Swiss Re FY2017 profit down by 90% y-o-y as a result of large NatCat losses

27 February 2018 — Vlad BOLDIJAR
Reinsurer Swiss Re annouced its aggregate FY2017 net income decreased by about 90% to USD 331 million (vs. USD 3.56 billion a year before), as a result of the large natural catastrophes, while the Group GWP was USD 34.77 billion vs. USD 35.62 bilion in 2016.

Combined estimated claims from large natural catastrophes for Swiss Re amounted to USD 4.7 billion in 2017 - "one of the costliest years for the re/insurance sector in history".

"After Cyclone Debbie in March, hurricanes Harvey, Irma, and Maria and the Mexican earthquakes caused considerable damage during the third quarter of 2017. During the last quarter of the year, wildfires in California resulted in additional estimated insurance claims for Swiss Re of USD 0.4 billion. As a result of the estimated combined claims of USD 4.7 billion from natural catastrophes", the reinsurer announced in a statement.

Per business lines, Property & Casualty Reinsurance posted net loss of USD 413 million; while the estimated natural catastrophe insurance claims was USD 3.7 billion and the annualised ROE was -3.5%. At the same time, the combined ratio increased to 111.5%, "reflecting the impact from the significant natural catastrophes". The value of P&C Re GWP decreased from USD 18.14 billion to USD 16.54 billion.

L&H Re delivered a strong net income of USD 1.09 billion in 2017, driven by a stable underwriting result and strong investment performance, which generated an annualised ROE of 15.3%. Gross premiums written for 2017 increased by 4.0% to USD 13.31 billion, mainly due to new business wins and growth in all markets, including a number of large transactions in the US and Asia.

Corporate Solutions reported a net loss of USD 741 million in 2017. "The result was significantly impacted by the natural catastrophes in the United States - Corporate Solutions' largest market - the Caribbean and Mexico". The ROE for 2017 was -32.2% while the combined ratio increased to 133.4%. Gross premiums written remained broadly unchanged at USD 4.19 billion.

Life Capital GWP increased by 18.3% to USD 1.8 billion, the 2017 net income was USD 161 million, while the annualised ROE decreased to 2.2%.

Swiss Re renewed USD 8.1 billion compared to the USD 7.5 billion premium volume up for renewal on 1 January 2018. This represents an increase of 8%, driven by higher rates across all major lines of business and regions and new large transactions. Prices increased by 2%. "Improvements were most pronounced in the loss-affected property lines and were more moderate in other lines. Risk-adjusted price quality increased to 103%. The majority of the loss-affected US property business will be up for renewal later in the year".

The reinsurer announced it's Board of Directors will propose a higher dividend of CHF 5.00 per share for 2017. "The dividend will be paid after shareholder approval at the Annual General Meeting (AGM) on 20 April 2018".

Regarding the partnership with the Japanese SoftBank Group and its potential minority investment, the reinsurer said the "Board of Directors is carefully assessing the strategic and financial implications of such a partnership, having in mind the best interests of the company and its shareholders. There is no certainty that any transaction will be agreed, nor as to the terms, timing, or form of any transaction".
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