Swiss Re reports Q1 loss on catastrophes, COVID and Ukraine conflict

Global reinsurance firm Swiss Re has reported a net loss of $248 million for the first-quarter of 2022, as $524 million of natural catastrophe claims, $515 million of claims from the COVID-19 pandemic and reserving for potential losses from the war between Russia and Ukraine dented its performance for the start of the year.

As ever, the scale of Swiss Re’s underwriting operation means it is exposed to the largest events that affect the world and the loss is unsurprising, but analysts have so far this morning said that performance of the reinsurance firm was still better than anticipated during the quarter.

Overall, Swiss Re’s net loss of $248 million meant a return on equity of –4.6% for the first quarter of 2022, which compares to the prior year periods profit of $333 million and an ROE of 5.2%.

The reinsurance firm dealt with significant claims and losses during the period, from $524 million of catastrophe losses across its property and casualty businesses, COVID-19 mortality related claims of $515 million and booking a $283 million reserve for possible losses from the conflict in Ukraine.

Swiss Re has continued to deploy more of its resources into underwriting, with net premiums earned and fee income increasing by 4.0% compared with the prior-year period, to reach $10.6 billion for Q1 2022.

Christian Mumenthaler, Swiss Re’s Group Chief Executive Officer, commented on the results, “The first quarter turned out to be a challenging one. Russia’s invasion of Ukraine came as a shock, and our thoughts are with everyone impacted. While the situation remains highly uncertain and we do not believe we have an outsized exposure, we decided to take a proactive and cautious approach to establishing reserves for potential impacts from the war. Despite this and other headwinds in the quarter, Swiss Re’s property and casualty businesses delivered robust underwriting results, and we remain focused on delivering on our financial targets for the year.”

Swiss Re’s Group Chief Financial Officer John Dacey added, “While the first quarter was impacted by negative equity mark-to-market movements, the recurring income yield remained stable at 2.1%. We expect our investment results to benefit from rising interest rates in the medium term. At the same time, the Group maintained its very strong capital position, enabling us to capture profitable growth opportunities in a supportive pricing environment.”

Swiss Re’s Property & Casualty Reinsurance (P&C Re) division reported positive net income of $85 million on the back of a combined ratio of 99.3%, which on a normalised basis comes out at just 96.9%.

That compares to $481 million of profit in Q1 2021, as the 2022 first-quarter result has been dented by catastrophes, lower investment performance and setting of $154 million of reserves related to the war in Ukraine.

P&C Re’s large natural catastrophe claims were $449 million, higher than the prior years $316 million, and mainly related to European windstorms in February and the Australia floods.

It’s interesting that despite last year having seen the massive loss of winter storm Uri, Swiss Re’s more globally diversified approach and position in the United States, meant this years retained catastrophe losses were higher.

P&C reinsurance premiums earned rose by 5.8% to $5.3 billion, driven by continued price improvements and a focus on active portfolio management, partially offset by adverse foreign exchange developments.

The P&C reinsurance division has continued to grow, with premium growth of 15% reported for the key April reinsurance renewals, amid a market where prices are rising.

At this stage of the year, Swiss Re said that its P&C Re division has grown its treaty premium volumes by 8%, with price increases of 3%.

Persistently high mortality in the United States due to the COVID-19 pandemic drove a life and health net loss of $230 million for the quarter.

$501 million of COVID-19 claims dented this division, but positively Swiss Re now says “With excess mortality in the US trending down significantly, L&H Re continues to target a net income of approximately USD 300 million for 2022.”

Corporate Solutions, the commercial risk underwriting unit of Swiss Re, took the rest of the catastrophe and Ukraine related impacts, with a further $129 million of reserves related to the Ukraine war set for this unit.

In addition, the CorSo unit reported $75 million of catastrophe losses, largely related to the flooding in Australia and the European winter storms in February.

However, despite this, Corporate Solutions delivered profit of $81 million for the quarter on a combined ratio of 95.2%, as results from this division continue to improve.

CEO Mumenthaler looked ahead, “While the first quarter of 2022 presented significant headwinds for the re/insurance industry and Swiss Re, we are confident in the Group’s ability to navigate the challenges. Thanks to the actions we have taken over the past years, our businesses have all the necessary levers in place to drive profitability and deliver against our financial targets for 2022.”