(Bloomberg) -- Pricing pressure in the reinsurance industry weighed on Swiss Re’s first-half earnings, overshadowing a drop in natural-catastrophe claims. The company said it’s exploring an initial public offering for its U.K. closed-book business.

Swiss Re’s net income fell to $1 billion from $1.2 billion a year earlier, missing analyst estimates. An abundance of capital in the industry is weighing on reinsurance prices, while low interest rates are making it harder for companies to earn money from their investments. A change in U.S. accounting rules also curbed Swiss Re’s profit.

Switzerland’s biggest reinsurer said it may offer shares of ReAssure to the public next year. The U.K. business needs outside capital to continue to buy closed life-insurance books, which it manages until maturity to generate cash flows. In October, Japanese insurance group MS&AD Insurance Group Holdings agreed to buy 5 percent of ReAssure in a deal that valued the business at about 3.5 billion pounds ($4.6 billion).

“Given the size of potential opportunities that are expected to come up in the market over the mid-term, it is important for ReAssure to have access to substantial new capital,” Swiss Re said Friday.

Swiss Re fell as much as 2.7 percent in Zurich, the biggest drop in more than two months. The stock has fallen 3.5 percent this year, while German competitor Munich Re has gained 3.7 percent.

Anchor Investor

The results were Swiss Re’s first since the company failed to win SoftBank Group Corp. as an anchor shareholder. The Japanese company in May ended nearly two months of deliberations about how it would invest in the reinsurer. Swiss Re said at the time that it would continue to welcome an anchor investor.

A 38 percent increase in first-half net income at Swiss Re’s property and casualty unit was offset by unfavorable financial markets and “modest pricing conditions,” Stefan Schuermann an analyst at Vontobel Holding AG, said in a note.

The Swiss company said it saw price increases in some property and casualty lines at July renewals, which focus mainly on the Americas. The gains were biggest in lines of business that were affected most by recent natural disasters.

Insured losses from hurricanes, floods and other natural catastrophes amounted to about $33 billion in the first half, the lowest since 2005, Munich Re estimates. However, the second half normally brings higher losses, such as last year’s spate of hurricanes in the U.S., which will determine whether reinsurers can provide capital returns.

To contact the reporter on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Andrew Blackman, Ross Larsen

©2018 Bloomberg L.P.

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