‘Simpler and nimbler’ Swiss Re roars back to big profit despite ‘turbulent’ headwinds

Global reinsurance giant  Swiss Re bounced back to profitability in the first quarter that its CFO John Dacey (pictured right) otherwise described as “turbulent” due to multiple large losses and nat cat claims. The business enjoyed higher investment returns, P&C Re growth and price increase of 19% at April renewals in the current hard market. The company’s CEO Christian Mumenthaler (pictured left) painted a bullish outlook for the year with an ambitious profit target, stating that the business is now “simpler and nimbler” and better positioned for the current uncertain macroeconomic environment.

The Zurich-based global reinsurer absorbed large natural catastrophe losses in all main businesses, but still managed to generate a solid net profit of $643 million and a return on equity (ROE) of 19.1% in Q1 2023, supported by “robust price improvements and higher investment results”. For the same period last year, it made a net loss of $248 million.

Net premiums earned and fee income for the group increased by 4.1% to $11.1 billion. P&C Re contributed $5.8 billion to the premiums, up 8.5% from the prior-year quarter.

Its property & casualty reinsurance (P&C Re) business produced a net profit of $369 million, compared with $85 million in the same period in 2022, despite large natural catastrophe claims. These were driven mostly by the earthquake in Turkey and Syria, for which P&C Re booked $426 million in net claims based on a market loss estimate of $5.3 billion, as well as by Cyclone Gabrielle and flooding in New Zealand.

P&C Re combined ratio was 97.2% for the first quarter. For the full-year, it is aiming to achieve a combined ratio below 95%, as the business earns the majority of its natural catastrophe premiums in the second half of the year.

At the April renewals, P&C Re renewed contracts with $2.6 billion in treaty premium volume, marking a 5% increase compared with the business that was up for renewal. Overall, P&C Re achieved a price increase of 19% in this renewal round, which it claims “more than offset higher loss assumptions” of 13%.

Swiss Re’s L&H Re unknit reported a net profit of $174 million for the first quarter of 2023, compared with a net loss of $230 million for the same period in 2022. The result benefitted from a strong decline in COVID-19 claims and a higher investment income. Net premiums earned and fee income remained unchanged at $3.8 billion.

Swiss Re Corporate Solutions had a strong start to the year with net profit of $168 million, compared with $81 million in the prior-year period. The reinsurer credited “continued disciplined underwriting, careful risk selection and adequate pricing” for the improvement. However, its net premiums declined to $1.3 billion in the first quarter of 2023 from $1.4 billion in the same period last year, reflecting the partial sale of the elipsLife business in mid-2022. Corporate Solutions’ combined ratio was 90.3%.

Swiss Re’s group chief executive officer Christian Mumenthaler said: “The first-quarter results demonstrate the resilience of all our main businesses, supported by adequate pricing, higher investment returns and cost discipline.”
Group chief financial officer John Dacey added: “The return on investments of 2.8% that we achieved in a turbulent quarter demonstrates the quality of our asset portfolio. On the liability side, we absorbed multiple large losses, while maintaining underwriting profitability.”

Commenting on the full-year 2023 outlook, Mumenthaler said: “In an uncertain macroeconomic environment, we continue to focus on achieving our ambitious profit target of more than USD 3 billion for the Group in 2023. The successful P&C Re renewals so far this year and a good start in L&H Re and Corporate Solutions underpin our confidence, supported by rising interest rates, cost discipline and a very strong capital position. Swiss Re also successfully transitioned to a new structure as of April 2023, creating a simpler and nimbler organisation and bringing us closer to clients.”

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