EVM performance
Swiss Re’s 2018 economic result was impacted by large losses and an unfavourable contribution from investment activities.
“EVM highlights the resilience of Swiss Re’s balance sheet.”
John Dacey
Group Chief Financial Officer
Underwriting result in Property & Casualty Reinsurance and Corporate Solutions impacted by large losses, partially offset by strong new business contributions in Life & Health Reinsurance.
Read online a description of the summary of significant EVM principles and sensitivities.
Economic Value Management (EVM) is Swiss Re’s proprietary integrated economic valuation and steering framework, consistently measuring economic performance across all businesses.
Swiss Re reported a total contribution to economic net worth (ENW) of USD 2.2 billion in 2018 compared to USD 1.9 billion in 2017. On a risk-adjusted basis, Swiss Re reported an EVM loss of USD 693 million, compared to an EVM loss of USD 9 million in 2017.
Group performance
The EVM loss of USD 693 million in 2018 reflected the impact of large natural catastrophe and man-made losses that adversely impacted the Property & Casualty Reinsurance and Corporate Solutions underwriting performance, and an unfavourable investment result, mainly due to widening credit spreads. These losses were partially offset by a strong new business result in Life & Health Reinsurance and a previous years’ business profit in Property & Casualty Reinsurance.
EVM profit
in USD millions, 2018
–693
(2017: USD –9 million)
ENW per share growth
over-the-cycle target: 10%
4.4%
(2017: 10.8%)
Total contribution to ENW
in USD billions, 2018
2.2
(2017: USD 1.9 billion)
The EVM profit on new business was USD 356 million compared to an EVM loss on new business of USD 1.3 billion in 2017. The 2018 result was mainly driven by a strong new business result in Life & Health Reinsurance, partially offset by the Property & Casualty Reinsurance and Corporate Solutions new business results following large natural catastrophe and man-made losses.
The EVM profit from previous years’ business amounted to USD 638 million in 2018 compared to an EVM loss of USD 148 million in 2017. The result was primarily driven by a previous years’ business profit in Property & Casualty Reinsurance, partially offset by large man-made losses in Corporate Solutions.
Investment activities generated an EVM loss of USD 1.7 billion in 2018 compared to a profit of USD 1.5 billion in 2017. The 2018 result reflected a negative impact from credit spread widening as well as underperformance from equities and Principal Investments. The 2017 result was driven by favourable performance across credit and equities as well as from Principal Investments.
ENW per share growth amounted to 4.4% in 2018, below the over-the-cycle target of 10%. The underperformance was due to large losses, a negative investment result, and unfavourable foreign exchange impacts.
Key information
| Download |
USD millions, unless otherwise stated |
2017 |
2018 |
Change in % |
||
|
|||||
EVM profit |
–9 |
–693 |
− |
||
Total contribution to ENW |
1 867 |
2 166 |
16 |
||
Economic net worth (ENW) |
37 667 |
35 993 |
–4 |
||
Economic net worth per share in USD |
119.74 |
119.96 |
0 |
||
Economic net worth per share growth, %1 |
10.8 |
4.4 |
|
||
Profit margin − new business, % |
–4.1 |
1.2 |
|
||
Profit margin − previous years’ business, % |
–0.8 |
3.5 |
|
||
Profit margin − investments, % |
16.5 |
–18.3 |
|
||
Business segment performance
Property & Casualty Reinsurance reported an EVM profit of USD 199 million in 2018 compared to a loss of USD 1.2 billion in 2017. The EVM loss on new business of USD 430 million was driven by large natural catastrophe and man-made losses, which included typhoons Jebi and Trami in Japan, hurricanes Florence and Michael as well as the Carr, Camp and Woolsey wildfires in the US. 2017 included large losses due to hurricanes Harvey, Irma and Maria (HIM), two earthquakes in Mexico and wildfires in California. EVM profit on previous years’ business was USD 698 million, driven by a net favourable development in expected claims payout patterns and ultimate claims estimates as well as lower capital costs. Investment activities generated an EVM loss of USD 68 million in 2018 compared to a profit of USD 212 million in 2017. The 2018 loss was driven by the impact of credit spread widening as well as losses from equities, partially offset by positive performance of alternative investments. The 2017 profit was driven by positive performance across equities and alternative investments, as well as credit investments.
Life & Health Reinsurance reported an EVM profit of USD 523 million in 2018 compared to USD 1.6 billion in 2017. The EVM profit on new business of USD 980 million reflected a strong contribution from transactions in New Zealand and Japan and improved core business profitability in the US. The 2018 previous years’ business profit was USD 168 million. This included the positive impact of lower capital costs, partly offset by adverse experience in the US and several valuation and assumption updates. Investment activities generated an EVM loss of USD 625 million in 2018 compared to a profit of USD 627 million in 2017. The 2018 loss reflected the impact from unfavourable interest rate movements on the net duration position, as well as credit spread widening, while the prior year was positively impacted by credit spread tightening as well as performance from equity securities.
Corporate Solutions reported an EVM loss of USD 673 million in 2018 compared to a loss of USD 917 million in 2017. The EVM loss on new business was USD 81 million, driven by large natural catastrophe and man-made losses, partially offset by a 2018 current accident year retrocession recovery on the Ituango dam flooding and the occurrence of a higher premium volume from a moderately improved market environment. The EVM loss on previous years’ business was USD 530 million, significantly impacted by high severity and frequency of large man-made losses; the largest being the gross loss on the 2011 contract year Ituango dam flooding and a major satellite loss, as well as reserve strengthening on the excess and surplus casualty book. Investment activities generated an EVM loss of USD 63 million in 2018 compared to a profit of USD 79 million in 2017, with results in 2018 reflecting the impact of credit spread widening and unfavourable performance from equity investments, both in contrast to the 2017 result.
Life Capital generated an EVM loss of USD 93 million in 2018 compared to a profit of USD 572 million in 2017. The 2018 loss reflected a negative investment performance of USD 533 million, impacted by credit spread widening and underperformance from implied equity exposure arising from the unit-linked business. This was partially offset by a favourable underwriting result. The 2017 profit reflected a strong investment performance of USD 420 million as well as a favourable underwriting result.
In 2018, an EVM loss of USD 649 million was reported in Group items compared to a loss of USD 128 million in 2017. The EVM loss from new business was USD 179 million in 2018, mainly driven by capital costs on excess capital and expenses, partially offset by trademark licence fees charged to the business segments. The previous years’ business loss was USD 72 million, driven by an increase in overhead expenses. Investment activities generated an EVM loss of USD 398 million in 2018 compared to a profit of USD 146 million in 2017, reflecting an unfavourable result from Principal Investments.
Business segments – key information
| Download |
USD millions, unless otherwise stated |
Property & Casualty Reinsurance |
Life & Health Reinsurance |
Corporate Solutions |
Life Capital |
Group items |
Total |
|
|
|
|
|
|
|
2017 |
|
|
|
|
|
|
EVM profit |
–1 161 |
1 625 |
–917 |
572 |
–128 |
–9 |
Total contribution to ENW |
–954 |
2 180 |
–750 |
987 |
404 |
1 867 |
Profit margin − new business, % |
–10.2 |
8.6 |
–21.2 |
4.3 |
|
–4.1 |
Profit margin − previous years’ business, % |
1.9 |
0.1 |
–18.3 |
1.0 |
|
–0.8 |
Profit margin − investments, % |
7.2 |
16.0 |
14.6 |
|
11.0 |
16.5 |
|
|
|
|
|
|
|
2018 |
|
|
|
|
|
|
EVM profit |
199 |
523 |
–673 |
–93 |
–649 |
–693 |
Total contribution to ENW |
1 350 |
1 271 |
–474 |
265 |
–245 |
2 166 |
Profit margin − new business, % |
–3.1 |
8.2 |
–2.2 |
11.8 |
|
1.2 |
Profit margin − previous years’ business, % |
11.7 |
1.8 |
–36.4 |
23.1 |
|
3.5 |
Profit margin − investments, % |
–2.4 |
–19.4 |
–11.9 |
|
–16.5 |
–18.3 |