Life & Health Reinsurance
Life & Health Reinsurance (L&H Re) reported a strong net income for 2019 of USD 899 million, compared with USD 761 million in 2018. 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 porfolio, realising gains of a similiar magnitude. Excluding this adjustment, the underwriting result was higher than in 2018, driven by active portfolio management and improved mortality developments in the Americas.
The investment result was very strong, reflecting higher net realised gains from sales of fixed income securities and market value gains on equity securities. The return on equity was 12.4%, compared with 11.1% in 2018, above the business segment’s target range of 10–12%.
USD millions |
2018 |
2019 |
Change in % |
|---|---|---|---|
Revenues |
|
|
|
Gross premiums written |
14 527 |
14 452 |
–1 |
Net premiums written |
12 647 |
12 734 |
1 |
Change in unearned premiums |
36 |
101 |
– |
Premiums earned |
12 683 |
12 835 |
1 |
Fee income from policyholders |
152 |
169 |
11 |
Net investment income – non-participating business |
1 305 |
1 207 |
–8 |
Net realised investment gains/losses – non-participating business |
347 |
628 |
81 |
Net investment result – unit-linked and with-profit business |
–33 |
118 |
– |
Other revenues |
1 |
4 |
– |
Total revenues |
14 455 |
14 961 |
4 |
|
|
|
|
Expenses |
|
|
|
Life and health benefits |
–10 280 |
–10 587 |
3 |
Return credited to policyholders |
–5 |
–162 |
– |
Acquisition costs |
–2 045 |
–1 975 |
–3 |
Operating expenses |
–758 |
–746 |
–2 |
Total expenses before interest expenses |
–13 088 |
–13 470 |
3 |
|
|
|
|
Income before interest and income tax expense |
1 367 |
1 491 |
9 |
Interest expenses |
–410 |
–445 |
9 |
Income before income tax expense |
957 |
1 046 |
9 |
Income tax expense |
–155 |
–147 |
–5 |
Net income before interest on contingent capital instruments |
802 |
899 |
12 |
Interest on contingent capital instruments, net of tax |
–41 |
|
–100 |
Net income attributable to common shareholders |
761 |
899 |
18 |
|
|
|
|
Management expense ratio in % |
5.4 |
5.2 |
|
Net operating margin in % |
9.4 |
10.0 |
|
Premiums
Net premiums earned and fee income in 2019 increased by 1.3% to USD 13.0 billion from USD 12.8 billion for the prior year. Gross premiums written decreased by 0.5% to USD 14.5 billion, reflecting unfavourable foreign exchange movements and the termination of an intra-group retrocession agreement with Life Capital. Adjusting for these two items, gross premiums written increased by 5.6%.
Net operating margin
The net operating margin for 2019 was 10.0%, an increase from 9.4% in 2018 due to strong investment performance.
Management expense ratio
The management expense ratio was 5.2%, a decrease from 5.4% in 2018, reflecting lower operating expenses and higher premium volumes.
Lines of business
Income before interest and income tax (EBIT) for the life segment decreased to USD 581 million for 2019, from USD 720 million in the prior year. The result in 2019 was adversely impacted by the carrying value adjustment following the acquisition of Old Mutual Wealth Life Assurance Limited by ReAssure. Excluding this item, the result benefited from active portfolio management and improved mortality developments in the Americas.
EBIT for the health segment was USD 258 million in 2019, compared with USD 355 million in the prior-year period. The 2019 result reflected the impact from an update of the assumptions for the Group business in Asia, experience and model improvements in EMEA and increased operating expenses in line with premium growth.
Premiums earned by line of business, 2019
Total: USD 12.8 billion
2019
2018
Investment result
The return on investments for 2019 was 5.0%, up from 3.7% in 2018, reflecting an increase in the investment result of USD 480 million.
Net investment income decreased slightly by USD 15 million to USD 1 113 million in 2019. The running yield for 2019 was 3.3%.
Net realised gains were USD 687 million for 2019, compared with USD 192 million for the prior period, with the current period positively impacted by gains from sales of fixed income securities and market value gains on equity securities.
Insurance-related investment results as well as foreign exchange gains/losses are not included in the figures above.
Shareholders’ equity
Shareholders’ equity increased to USD 8.3 billion as of 31 December 2019 from USD 6.3 billion as of 31 December 2018. The increase of USD 2.0 billion reflects a change in net unrealised gains and net income for the period, partly offset by the dividend paid to the Group.
Return on equity was 12.4% in 2019, up from 11.1% in 2018.
Outlook
The Business Unit expects increases in life and health treaty reinsurance new business to be driven by high-growth markets, with more modest growth in mature markets. In mature markets, the prolonged low interest rate environment continues to have an unfavourable impact on long-term life business. Cession rates are expected to be broadly stable in major markets. The Business Unit sees a continued strong focus of clients on capital, risk and balance sheet optimisation in mature markets, leading to ongoing opportunities for large transactions.
Swiss Re will continue to pursue growth opportunities in high-growth markets and in large transactions, including longevity deals. L&H Re is responding to the expanding need for health protection driven by ageing societies, and is applying its risk knowledge to help reduce the protection gap in all regions.
Since the emergence of the SARS-CoV-2 coronavirus, we observe changes in the volumes of new business sales in some markets due to the reduced personal interaction between consumers and sales agents. The situation is changing rapidly and Swiss Re is closely monitoring developments.