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Swiss Re Q2 Profit Drops on Higher Natural Catastrophe Losses

While reinsurers had to pay more for catastrophe claims in the second quarter to the primary insurers whom they help shoulder such risks, overall insured losses during the first half of the year were in line the average over the last 10 years, according to Munich Re estimates. Low claims are damping demand and prices for reinsurance, and investment income is being squeezed by record-low interest rates.

The second quarter “was marked by a difficult macroeconomic environment as well as more pronounced natural catastrophe losses and large reported claims in our Corporate Solutions business unit,” Christian Mumenthaler, who became chief executive officer on July 1 after Michel Lies retired, said in the statement.

The reinsurer, which oversees investments of about $140 billion, is moving more of its assets into corporate debt as low or negative interest rates on government bonds and volatile markets squeeze investment margins, Chief Investment Officer Guido Fuerer said in an interview last month. In the second quarter, Swiss Re’s return on investments fell to 3.7 percent from 4.2 percent a year ago.

Net income at property and casualty reinsurance, Swiss Re’s biggest unit, dropped 39 percent to $283 million “reflecting large natural catastrophe and man-made losses in the quarter,” the company said. It expects a loss of $220 million for the Canada wildfires that raged across northern Alberta in May, the most costly insured natural disaster in the country’s history.

The unit’s combined ratio, a profitability measure in property and casualty insurance, worsened to 101 percent in the quarter from 92.9 percent a year ago. A ratio greater than 100 means that an insurer is paying more in claims and costs than it is collecting in premiums.

The Corporate Solutions unit, which sells primary insurance to companies, reported a net loss of $25 million in the quarter after a year-earlier profit of $76 million as it booked losses from two large man-made casualty losses in 2015, Swiss Re said.

Swiss Re has lost 16 percent in Zurich trading this year, valuing the company at 30 billion francs. That compares with a 22 percent decline of the 32-member Bloomberg Europe 500 Insurance Index.

Generali Q2 Net Income Falls 6% on Low Interest Rates & Volatile Equity Markets

“Financial performance continues to be impacted by volatile markets and low interest rates,” the company said in the statement. Despite the challenging environment in financial markets, Generali said it expects to improve shareholder remuneration in 2016.

European insurers like Generali are struggling to sustain earnings growth as investment returns fall and competition puts pressure on prices. Chief Executive Office Philippe Donnet, appointed in March to replace Mario Greco, is seeking to boost the retail business in Europe while focusing on cash generation and cost cutting. The insurer targets an operating return on equity of more than 13 percent this year.

The top management reshuffle “has re-introduced a governance discount that we expect to weigh on share price performance medium term,” Ralph Hebgen and Michele Ballatore, analysts at Keefe, Bruyette & Woods, wrote in a note July 8. Generali “has the capacity to grow operating earnings through efficiency gains.”

Generali’s regulatory solvency ratio fell to 161 percent from 171 percent at the end of 2015.

AXA, Alibaba and Ant Financial Services Form Global Strategic Partnership

The first phase of the proposed collaboration will focus on developments in the following areas:

  • AliExpress, a retail marketplace targeted at consumers worldwide. AXA would develop and provide insurance products for AliExpress’ global customers, such as extended warranties for repairs and/or damaged goods and enhanced online payment protection;
  • Alibaba’s wholesale marketplaces (Alibaba.com, 1688.com). AXA would provide insurance products to small and medium businesses from all over the world, which are already trading on these platforms;
  • Ant Financial Services (an Alibaba-affiliate which provides financial services). AXA would offer travel insurance products for Chinese travelers going overseas.

These insurance products and services would be developed by AXA’s local entities according to the customers’ local requirements, AXA said.

“Forming partnerships with the most forward-thinking companies is part of our strategy to seize new business opportunities,” said Thomas Buberl, deputy CEO of AXA.

He said the collaboration with Alibaba could provide AXA “with a unique global and direct distribution channel….”

With Alibaba’s in-depth knowledge of its home market, “this partnership will also help us further accelerate our development in China…,” Buberl continued

“As cross-border e-commerce grows rapidly, it is critical that we evolve our services and offerings to the businesses and consumers that conduct trade on our platforms,” said Michael Evans, president, Alibaba Group. “The collaboration between AXA and Alibaba will enable us to create new solutions and ultimately improve the overall customer experience.”

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