Swiss Re forecasts earnings rebound after tough year

Swiss Re full-year net income has slumped to $US472 million ($686 million) compared to $US1.4 billion ($2 billion) previously following a difficult year, but the group has forecast a rebound in its results.

The return on equity declined to 2.6% compared to 5.7% in a period marked by the war in Ukraine, surging inflation, the tail end of the covid pandemic and elevated natural catastrophe losses.

“We have focused on addressing these challenges proactively, all while maintaining our very strong capital position,” CEO Christian Mumenthaler said. “This has enabled us to take advantage of attractive market conditions at the January renewals, while continuing our commitment to the ordinary dividend.”

Swiss Re reported a strong fourth quarter, and has targeted net income of more than $US3 billion ($4.3 billion) this year supported by attractive market conditions, an expected decline in covid claims, higher interest rates and cost discipline.

Mr Mumenthaler says the year has started well with the successful January renewals, and the investment portfolio is well positioned to benefit from rising interest rates.

“Despite the uncertain macroeconomic environment, we are confident in the group’s ability to deliver on the new ambitious targets,” he said.

Property and Casualty Reinsurance (P&C Re) achieved a price increase overall of 18% in the January renewals, with improved rates in all lines of business. Swiss Re says this more than offset higher loss assumptions of 13%, which reflect “a prudent view on economic inflation and loss model updates”.

P&C Re renewed treaty contracts with a $US10.2 billion ($14.8 billion) in premium volume, representing a 13% volume increase compared with the business up for renewal, and the company says “healthy growth” of 21% was achieved in the natural catastrophe book.

The business reported net income of $US312 million ($454 million) last year, compared to $US2.2 billion ($3.2 billion) previously. The combined operating ratio was 102.4%.

The Corporate Solutions business delivered net income of $US486 million ($706 million) down from $US578 million ($840 million) previously. The combined operating ratio at 93.1% compared with the target of less than 95%.

The result was affected by elevated large man-made loss activity including impacts related to the war in Ukraine and significantly less favourable prior-year developments.

Life and health reported net income of $US416 million ($605 million) compared to a year earlier loss of $US478 million ($695 million).