Swiss Re reports continuing growth through 2024 renewals so far

Reinsurance giant Swiss Re has reported its first-half results this morning, with $2.1 billion in net income generated and a 20.1% ROE. At renewals so far this year premium expansion has continued, but while gross price increases remained positive, after accounting for loss assumptions the net price change is slightly negative.

Swiss Re reported that in property and casualty (P&C) reinsurance the first-half resulted in net income of $989 million on the back of a combined ratio of 84.5%.

The reinsurer said that its financial performance was strong across all business units, while it has also continued to prudently make reserve increases in some areas, to better protect its portfolios of risk going forwards as well.

Andreas Berger, Swiss Re Group CEO, said, “Swiss Re’s performance in the first half of 2024 reflects our focus on delivering consistent results. We continue to increase the overall resilience of the firm through a disciplined approach to underwriting new business while remaining on top of loss trends across our in-force portfolios.”

CFO John Dacey added, “These results highlight our focus on capital allocation discipline and quality across our underwriting and investment portfolios. Additionally, higher interest rates continue to benefit our investment income.”

Citing disciplined underwriting, low natural catastrophe claims and strong investment income for the period, Swiss Re generated $22.5 billion of insurance revenue across the group in H1, while the insurance service result, a measure of underwriting profitability, was $2.9 billion.

In P&C reinsurance, Swiss Re said it made “selected additions across natural catastrophe and man-made loss reserves, the large majority of which were in the form of incurred-but-not-reported reserves. P&C Re also increased reserves on specific casualty lines.”

The company disclosed $600 million of favourable large nat cat experience, as catastrophe losses were lower than budgeted for. But $500 million of additions were made, across selected nat cat and man-made reserves in property and specialty, as well as $650 million to casualty lines.

Analysts have again responded positively to the moves, this morning, saying it is a further signal of Swiss Re’s desire to stay ahead of loss trends and is something the reinsurer can easily do at a time when profitability is high.

P&C reinsurance continues to target a full-year combined ratio of below 87%, running at 84.5% as of the mid-year.

At the most recent reinsurance renewals, at July 1st 2024, Swiss Re said it renewed $4.5 billion in treaty premium volume, which represents a 7% increase year-on-year.

The company also noted that it achieved a price increase of 8% in this renewal round, continuing the trends of the last few years.

Loss assumptions increased by 10%, but Swiss Re notes this is based on its prudent view on inflation and updated loss models.

But, as a result, the net price change was actually -2% across the July renewal book, which seems reflective of the moderates and stable reinsurance market environment.

Across the July renewals, Swiss Re said that it grew property and specialty premium volumes by +11%, and casualty by +2%.

Year-to-date, at reinsurance renewals, Swiss Re’s premium volumes are now running 8% ahead of the prior year, as the company continues to expand in the harder market.

Price increases are running at +9% and Swiss Re notes that it is natural catastrophe risks where price increases are most pronounced.

However, for the YTD as well, loss assumptions are running ahead of price increases too, at +11%.

This disclosure that, on a net basis, prices changes actually negative when taking into account higher loss assumptions and inflationary effects, seems important for thinking about how long market conditions might be sustained at the higher price levels we see today.

Any reinsurer, like Swiss Re, will be reluctant to see the negative net price movements accelerate too much, when there is so much uncertainty in the world around geopolitics, climate, inflation and other loss cost trends.

YTD, Swiss Re said that its natural catastrophe premium volumes are up by 12%, while property is up 14%, specialty 15% and casualty 7.2%.

On nat cat reinsurance renewals Swiss Re said, “Increased premium driven by both volume and rate improvements, while discipline was maintained on attachment points.”

Overall, $4.1 billion in nat cat premiums have been renewed this year, $400 million up on the amount due for renewal.

Swiss Re’s growth has largely been in the EMEA region this year, at 17% increased premium volumes, compared to just 1% for the Americas, and 3% for Asia.

Looking ahead to the rest of the year, CEO Andreas Berger said, “After a strong start in the first half of this year, we maintain our 2024 targets, including Group net income of more than USD 3.6 billion. Amid a challenging macroeconomic and geopolitical environment, we continue to focus on disciplined underwriting to maintain and where possible improve the resilience of our portfolios to enable delivery of consistent results.”