The FINANCIAL — Swiss Re reported net income of USD 3.0 billion for the first nine months of 2016, despite the difficult market environment. All Business Units contributed to this strong result.
Net income in Property & Casualty Reinsurance was USD 1.5 billion in the first nine months of 2016, reflecting solid underwriting. Life & Health Reinsurance net income was USD 635 million, demonstrating continued good performance. Corporate Solutions reported net income of USD 150 million after profitable business performance. Life Capital reported net income of USD 726 million attributable to investments and underlying growth. Swiss Re starts its public share buy-back programme of up to CHF 1.0 billion on 4 November 2016.
Swiss Re Group Chief Executive Officer, Christian Mumenthaler, says: “We delivered strong earnings in the first nine months, despite a continued difficult environment across the entire industry. Our results once more demonstrate that our underwriting discipline and our differentiation position us well for long-term success. We continue to focus on profitable growth while also addressing the protection gap in regions where people are still not insured. You only have to think of the tragic earthquakes that struck Italy, a country where on average only just over 1% of residential buildings are insured against earthquakes. We will continue to work on closing these protection gaps. Innovation and technology will help us get there.”
Strong Group results in the first nine months of 2016 amid a difficult market environment
Swiss Re reported strong net income of USD 3.0 billion in the first nine months, compared to USD 3.7 billion for the same period in 2015. Net income was supported by large and tailored transactions and a strong investment result, partially offset by losses from large natural catastrophes and a difficult market environment.
The annualised Group return on equity (ROE) for the first nine months was 11.6% (vs 14.5% for 9M 2015), with earnings per share (EPS) of USD 9.15 or CHF 8.97, compared with USD 10.69 or CHF 10.19 for the prior-year period.
Premiums earned and fee income for the Group rose 9.6% to USD 24.7 billion (vs USD 22.6 billion). At constant exchange rates, premiums and fees increased by 11.8%, reflecting growth in selected markets and lines of business, mostly through large and tailored transactions. The Group’s combined ratio in the first nine months was 94.8% (vs 85.7%).
The Group’s annualised return on investments (ROI) remained strong at 3.6% (vs 3.8%). Net investment income was USD 2.8 billion (vs USD 2.7 billion), driven by an increased asset base arising from acquisitions and large transactions.
Common shareholders’ equity increased to USD 37.4 billion as of 30 September 2016, up from USD 32.4 billion at the end of December 2015. Book value per common share was USD 112.90 or CHF 109.40 at the end of September 2016, compared to USD 95.98 or CHF 96.04 at the end of December 2015. The Group continues to have a very strong capitalisation and the company’s Swiss Solvency Test ratio remains comfortably above Swiss Re’s risk tolerance.
P&C Re delivers strong results with net income of USD 1.5 billion; ROE of 16.1%
P&C Re net income declined to USD 1.5 billion in the first nine months (vs USD 2.3 billion in the prior-year period), after higher natural catastrophe losses, particularly in the second quarter, and lower favourable prior-year developments. The annualised ROE for the first nine months was 16.1% (vs 23.5%).
Net premiums earned increased 11.8% to USD 12.7 billion (vs USD 11.4 billion). Swiss Re applied a disciplined underwriting approach. The increase was driven by large and tailored transactions in the US and Europe. P&C Re reported a combined ratio of 93.8% for the first nine months (vs 84.5%). The increase was mainly driven by higher a large loss burden due to the wildfires in Fort McMurray, Canada, a series of agricultural losses in Europe, softening market conditions, and less favourable impact from prior accident years compared to the year before.
L&H Re reports net income of USD 635 million; ROE 12.5%
L&H Re net income declined to USD 635 million for the first nine months vs USD 781 million for the same period in 2015, when the result benefited from more favourable valuation adjustments. The ROE was 12.5% (vs 17.4%), above Swiss Re’s target of 10%–12%.
Premiums earned and fee income for the first nine months increased 8.7% to USD 8.5 billion (vs USD 7.8 billion), driven by higher premiums in all regions from new business as well as large in-force transactions, particularly in the US.
Corporate Solutions delivers net income of USD 150 million; ROE 8.6%
Corporate Solutions’ net income was USD 150 million in the first nine months of 2016 (vs USD 337 million in the prior-year period). The 2016 result was impacted by large man-made casualty losses, offset by profitable business performance across most other lines and income from investment activities. The ROE was 8.6% (vs 19.4%).
Premiums earned increased 2.9% to USD 2.6 billion in the first nine months of 2016, driven by the IHC Risk Solutions acquisition, which was completed in the first quarter of 2016. The combined ratio increased to 99.3% in the first nine months (vs 91.2%).
The recently announced joint venture with Bradesco Seguros S.A., which is pending regulatory approval, will create a leading commercial large-risk insurer in Brazil. Corporate Solutions has also obtained an insurance license in Hong Kong, which allows it to offer a broader range of products to the Hong Kong and Taiwanese markets.
Life Capital achieves a strong performance with net income of USD 726 million; ROE of 14.5%
Created on 1 January 2016, the Business Unit Life Capital manages Swiss Re’s closed and open life and health insurance books, including the existing Admin Re® business and primary life and health insurance businesses. Comparative information has been adjusted accordingly to reflect the inclusion of the primary life and health insurance business formerly conducted by L&H Re.
During the first nine months of 2016, Life Capital reported net income of USD 726 million compared to USD 273 million in the comparative period of 2015. The 2016 result included a contribution from Guardian Financial Services, the acquisition which closed in early January. The increase in net income was driven by investment performance, mainly from the Guardian portfolio, and solid underlying business performance. The ROE was 14.5% in the first nine months of the year (vs 6.2%), due to higher net income.
Premiums earned and fee income in the first nine months rose to USD 898 million (vs USD 825 million).
Gross cash generation increased to USD 364 million in the first nine months of 2016 (vs USD 265 million the year before), despite impacts from lower interest rates in the UK.
Strong third quarter performance across the Group
The Group reported net income of USD 1.2 billion for the third quarter (vs USD 1.4 billion in Q3 2015). Net investment income for the quarter was USD 916 million. The Group ROI was strong at 3.5% (vs 3.2%), driven by net investment income, mainly from fixed income as well as equities and alternative investments, and net realised gains from sales of fixed income and equity securities.
P&C Re net income declined to USD 678 million (vs USD 1.0 billion), after a series of agricultural losses in Europe, lower prior-year development and as a result of the softening market conditions. The ROE for the third quarter was 21.6%. Net premiums earned rose to USD 4.6 billion. The combined ratio was 87.9% (vs 77.7%).
Net income in L&H Re was USD 218 million (vs USD 272 million). The ROE for the third quarter decreased to 11.6% from 18.8%. Net premiums earned rose to USD 2.8 billion, driven by growth in the Americas and Asia.
Corporate Solutions reported net income of USD 95 million for the third quarter (vs USD 89 million in Q3 2015). The ROE for the quarter was 16.5%. Net premiums earned increased by 7.3% to USD 854 million. The combined ratio was 94.7% (vs 90.1%).
Life Capital delivered a net income of USD 157 million (vs USD 23 million), driven by favourable investment performance including higher realised gains. The ROE for the third quarter was 7.8%. Premiums earned and fee income was USD 307 million (vs USD 262 million). Gross cash generation for the quarter was USD 248 million.
Swiss Re Group Chief Financial Officer David Cole says: “Despite continuous market pressures, we reported a strong net income in the third quarter, driven by investment income and solid underwriting. This shows how our differentiation – driven by our very strong capitalisation and excellent client relationships – contributes to our profitability and value creation. Even in this difficult environment, we continue to invest in our business and our research and development. Examples are the continued expansion of our Corporate Solutions footprint as well as the investments we make to support the further development of the Life Capital Business Unit. We will provide more information during our annual Investors’ Day on 2 December 2016.”
Swiss Re will start share public buy-back programme on 4 November 2016
Having received all required regulatory approvals, Swiss Re will start the public share buy-back programme of up to CHF 1.0 billion purchase value on 4 November 2016, to achieve its objective of returning capital to shareholders when excess capital is available and other business opportunities do not meet its profitability requirements. The public share buy-back programme was previously authorised by Swiss Re’s shareholders in April 2016.
Source: The Financial