Swiss Re delivers strong returns on lower catastrophes, higher rates

Global reinsurance giant Swiss Re has delivered a return on equity (ROE) of 25.9% for the first nine months of 2023, with lower catastrophe losses and higher rates feeding through to a significant improvement in performance this year.

Swiss Re has been growing its business into the harder reinsurance market environment, with premiums earned in the property and casualty (P&C) business rising 5.4% so far this year.

Across its business Swiss Re has delivered strong profits for the year so far, with its Property & Casualty Reinsurance (P&C Re) business delivering net income of US $1.5 billion at a combined ratio of 94.3, its Life & Health Reinsurance (L&H Re) business seeing net income of US $634 million, and its Corporate Solutions unit securing net income of US $492 million at a combined ratio of 91.3%.

In the third-quarter alone, Swiss Re delivered a group net profit of US $1 billion, while for the nine months the figure was US $2.5 billion, well on-track for the US $3 billion full-year target.

Swiss Re’s Group Chief Executive Officer Christian Mumenthaler commented, “Swiss Re’s performance in the first nine months of 2023 is the result of our continued focus on underwriting quality. This has enabled us to navigate a heightened risk environment that continues to be characterised by significant loss events for the insurance industry.”

Swiss Re’s Group Chief Financial Officer John Dacey added, “With interest rates continuing to rise, we see improvements in the recurring income yield and in our overall investment results. Combined with the improved underwriting performance, this has significantly strengthened the Group’s earnings capacity.”

A year ago, for the first nine months of 2022, Swiss Re had reported a net loss of US $285 million and an ROE of –2.1%.

The much improved performance will also read-across for investors in the Swiss Re range of third-party capital structures, from its Sector Re and other sidecar arrangements, to its Swiss Re Insurance-Linked Investment Management Ltd (SRILIM) ILS fund that enables investors to share in the performance of its catastrophe book.

In P&C Reinsurance, Swiss Re reported a US $1.5 billion net profit, driven by underwriting performance, renewals and investment income.

The combined ratio in P&C Re was 93.7% fir Q3 and 94.3% for the first nine months, despite what Swiss Re called “a substantial level of large natural catastrophe losses for the industry.” A year ago, the nine months of 2022 saw an underwriting loss, with a 106.1% CR.

Swiss Re also absorbed more casualty related reserve creep, with negative prior-year developments of US $151 million, reflecting significant additions to US liability reserves. This is bound to be a focus for the analysts today, but the continued strong delivery across the business should help to overshadow somewhat the need to harden legacy US casualty reserves.

Swiss Re reported large natural catastrophe claims of US $1.1 billion for the first nine months, well down on the prior years US $2.5 billion.

Interestingly, the reinsurance firm said the nine month catastrophe loss total was net of reinstatement premiums of US $52 million, which might suggest Swiss Re had recovered something under reinsurance or retrocession during the period and needed to reinstate it.

US $421 million of the catastrophe loss total is from the third quarter, mostly due to severe weather events in Europe, wildfires on the Hawaiian Island of Maui and the earthquake in Morocco.

Group CEO Christian Mumenthaler further explained, “In light of the good performance year to date, we maintain our targets for the full year including a Group net income of more than USD 3 billion. We continue to focus on our disciplined underwriting strategy that provides a strong base for the future.”