• Group net income solid at USD 1.9 billion; large and tailored transactions and strong investment results continue to make significant contribution • Property & Casualty Reinsurance net income USD 870 million; ROE of 13.7% • Life & Health Reinsurance net income USD 417 million; ROE of 12.6% • Corporate Solutions net income USD 55 million; ROE of 4.8% • Life Capital net income USD 569 million; USD 116 million gross cash generation and ROE of 18.1% • Results marked by number of large natural catastrophes in second quarter; estimated total respective losses in P&C Re are approximately USD 350 million • Despite challenging P&C market environment, attractive portfolio at the July treaty renewals maintained • Swiss Re's Board of Directors proposes election of Jacques de Vaucleroy to the Board of Directors in 2017
Swiss Re reported net income of USD 1.9 billion for the first half of 2016, a solid result in a period marked by natural catastrophes, political uncertainty and volatile financial markets. Net income in Reinsurance continued to be supported by large and tailored transactions, which made significant contributions to both the Life & Health and Property & Casualty Reinsurance segments. Net income in P&C Re was impacted by a number of larger natural catastrophes in the second quarter of 2016, including the wildfires in Canada, earthquakes in Japan and floods in Europe. Corporate Solutions reported a decline in net income to USD 55 million after two large claims. Life Capital, which includes Admin Re®, generated strong net income of USD 569 million, reflecting the contribution of Guardian Financial Services.
Swiss Re's new Group Chief Executive Officer, Christian Mumenthaler, says: "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 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."
Solid Group results in the first six months of 2016
Swiss Re reported solid net income of USD 1.9 billion in the first half, down from USD 2.3 billion for the same period in 2015. The result reflects the benefits from continued large and tailored transactions as well as a strong investment result, partially offset by a number of large natural catastrophes in P&C Re with estimated aggregate losses of approximately USD 350 million (net of retrocession and before tax).
The annualised Group return on equity (ROE) for the first half was 10.9% (vs 13.5% for H1 2015), with earnings per share (EPS) of CHF 5.51 or USD 5.61, compared with CHF 6.27 or USD 6.60 for the prior-year period.
Premiums earned and fee income for the Group totalled USD 16.1 billion for the first six months of 2016 (vs USD 14.7 billion), an increase of 9.6%. At constant exchange rates, premiums and fees increased by 12.1%, reflecting growth in selected markets and lines of business. The Group combined ratio in the first half was 98.0% (vs 88.9%).
The Group's annualised return on investments (ROI) remained strong at 3.7% for the first half (vs 4.0%). The decrease was driven by reduced net realised gains alongside a higher average invested asset base. Net investment income was USD 1.9 billion for the first six months of 2016 (vs USD 1.8 billion), as the positive impact of the Guardian acquisition offset lower re-investment rates.
Common shareholders' equity increased to USD 35.8 billion as of 30 June 2016 from USD 34.8 billion at the end of March. Book value per common share was USD 107.95 or CHF 105.16 at the end of June 2016, compared with USD 95.98 or CHF 96.04 at the end of December 2015.
P&C Re reports net income of USD 870 million; ROE of 13.7%
P&C Re delivered net income of USD 870 million in the first half (vs USD 1.3 billion in the prior-year period), reflecting solid underwriting results, despite higher natural catastrophe losses and lower favourable prior-year development. The annualised ROE for the first half was 13.7% (vs 20.2%).
Net premiums earned increased 11.3% to USD 8.1 billion (vs USD 7.3 billion), mainly driven by large transactions in the US and Europe.
P&C Re reported a combined ratio of 97.2% in the first half (vs 88.3%). The increase reflects large losses and lower favourable prior-year development compared with the first half year of 2015, which benefited from a particularly benign natural catastrophe experience.
L&H Re delivers net income of USD 417 million; ROE 12.6%
L&H Re reported a net income of USD 417 million for the first half (vs USD 509 million for the same period in 2015). The prior-year result benefited from higher foreign exchange remeasurement gains. In addition, the current-year results were impacted by adverse claims experience, including incurred but not reported claims, and valuation updates. The ROE was 12.6% (vs 17.1%).
Premiums earned and fee income for the first half increased to USD 5.7 billion (vs USD 5.1 billion). Premiums were higher in all regions, from new business as well as a large in-force transaction in the US in the current period and other new transactions in late 2015.
Corporate Solutions net income of USD 55 million; ROE 4.8%
Corporate Solutions net income was USD 55 million in the first six months of 2016 (vs USD 248 million in the prior-year period). The 2016 half-year result reflected two large man-made casualty losses in North America, which occurred in Q3 and Q4 2015. The magnitude and responsibility for these losses were only established in the second quarter of 2016. The impact was partially offset by favourable business performance across most other lines and moderate income from investment activities. The ROE for the first half was 4.8% (vs 21.6%).
Premiums earned remained broadly unchanged at USD 1.7 billion in the first half of 2016 compared with the same period of 2015. The combined ratio increased to 101.6% in the first half (vs 91.7%).
Life Capital delivers net income of USD 569 million; ROE of 18.1%
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.
For the first six months of 2016, Life Capital reported a net income of USD 569 million (vs USD 250 million for the prior-year period). The first-half 2016 result included a contribution from Guardian Financial Services, whose acquisition closed in early January, and the underlying business performed in line with expectations. The ROE was 18.1% in the first half of the year (vs 8.4%).
Premiums earned and fee income in the first half rose to USD 591 million (vs USD 563 million).
Gross cash generation was USD 116 million in the first six months of 2016 (vs USD 139 million the year before), impacted by lower interest rates and widening credit spreads in the UK.
Solid second quarter performance across the Group
The Group reported net income of USD 637 million for the second quarter (vs USD 820 million in Q2 2015). The Group net investment income for the quarter was USD 930 million. The Group ROI was strong at 3.7% (vs 4.2%), driven by net investment income and net realised gains across the portfolio.
P&C Re delivered a net income of USD 283 million (vs USD 461 million), reflecting large natural catastrophe and man-made losses in the quarter, partly offset by favourable prior-year development. The result includes an expected loss of USD 220 million for the wildfires in Canada (net of retrocession and before tax). The ROE for the second quarter was 9.4%. Net premiums earned rose to USD 4.1 billion, driven by large and tailored transactions in the US and in Europe. The combined ratio was 101.0%, reflecting the impact of higher than expected large natural catastrophe events.
Net income in L&H Re was USD 173 million (vs USD 226 million). The ROE for the second quarter declined to 10.1%. Net premiums earned rose 12.6% to USD 2.9 billion, driven by large and tailored transactions as well as successful renewals in China and Australia.
Corporate Solutions reported a net loss of USD 25 million for the second quarter (vs a USD 76 million profit in Q2 2015). The ROE for the quarter was a negative 4.2%. The result decreased primarily due to the two large man-made casualty losses that occurred in 2015, and lower realised gains from sales of equities and insurance in derivative form. Net premiums earned increased by 3.8% to USD 875 million. The combined ratio increased to 112.7% (vs 96.6%).
Life Capital delivered a net income of USD 248 million (vs USD 42 million). The strong underlying result was supported by the investment result, mainly from the Guardian portfolio. The ROE for the second quarter was 13.4%. Premiums earned and fee income rose to USD 307 million (vs USD 257 million).
Swiss Re's Group Chief Financial Officer David Cole says: "Overall profitability in the second quarter remained solid despite the headwinds we faced. The events in the quarter underscore the strength of our globally diversified business model."
Attractive portfolio maintained at July renewals
Swiss Re maintained an attractive portfolio at the July treaty renewals, which focuses mainly on the Americas. The treaty premium volume for the July renewals increased by 10%, while the year-to-date volume has increased by 18%, driven by large and tailored transactions. It shows the continued success of differentiation through such large and tailored deals, which were up by 76% between January and July, while the flow business decreased by 7%.
The year-to-date risk adjusted price quality of the renewed portfolio remains at 102%. The price environment for property and casualty reinsurance continued to be challenging, with continued price erosion in property. Therefore, Swiss Re has reduced natural catastrophe capacity in specific segments, including US hurricane. Even though abundant capital continues to pressure rates, it does so to a much lesser extent than previously.
Swiss Re proposes to elect Jacques de Vaucleroy to the Board
The Board of Directors proposes to elect Jacques de Vaucleroy as a new, non-executive and independent member at the Annual General Meeting of shareholders on 21 April 2017.
Jacques de Vaucleroy has thirty years of experience in global business, mostly in the financial services and retail industries. He gained his experience through global and regional CEO roles at AXA and ING, as well as his non-executive Board role at Delhaize Group, a large food retailer. Jacques de Vaucleroy served as CEO of the Northern, Central and Eastern Europe (NORCEE) region of AXA Group (France) until June 2016, after having been a member during 6 years of the Management Committee of AXA Group with global responsibility for Life and Savings in addition to his role of CEO of the NORCEE region.
Swiss Re Chairman Walter B. Kielholz says: "I am very pleased that we can propose Jacques de Vaucleroy to join the Board. His deep experience in our industry, and the primary life business in particular, will make a great fit for Swiss Re — especially as we continue to further evolve our Life Capital Business Unit."
Creating roadmaps for success during testing times
The current low-yield environment continues to challenge the industry. In addition, political developments such as the UK vote to leave the European Union add to a period of uncertainty and volatility whose longer-term consequences are not yet clear. Taken together, these make Swiss Re's experience and expertise in managing risks even more important.
Group Chief Executive Officer Christian Mumenthaler says: "It is the first time in several years that we have seen multiple larger losses from a number of natural catastrophes in one quarter. These events remind us, however, why we are here: to support our clients after disasters with the goal to help make the world more resilient. The first six months show that our broad expert knowledge on risk and the relationships we have with our clients are key. By working together we can create a roadmap for mutual success, even in testing times."
Details of year-to-date performance (H1 2016 vs H1 2015)
1. Also reflects Group Items, including Principal Investments.
Details of second quarter performance (Q2 2016 vs Q2 2015)
2. Also reflects Group Items, including Principal Investments.
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