised combined ratio estimate of less than 95 percent in 2021.

The Corporate Solutions combined ratio was 92.7 percent (compared with 118.7 percent in H1 2020), supported by favourable prior-year development. This was a result of "strict expense management" and continued rate increases. The unit is is on track to achieve its targeted normalised combined ratio of less than 97 percent in 2021.

P&C Re’s net premiums earned grew by 8.9 percent to $10.5 billion, while Corporate Solutions rose 3.3 percent to $2.6 billion. L&H Re net premiums earned and fee income increased by 12.6 percent to $7.5 billion.

Swiss Re's iptiQ delivered strong growth in the first half of 2021. Compared with the same period last year, gross premiums written for the core business rose by 133 percent to $333 million

Mumenthaler said: “We are very pleased with the improved profitability achieved by the Group in the first half of this year. The focus on portfolio quality at P&C Re is delivering very strong results, and we are reaping the fruits of our decisive actions that brought Corporate Solutions back on track.

"Although L&H Re is still impacted by claims related to COVID-19 as we support our clients and society during this pandemic, its underlying business continues to perform well. All our businesses are growing, and our very strong capital position allows us to pursue attractive opportunities across all lines of business."

Swiss Re’s group chief financial officer John Dacey, added: “Our property and casualty businesses are on track to deliver on their ambitious combined ratio goals for this year. At L&H Re, we currently believe that the progress of the global vaccination programmes will lead to diminishing COVID-19 losses over the coming quarters. Swiss Re’s asset management continues to successfully navigate financial markets and deliver strong returns for the Group.“

Commenting on the outlook, Mumenthaler said: “The first half of 2021 has demonstrated the strength of our business model as we see our underwriting actions deliver results. While we remain in an uncertain pandemic situation, we are confident that all our businesses are well positioned to continue to perform strongly.“

According to Moody’s analyst Dominic Simpson: “ Swiss Re’s profit of $1 billion at H1 despite having to increase its COVID-related loss provisions by $870 million is testament to the expected improvement in the underlying performance across its business divisions. Strong results from the P&C reinsurance and Corporate Solutions businesses comfortably outweighed a loss in the Life & Health business as a result of significant additional COVID-related mortality losses."

Swiss Re's P&C Re achieved a nominal price increase of 4 percent in year-to-date renewals, while the volume of treaty contracts remained largely stable at $16 billion. In the July treaty renewals, premium volumes slightly increased.

Simpson said: "Rate increases achieved at the renewals during 2021 will further benefit the Group’s underlying profitability, although Q3 has got off to a difficult start for Swiss Re and its peers with significant losses expected from the European floods in July.”

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