Disappointing Q2 for Swiss Re - FREE

Disappointing Q2 for Swiss Re - FREE

Swiss Re has published its results for the halfway stage of 2016, revealing a mixed picture and some major losses.

Its core property and casualty (P&C) reinsurance business suffered a $42m underwriting loss in the second quarter, with a combined ratio of 101%, deteriorating from 92.9% in the same period of last year.

Property reinsurance was hit by several large natural catastrophe and man-made losses; casualty saw reserve strengthening for US Asbestos, partially offset by reserve releases, mostly in Europe; motor saw reserve strengthening in the Americas, offset by releases in Europe; and credit was impacted by a large loss in Brazil.

The reinsurer said it had reduced its capacity for natural catastrophe risks in some segments, including US hurricane.

The Fort McMurray wildfire in Canada’s Alberta province produced an expected net loss of $220m for Swiss Re.

P&C reinsurance premium earned was $4.14bn in the second quarter, up from $3.5bn in the same quarter in 2015.

For the first half, Swiss Re’s P&C reinsurance premium earned reached $8.09bn, up from $7.27bn at the same point last year.

The segment produced a combined ratio of 97.2% for the first half, deteriorated from 88.3% at 2015’s halfway point, while net income in the division was $870m down some 32% from $1.28bn over the same period.

Its Corporate Solutions commercial insurance arm produced a $111m underwriting loss for 2016’s second quarter, blamed on large man-made losses, and borne out with a 112.7% Q2 combined ratio, and 101.6% for the first six months.

Swiss Re said its Corporate Solutions arm had suffered a higher frequency of small- and medium-sized property losses in the second quarter, while casualty was hit by two large North American loss events the previous year, the cost of which had mushroomed in Q2.

The primary arm was also impacted by a large Q2 marine loss in North America and a higher frequency of smaller losses, while credit also suffered large losses, Swiss Re said.

Corporate Solutions had $875m premium earned in the second quarter, and $1.74bn in the first six months.

Group-wide, Swiss Re reported “solid” half year net income of $1.9bn, $637m of which came in the second quarter, compared to $820m in 2015’s second quarter.

Consolidated premium earned and fees amounted to $8.18bn in Q2, up from $7.14bn in the same quarter last year; the first half figure was $16.12bn, up from a $14.7bn total twelve months earlier.

Christian Mumenthaler, Swiss Re's new group CEO, summed up: “We have a solid result for the first half 2016 despite a challenging second quarter that was marked by a difficult macroeconomic environment as well as more pronounced natural catastrophe losses and large reported claims in our Corporate Solutions Business Unit.

The group produced an investment return of 3.7% annualised for Q2 and for the first half, down from 4% in 2015’s first half and 4.2% in last year’s second quarter.

Swiss Re’s results were ahead of the consensus of forecasts from analysts. “This is a relatively weak set of results, impacted by natural catastrophes and reserve strengthening in key business lines,” said Andrius Budnikas, a Citi equities analyst.

Mumenthaler added: “The overall picture confirms the strength of our brand, while demonstrating our outstanding client access. These attributes and the focus on underwriting discipline together with our excellent capitalisation will help us navigate, and potentially benefit from, the turbulent times.”

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