Swiss Re blames Australian cat claims for slump in Q1 profits

Swiss Re blamed high levels of insurance claims from natural catastrophe events and a challenging business environment for a big slump in its profits in the first quarter of 2017 as gross written premiums at the company also decreased.

The company made a net profit of $656 million in the first quarter of 2017, a big decrease on the $1.2 billion it made a year earlier. It noted that a big part of the hit was an estimated $350 million in expected insurance claims from Cyclone Debbie in Australia but also stressed the rate pressures, low interest rates and other natural catastrophe losses.

The change was stark in its P&C reinsurance unit, which posted a profit of $321 million compared with $587 million a year earlier. But all its units were less profitable than the same period a year earlier: profits in its L&H Reinsurance unit fell to $193 million from $244 million; in its corporate solutions division they fell to $55 million from $80 million; its Life Capital unit posted profits of $73 million compared with $321 million a year earlier.

Christian Mumenthaler, Swiss Re's group chief executive officer, said: "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.

“Our high-quality investment portfolio continues to make a significant contribution to the overall result. Events like Cyclone Debbie do take a toll on our short-term performance, but more than anything, they take a toll on people's lives, destroy infrastructure and weaken economies. At the same time, natural catastrophes like this one underscore the purpose of the insurance industry overall. It is during such times that we can deliver our core services and demonstrate the value we provide to our clients and to society."

The company also shrank somewhat, which it attributed to a more disciplined approach in a challenging environment. Its gross premiums written for the quarter declined by 10.5 percent to $10.2 billion; the biggest decreased was in its P&C Reinsurance unit which posted GWP of $5.8 billion a decreased of 17.6 percent compared with $7 billion a year earlier.

“With the pricing environment continuing to be difficult, Swiss Re strictly followed its disciplined underwriting approach, ensuring it receives an adequate price for the protection it provides,” the company said.

“The decline in gross premiums written by 17.6 percent to $5.8 billion in the first quarter was therefore the result of the active reduction in capacity, in particular in EMEA and Chinese quota share business, partly because prices did not meet profitability expectations. Measured at constant foreign exchange rates, the decrease would have been 15.6 percent.”

David Cole, CFO of Swiss Re, said: “The satisfactory result in the first quarter demonstrates our ability to deliver in a difficult market environment while we continue to invest in building the long-term value of our businesses. Our capital position remains very strong and our reserve strength intact. Disciplined underwriting allows us to allocate capital to selected opportunities which we believe will support our future success."

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