By CYRIL TUOHY, managing editor of Risk & Insurance®
When Swiss Re bought General Electric Insurance Solutions' insurance property/casualty book of business at the end of 2005 for $6.8 billion, the Zurich-based reinsurance giant figured it was a logical way for it to grow.
Already entrenched in offering reinsurance around the world, Swiss Re considered GE's insurance unit a "powerful business fit" to "strengthen our franchise," in the words of former Swiss Re CEO John Coomber.
Before long, the unit was renamed Corporate Solutions, and Swiss Re was ready to march further into the primary property/casualty insurance segment, to be sure a field already crowded by commercial-lines giants AIG, Zurich, Travelers, Liberty Mutual, CNA, Hartford, ACE and Chubb.
With net earned premium of $6.2 billion in 2004, Swiss Re's new purchase was going to enhance the client base and the company's product offerings, said former CEO Jacques Aigrain, who succeeded John Coomber on New Year's Day 2006.
But then came the Great Recession and the fortunes of Corporate Solutions were put on hold as Swiss Re licked its wounds.
Bad real estate bets in the form of credit default swaps caused the Swiss Re group to lose $663 million in 2008, down from $3.4 billion in profits the previous year, and the board had to find a replacement for Aigrain, who was fired.
Swiss Re has since rebounded with net income of $863 million last year, up from $496 million in 2009.
With the announcement last October of the reorganization of the Corporate Solutions unit, an in-force book worth $2.5 billion in annual premiums and a network of more than 20 offices around North America, the reinsurer claims that it's ready to make serious headway into the primary commercial insurance segments of the North American market.
Already owning a piece of a risk-transfer transaction "with every second company within the Fortune 500," said Corporate Solutions' Chief Marketing Officer Rudolf Flunger, means Swiss Re's in a good position to further its reach into the upper middle market, companies with revenues of $750 million or more.
Corporate Solutions wants to position itself as a "value proposition" that is compelling "whether from a brand standpoint, a financial strength standpoint, the standpoint of offering large amounts of net capacity," according to Flunger.
Flunger declined to release growth targets for Swiss Re Corporate Solutions, which accounts for about 12 percent of Swiss Re's group premiums. The unit will report earnings separately beginning in 2012.
Last year, Swiss Re posted operating income of $2.4 billion on earned premiums of $10.8 billion from its property/casualty operations, down from $3.5 billion on earned premiums of $12.7 billion in 2009, the company said.
OLD PLANS, DUSTED OFF
Analyst William Hawkins, writing in the wake of Swiss Re's investor day in March, said the company was "dusting off" old plans for its Corporate Solutions unit and looking to grow it by about 6 percent per year.
"The group will target corporates with revenue of about $0.75 billion and aim to service global and niche contracts," wrote Hawkins, who is with Keefe, Bruyette & Woods. Two-thirds of Corporate Solutions' business is derived from North America, 30 percent from Europe, and 10 percent from Asia and Latin America.
Swiss Re is expected to post $10.9 billion in net earned property/casualty insurance and reinsurance premiums in 2011, up from $10.4 billion in 2010, according to an estimate released in May by Hawkins.
Flunger, in a July interview with Risk & Insurance®, said Corporate Solutions' book of business is "large enough that we have proven capabilities," but at the same time "small enough to see exciting growth opportunities."
Corporate Solutions is looking to grow through the underwriting of property and some specialty risks, and to mine its strengths in the engineering and construction segments, the financing of big infrastructure projects and developing new ways to cover professional liability risks.
The insurer, with the help of its parent Swiss Re, can bring to bear its technical expertise, innovation and experience in offering custom solutions to large insureds, Flunger said, and noted that Swiss Re is often cited as a leader in the development and marketing of weather risk products, catastrophe bonds and insurance-linked securities.
Because much of Corporate Solutions' services is sold through brokers they, too, can help insureds pick through the panoply of services offered by Corporate Solutions, he also said.
Swiss Re has been in the North American Market for about 15 years, so it's important to remember that even well before its purchase of Corporate Solutions, Swiss Re wasn't new to the primary insurance market, he said.
"Corporate Solutions has its own CEO and a full management team ... including a dedicated chief underwriting officer and a chief claims officer," said Flunger. "The Corporate Solutions organization signals clearly that this is a long-term plan and we're here to stay."
July 1, 2011
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