Swiss Re Reports Full-Year 2019 Net Income of $727M, Driven by a Strong L&H Re Result, Excellent Investment Performance

ZURICH, Switzerland, Feb. 21 -- Swiss Re issued the following news release:

Swiss Re reported a 73% increase in Group net income to USD 727 million for 2019. The Group's property and casualty businesses were impacted by USD 2.7 billion in large losses from natural catastrophes and man-made events, as well as by increased claims in US casualty. Life and health businesses continued to perform strongly, with L&H Re delivering an ROE above its target range. Group net premiums earned and fee income rose 12% to USD 38.6 billion, primarily driven by premium growth in P&C Re. The Group's ROE improved to 2.5% from 1.4%. Based on the Group's very strong capital position and supported by confidence in Swiss Re's long-term capital generation, the Board of Directors will propose to the Annual General Meeting (AGM) an increased dividend of CHF 5.90 per share and authorisation for a public share buyback of up to CHF 1 billion.

Swiss Re Group Chief Executive Officer Christian Mumenthaler said: "Our 2019 results were impacted by heavy natural catastrophe losses, our decisive management actions to reposition Corporate Solutions and increased claims in US casualty. We are taking proactive measures to put us at the forefront of adverse trends. On the other hand, we delivered an excellent investment result and strong performance in L&H Re, demonstrating the power of our diversified business model. We achieved a key strategic milestone with the agreement to sell ReAssure. And we are starting 2020 with an improved quality of our portfolio, underpinned by strong January renewals and pricing momentum."

Swiss Re continued its strong investment result track record, reporting an ROI of 4.7% for 2019, up from 2.8% in 2018. The improvement was driven by a strong equity market performance, including a significant contribution from the sale of the Group's investment in the Brazilian insurance group SulAmerica S.A., as well as gains within the fixed income portfolio. The Group's running yield was largely unchanged at 2.8% compared with 2.9% in the declining global yield environment.

The Group's capital position remains very strong with a Group Swiss Solvency Test (SST) ratio above the 220% target level. Taking into account the Group's sustained capital generation, Swiss Re's Board of Directors will propose a dividend of CHF 5.90 per share for 2019, representing a 5% increase. The dividend will be paid after shareholder approval at the AGM on 17 April 2020. The Board of Directors will also request authorisation from shareholders at the AGM for a public share buyback programme of up to CHF 1 billion purchase value, to be executed at the discretion of the Board and subject to the necessary regulatory approvals.

Swiss Re Group Chief Financial Officer John Dacey said: "Despite significant loss events in 2019, Swiss Re maintains its very strong capital position and continued reserve adequacy. P&C Re matched strong growth with rigorous expense discipline, Corporate Solutions also improved its expense ratio, and L&H Re continues to deliver robust performance. The strength of our business model allows us to continue to offer an attractive dividend bolstered by a public share buyback programme."

P&C Re profit impacted by large natural catastrophe claims

P&C Re reported a net income for the full year of USD 396 million, up from USD 370 million in 2018. The result reflected large natural catastrophe and man-made losses of USD 2.3 billion as well as proactive measures to address ongoing trends in US casualty. This was balanced by profitable business growth, driven by large transactions and expansion in natural catastrophe business, as well as by a very strong investment result. Net premiums earned increased 20% to USD 19.3 billion. The ROE was 4.4% compared with 3.7% in 2018.

The large natural catastrophe losses in 2019 were driven mainly by typhoons Hagibis and Faxai in Japan, Hurricane Dorian in the Atlantic and wildfires, floods and hailstorms in Australia. The result was further impacted by late claims development from Typhoon Jebi. In addition, man-made losses included the Ethiopian Airlines crash and the subsequent grounding of the Boeing 737 MAX fleet.

The P&C Re combined ratio was 107.8% in 2019, compared with 104.0% reported for 2018. The normalised/1 combined ratio was in line with previous estimates and is expected to improve to 97% for 2020.

January P&C Re renewals show healthy growth in natural catastrophe business

Swiss Re renewed contracts with USD 10 billion in premium volume on 1 January 2020. This represents a 2% volume increase compared with 2019 as increases in property business, particularly in the natural catastrophe book, were partly offset by a reduction in casualty lines.

P&C Re achieved a nominal price increase of 5% in this renewal round. Risk-adjusted price quality was unchanged, reflecting lower interest rates and more conservative loss assumptions. Business in many loss-affected regions, such as Japan and Australia, is due to renew later in the year.

L&H Re continues to deliver strong results; ROE above target range

L&H Re reported a strong net income for 2019 of USD 899 million, compared with USD 761 million in 2018. Net premiums earned and fee income increased to USD 13.0 billion from USD 12.8 billion in 2018. Adjusted for unfavourable foreign exchange movements and the termination of an intragroup retrocession agreement with Life Capital, net premiums earned and fee income rose 6.9%.

Return on equity for L&H Re improved to 12.4% from 11.1% in 2018 and was above the business segment's target range of 10-12%.

The underwriting result included a negative adjustment to the carrying value of an existing treaty, which had to be fair valued following the acquisition of Old Mutual Wealth Life Assurance Limited by ReAssure from Quilter plc, reflecting the decrease in interest rates since treaty inception. As a result, L&H Re rebalanced its asset portfolio, realising gains of a similar magnitude. Excluding this adjustment, the underwriting result was higher than in 2018, driven by active portfolio management and improved mortality developments in the Americas.

Corporate Solutions result impacted by decisive management actions to address underperformance as well as US casualty deterioration

Corporate Solutions reported a net loss of USD 647 million and a combined ratio of 127.9% in 2019, impacted by the decisive management actions announced on 31 July 2019 to reposition the business and strengthen reserves. The result was also affected by large and medium-sized claims, mainly from prior accident years related to the recent deterioration in the US casualty business.

Net premiums earned rose 6.1% to USD 4.2 billion, as double-digit rate increases and growth in targeted lines of business more than offset the impact from active pruning of selected underwriting portfolios.

The Business Unit is making progress in actively managing risk exposure to ensure a more focused and profitable portfolio going forward. The strong pricing momentum experienced in 2019 has continued into early 2020, with Corporate Solutions achieving price increases of 14% in January 2020. The normalised combined ratio for Corporate Solutions is estimated to improve to 105% in 2020, supported by the accelerating momentum in insurance rates and progress in repositioning portfolios. The target normalised combined ratio for 2021 remains at 98%.

Life Capital successfully transitioning to a dynamically growing, digital B2B2C business

Life Capital reported a net loss of USD 177 million for 2019, reflecting a USD 0.2 billion charge related to the agreement to sell ReAssure. Excluding this one-time accounting impact, net income rose to USD 53 million from USD 23 million in 2018.

As announced on 6 December 2019, Swiss Re entered into an agreement to sell ReAssure to Phoenix Group Holdings plc. The transaction, which is expected to close in mid-2020, subject to regulatory and antitrust approvals, valued ReAssure at GBP 3.25 billion and is a significant step for Life Capital in the transformation to a dynamically growing, digital B2B2C business.

Net premiums earned and fee income increased to USD 2.1 billion from USD 1.6 billion in the prior year, driven by growth in the open book businesses and changes to intragroup retrocessions. Gross premiums written of the open books increased by 22% in 2019, when measured at constant foreign exchange rates.

Life Capital generated gross cash of USD 1.1 billion in 2019 compared with USD 818 million in the prior year. The gross cash generated in 2019 was mainly driven by proceeds from the sale of subordinated bonds issued by ReAssure and the sale of a 10% stake in ReAssure to MS&AD Insurance Group Holdings Inc, partly offset by the impact of the ReAssure recapitalisation ahead of separation.

Jonathan Isherwood appointed CEO Reinsurance Americas, Regional President and member of the Group Executive Committee

Jonathan Isherwood, who is currently Head of Globals Reinsurance and member of the Reinsurance Executive Committee, will succeed Eric Smith, who has decided to retire. He will take over responsibilities as CEO Reinsurance Americas starting 1 April 2020 and assume the role of Regional President Americas and join the Group Executive Committee effective 14 August 2020. An accomplished leader with close to 30 years of experience in the financial sector, Jonathan Isherwood has held leadership positions across functions such as finance, risk, underwriting, operations and sales. For the past seven years, he successfully led the team working with global clients of the Reinsurance Business Unit. Prior to this role, he led a combined Reinsurance claims department. He also held a variety of positions at GE Insurance Solutions and GE Capital.

Swiss Re's Chairman Walter B. Kielholz said: "On behalf of the Swiss Re Board of Directors, I would like to thank Eric Smith for his contribution and engagement over the past nine years. His vision, deep market knowledge and client focus helped to advance Swiss Re's position in the Americas. In Jonathan Isherwood we found an accomplished internal candidate, with a recognised management track-record and a strong client orientation, to take over this important role, and we wish him every success."

The foregoing and the 2019 Financial Review of the Swiss Re Group contain updates on our business and results and preliminary unaudited financial information for 2019. The updates on our business and results will be included in our 2019 Annual Report, together with our audited financial statements for 2019 and other disclosures we are required to include or historically have included in an annual report. The foregoing and the 2019 Financial Review of the Swiss Re Group are not intended to be a substitute for the full 2019 Annual Report, which will be published on the Swiss Re website on 19 March 2020.

Media conference and call

Swiss Re will hold a media conference with a dial-in possibility this morning at 10:30 (CET). If you plan to dial in, you are kindly requested to call 10 minutes prior to the start using the following numbers:

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Swiss Re

The Swiss Re Group is one of the world's leading providers of reinsurance, insurance and other forms of insurance-based risk transfer, working to make the world more resilient. It anticipates and manages risk - from natural catastrophes to climate change, from ageing populations to cybercrime. The aim of the Swiss Re Group is to enable society to thrive and progress, creating new opportunities and solutions for its clients. Headquartered in Zurich, Switzerland, where it was founded in 1863, the Swiss Re Group operates through a network of around 80 offices globally. It is organised into three Business Units, each with a distinct strategy and set of objectives contributing to the Group's overall mission.

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- Group net income increased 73% to USD 727 million from USD 421 million in 2018

- Property & Casualty Reinsurance (P&C Re) net income rose 7% to USD 396 million, with net premiums earned up 20%; return on equity (ROE) of 4.4%

- January 2020 P&C Re renewals premium volume up 2% as growth in property business was offset by a reduction in casualty; nominal price increase of 5%

- Life & Health Reinsurance (L&H Re) net income rose 18% to USD 899 million; ROE of 12.4% above target range

- Corporate Solutions net loss of USD 647 million reflects decisive management actions to address underperformance as well as increased claims in US casualty business

- Life Capital result impacted by the previously announced charge related to the agreement to sell ReAssure; net loss of USD 177 million; gross cash generation of USD 1.1 billion

- Excellent return on investments (ROI) of 4.7%; running yield at 2.8%

- Board of Directors to propose a dividend increase of 5% to CHF 5.90 per share and share buyback of up to CHF 1 billion

- Jonathan Isherwood appointed CEO Reinsurance Americas, Regional President and member of the Group Executive Committee, succeeding Eric Smith, who has decided to retire

See table and footnote here (https://www.swissre.com/media/news-releases/nr-20200220-fy-2019-news-release.html)

Footnotes:

1/ Assuming an average large natural catastrophe loss burden and excluding prior-year reserve developments and impact of an Adverse Development Cover with Corporate Solutions.

2/ Gross cash generation is the estimated net cash arising from business activity within the Life Capital Business Unit during the reporting period, taking into account both surplus development and certain capital actions. It is calculated gross across both Swiss Re's and MS&AD's interest in ReAssure.