EVM performance

Underwriting result in Property & Casualty Reinsurance and Corporate Solutions was impacted by large losses, largely offset by strong performance from investment activities and Life & Health Reinsurance.

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 2.9 billion in 2019, compared to USD 2.2 billion in 2018. On a risk-adjusted basis, Swiss Re reported an EVM loss of USD 19 million in 2019, compared to an EVM loss of USD 693 million in 2018.

Group performance

The EVM loss of USD 19 million in 2019 reflected the impact of large natural catastrophe and man-made losses that adversely impacted Property & Casualty Reinsurance and Corporate Solutions, proactive measures to address ongoing trends in US casualty business, as well as higher capital costs. These losses were partially offset by an excellent investment result, a strong new business result in Life & Health Reinsurance and an estimated EVM profit on the agreement to sell ReAssure.

The EVM profit on new business was USD 1.2 billion, compared to USD 356 million in 2018. The 2019 result was mainly driven by a strong new business result in Life & Health Reinsurance and the estimated profit on the agreement to sell ReAssure in Life Capital, partially offset by the Property & Casualty Reinsurance new business result following large natural catastrophe losses and adverse industry trends in US casualty business.

The EVM loss from previous years’ business amounted to USD 3.3 billion in 2019, compared to an EVM profit of USD 638 million in 2018. The 2019 result reflected unfavourable developments in Property & Casualty Reinsurance and Corporate Solutions, driven by large losses and adverse industry trends in US casualty business and higher capital costs for Property & Casualty Reinsurance.

Investment activities generated an EVM profit of USD 2.1 billion in 2019, compared to a loss of USD 1.7 billion in 2018. The 2019 results reflected credit spread tightening as well as strong performance across equities and alternative investments. The 2018 results were driven by a negative impact from credit spread widening as well as underperformance from equities and Principal Investments.

ENW per share growth amounted to 8.2% in 2019, below the over-the-cycle target of 10%. The underperformance was due to large losses, partially offset by the strong investment result.

Business segment performance

Property & Casualty Reinsurance reported an EVM loss of USD 1.4 billion in 2019, compared to a profit of USD 199 million in 2018. The EVM loss on new business of USD 209 million was driven by large natural catastrophe losses, mainly due to typhoons Hagibis and Faxai, Hurricane Dorian as well as proactive measures to address ongoing trends in US casualty and losses under the Adverse Development Cover with Corporate Solutions. The 2018 EVM loss of USD 430 million included large losses from typhoons Jebi and Trami in Japan, hurricanes Florence and Michael in the US as well as wildfires in California. The EVM loss on previous years’ business of USD 1.8 billion was due to the update of capital costs, late claims for Typhoon Jebi, the impact of adverse trends for US casualty business as well as the Ethiopian Airlines crash and the subsequent Boeing 737 MAX grounding. Investment activities generated an EVM profit of USD 627 million in 2019, compared to a loss of USD 68 million in 2018. The 2019 EVM profit reflected strong performance across equity and alternative investments as well as the impact of credit spread tightening. The 2018 EVM loss was driven by credit spread widening as well as losses from equities, partially offset by positive performance from alternative investments.

Life & Health Reinsurance reported an EVM profit of USD 1.8 billion in 2019, compared to a profit of USD 523 million in 2018. The EVM profit on new business of USD 1.3 billion reflected strong transactional business growth in EMEA and the Americas as well as core business performance in the Americas. The 2018 EVM profit of USD 980 million included two large transactions in New Zealand. The EVM loss on previous years’ business of USD 272 million included the impact of adverse mortality assumption updates in the Americas and unfavourable morbidity assumption updates and experience in Asia, partially offset by a favourable impact from the restructuring of intra-group retrocession agreements and several modelling and assumption updates. Investment activities generated an EVM profit of USD 739 million driven by the impact of credit spread tightening as well as positive equity performance. The 2018 EVM loss of USD 625 million reflected the impact from unfavourable interest rate movements on the net duration position, as well as credit spread widening.

Corporate Solutions reported an EVM loss of USD 805 million in 2019, compared to an EVM loss of USD 673 million in 2018. The EVM profit on new business of USD 164 million was mainly driven by recoveries under the Adverse Development Cover with Property & Casualty Reinsurance, rate hardening and large transactions, partially offset by management actions. Profitable business performance from insurance in derivative form also contributed to the new business profit. The EVM loss on previous years’ business of USD 1.1 billion was impacted by the decisive management actions to address performance issues including reserve strengthening. The previous years’ business result was also impacted by large and medium-sized man-made losses, mainly relating to adverse trends for US casualty business. Investment activities generated an EVM profit of USD 112 million in 2019, compared to a loss of USD 63 million in 2018, with results in 2019 reflecting the impact of credit spread tightening and favourable performance from equity investments, both in contrast to the 2018 result.

Life Capital generated an EVM profit of USD 591 million in 2019, compared to an EVM loss of 93 million in 2018. The EVM profit on new business was USD 133 million, mainly driven by the estimated gain on the agreement to sell ReAssure of USD 0.3 billion, partially offset by underwriting losses driven by expenses to grow the open book businesses. The EVM loss on previous years’ business was USD 137 million, impacted by increased capital costs and expense reserves as well as other reserve strengthening in certain business lines. Investment activities generated an EVM profit of USD 596 million in 2019, compared to a loss of USD 533 million in 2018, driven by credit spread tightening and favourable performance from implied equity exposure arising from unit-linked business. The 2018 EVM loss was impacted by credit spread widening and underperformance from implied equity exposure arising from the unit-linked business.

Group items reported an EVM loss of USD 184 million in 2019, compared to a loss of USD 649 million in 2018. The EVM loss on new business was USD 190 million in 2019, mainly driven by capital costs on excess capital and overhead expenses, partially offset by trademark licence fees charged to the business segments. The EVM profit on previous years’ business was USD 11 million, mainly driven by lower overhead expense assumptions. Investment activities generated an EVM loss of USD 6 million in 2019, compared to a loss of USD 398 million in 2018, reflecting an improved performance from Principal Investments in 2019.