Morningstar | Corporate Solutions Remains a Concern in Swiss Re's Nine-Month Results
Swiss Re reported net income for the first nine months of 2018 that came in at $1.1 billion; this was after the impact of $1.6 billion of claims burden from natural catastrophes and large man-made disasters. This net income figure has been affected by around $145 million pretax because of an accounting change on the recognition of equity investments that took effect Jan. 1, 2018. Excluding this impact, net income was $1.2 billion. While these net income figures are below our estimates, we don't see enough reason to revise our forecasts and we therefore maintain our CHF 94 fair value estimate and no-moat and stable trend ratings.The property and casualty reinsurance business returned net income of $634 million, which included around $1.2 billion of large losses from natural catastrophes of windstorms, floods, and typhoons including Jebi and Trami in Japan, Hurricane Florence in the United States, and other windstorms in Canada. This meant the business returned a 99.5% combined ratio, leaving the division on track to achieve 99.0% for the full year. Gross written premium came in at $13.8 billion.
Life and health reinsurance delivered net income of $644 million, driven by transactions in Canada and New Zealand. The fixed-income running yield saw a small 10-basis-point uptick to 3.4%, and reinvestments were made at higher rates of return. Gross premium income came in at $10.8 billion, a rise of just under 12%.
The corporate solutions business returned a net loss of $5 million, mainly caused by the collapse of the Genoa bridge in Italy and a shipyard in Germany. We have been and continue to remain apprehensive about this business unit due to competition and pricing. The combined ratio came in at 105.4%. Gross written premium was $3.1 billion, driven particularly by primary lead, the expansion area we are concerned about. We continue to foresee this business making underwriting losses.
The overall investment portfolio's annualised investment return was 2.8%.
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