17 February 2023Insurance

Swiss Re profits tumble 67%, but CEO says ‘2023 has started well’ with 13% P&C Re growth at 1.1

Profits at world’s largest reinsurer  Swiss Re more than halved due to “higher-than-expected” inflation and heavy nat cat losses in 2022, but its CEO remains bullish on attractive market’ following a solid start at the January 2023 renewals where its P&C Re premium volume grew 13% with overall 18% price increases.

The Zurich-based global reinsurer reported a net profit of $472 million for 2022, with a net profit of $757 million in the fourth quarter. The full-year profit was down nearly 67% on $1.4 billion and an ROE of 5.7% seen in 2021.

Swiss Re blamed the massive decline on surging economic inflation and expected claims in the property and casualty businesses, mark-to-market impacts on listed equity investments and large natural catastrophe claims above its expectations.

The group’s property & casualty reinsurance division P&C Re, however, turned a net profit of $312 million for 2022, supported by a strong fourth-quarter net profit of $595 million. The full-year result was negatively impacted by higher-than-expected economic inflation, for which Swiss Re set up reserves of $1.0 billion.

P&C Re combined ratio was 91.0% in the fourth quarter and 102.4% for the full year.

Swiss Re noted that large natural catastrophe claims were “above expectations” at $2.7 billion, mainly from Hurricane Ian, floods in Australia and South Africa, hailstorms in France, winter storms in Europe and the US as well as a series of other smaller events. Net premiums earned increased slightly to $22.0 billion, supported by continued price improvements over the year.

At the January 2023 renewals, P&C Re renewed treaty contracts with $10.2 billion in premium volume, representing a 13% increase compared with the business that was up for renewal, and achieved price increases of 18%. The company reported a growth of 21% in the natural catastrophe book.

Swiss Re’s life and health (L&H Re) division exceeded its full-year net profit target by achieving $416 million for 2022, compared with a net loss of $478 million in the previous year – thanks to decreased COVID-19-related claims. The unit’s net premiums earned largely unchanged at $15 billion.

The company’s Corporate Solutions business outperformed its combined ratio target at 93.1% for the full year 2022. Its net profit was $486 million, impacted by elevated large man-made loss activity including impacts related to the war in Ukraine and significantly less favourable prior-year developments.

For 2023, the Group has revealed an ambitious net profit target of more than $3 billion, supported by P&C Re renewals, an expected decline in COVID-19 claims, higher interest rates and cost discipline.

Swiss Re’s group chief executive officer Christian Mumenthaler said: “2022 was a challenging year, marked by the war in Ukraine, surging inflation, the tail end of the COVID-19 pandemic and elevated natural catastrophe losses. We have focused on addressing these challenges proactively, all while maintaining our very strong capital position. This has enabled us to take advantage of attractive market conditions at the January renewals, while continuing our commitment to the ordinary dividend.”

“2023 has started well,” he added, “with successful January renewals reflecting our ambition to drive profitability and create value for shareholders, while continuing to support clients. Our investment portfolio is well-positioned to benefit from rising interest rates, and we do not expect a return of high COVID-19 claims that we had seen over the past years. Despite the uncertain macroeconomic environment, we are confident in the Group's ability to deliver on the new ambitious targets.”

John Dacey, chief financial officer, said: “Throughout the year, Swiss Re took measures to add $1.1 billion in reserves to address the risk of higher claims due to economic inflation across our property and casualty businesses. Higher interest rates are already helping to compensate for this impact, with the contribution from our fixed-income portfolio rising by $170 million in the fourth quarter compared with the prior-year period.

“After absorbing a significant impact from COVID-19 in the early part of 2022, L&H Re has returned to attractive levels of profitability. Corporate Solutions continued to deliver resilient results and outperformed its full-year target. We are pleased to end the year with a solid fourth-quarter result that was driven by strong operational performance from our main businesses.”

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