Swiss Re takes $4 billion hit from Covid and natural disasters

The storm Uri and Hurricane Ida (photo above from Lafitte) in the US, along with floods in Europe, caused the majority of the claims at Swiss Re. Copyright 2021 The Associated Press. All Rights Reserved.

Swiss Re, one of the world’s biggest reinsurers, took a combined hit of more than $4 billion (CHF3.7 billion) last year from the Covid-19 pandemic and a series of natural catastrophes.

This content was published on February 28, 2022 - 12:38
Ian Smith, Financial Times

Pandemic-related claims of $2 billion came mostly from the group’s life and health division, after heightened numbers of American deaths led to a surge in life insurance payouts.

“There is a real tragedy here that has happened in the US,” chief executive Christian Mumenthaler told reporters on February 25, highlighting the final three months of 2021 when excess mortality — driven by the Delta variant of the virus — reached a level he said had not been seen in Europe.

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Swiss Re expects another $600 million in pre-tax losses related to Covid-19 in its life and health division this year, with most of that coming from the US.

Claims flowing from extreme weather events were even higher. Winter Storm Uri and Hurricane Ida in the US, along with floods in Europe, were the major contributors.

A strong performance in the property and casualty division allowed Swiss Re, which shares risks with primary insurers, to bounce back from 2020’s Covid-related loss to report a net profit of $1.4 billion.

But this was below the $1.8 billion consensus estimate collated by S&P Capital IQ. Meanwhile, its guidance for profits this year was labelled “disappointing” by analysts at Jefferies.

Swiss Re’s share price was down more than 5% on Friday.

In the results statement, Mumenthaler hailed the return to profit as a “turning point” but acknowledged the “still major Covid-19 impacts and a high occurrence of large natural catastrophe events throughout the year”.

The company has also said it was not “particularly exposed” to reinsurance losses as a result of Russia’s war with Ukraine but declined to set out its exposure or say what exact lines of business it had in either country.

“We’ll see how things develop but we are not overweight in any sense and the lines that we do write there have been restricted for some period of time,” said group chief financial officer John Dacey.

It was impossible to predict any losses this early in the conflict, he added.

Dacey also said that war exclusions — policy exemptions used across the industry for losses or damage caused by an invading army — were likely to come into play in Ukraine.

Overall, Swiss Re has about a 10% share of the reinsurance market.

Copyright The Financial Times Limited 2022

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