Large European reinsurer Swiss Re has today reported a significant rise in net income to $3.2 billion for 2023 and a return on equity of 22.3%, as underwriting margins improved and the firm’s P&C reinsurance arm delivered income of $1.9 billion.
Group-wide, net income increased by 578% from the $472 million recorded in 2022, as net premiums earned and fee income jumped 4.4% to $45 billion.
The reinsurer benefitted from substantially higher recurring investment income and a strong capital position, with the full year return on investment rising to 3.4% from 2%, and the recurring income yield rising to 3.6% from 2.6% in 2022, driven by reinvestments in the higher interest rate environment.
In its P&C reinsurance business, net income rose significantly to $1.9 billion compared with $312 million in 2022, which Swiss Re primarily attributes to a resilient underwriting performance and disciplined renewals.
While the reinsurer strengthened reserves in the casualty part of the business, this was offset by strong margins and positive reserve developments in property and speciality lines, while a solid investment performance also supported the result.
Within P&C Re, large natural catastrophe claims totalled $1.3 billion in 2023, which is below the full-year budget of $1.7 billion. Claims were driven by the earthquake in Turkey and Syria, Hurricane Otis in Mexico, and the severe flooding across Europe throughout the year.
P&C Re net premiums earned rose 3.9% to $22.9 billion against $22 billion in 2022. The segment’s combined ratio strengthened from 102.4% in 2022 to 94.8% in 2023, coming in below the target of less than 95%. P&C Re net income increased from $312 million to $1.9 billion.
At the key January 1st, 2024, reinsurance renewals, Swiss Re renewed P&C Re treaty contracts worth $13.1 billion in premium, representing a 9% increase compared with the business that was up for renewal. The P&C Re portfolio achieved a price increase of 9% at 1.1 2024, and based on what Swiss Re describes as a prudent view on inflation and updated loss models, loss assumptions rose 11%.
Turning to the company’s L&H reinsurance arm, and net income also rose significantly here, from $416 million in 2022 to $976 million in 2023, which is above the target of $900 million. Swiss Re attributes the solid performance to active in-force portfolio management and a strong investment result, which offset elevated mortality claims in the US.
Within L&H Re, net premiums earned and fee income rose 4.4% year-on-year to $15.6 billion, driven by large transactions written across regions. The annualised recurring income yield hit 4.1% in 2023 compared with 3.2% in 2022.
Swiss Re’s Group Chief Executive Officer, Christian Mumenthaler, commented: “Swiss Re can look back on a successful 2023. We achieved all our financial targets in a year that was characterised by geopolitical turbulence and continued economic uncertainty. Improved price adequacy in our property and casualty businesses following strong renewals and our underwriting discipline helped us to manage elevated industry losses from natural catastrophes, while L&H Re achieved a solid result, benefitting from active in-force portfolio management and a strong investment performance.”
“Our businesses are well positioned to benefit from the current market environment, while the higher interest rate environment supports recurring investment income. This positive earnings momentum gives us confidence to increase the pay-out to investors by proposing a 6% higher ordinary dividend of USD 6.80 per share for 2023,” added John Dacey, Group Chief Financial Officer.
In Corporate Solutions, the firm’s commercial insurance arm, net income increased to $678 million from $486 million in 2022, with the reinsurer highlighting a steadily improved portfolio resilience on the back of disciplined underwriting and portfolio steering. A stronger investment result also benefited this part of the business.
Net premiums earned were flat year-on-year at $5.5 billion in 2023. Although, Swiss Re explains that at constant foreign exchange rates and excluding the elipsLife business, net premiums earned increased by 7.3% as a result of new business mainly in property, credit & surety as well as in accident & health, partially offset by reductions in professional liability lines.
Swiss Re Corporate Solutions delivered a combined ratio of 91.7% for 2023, which is stronger than the 93.1% reported a year earlier and better than the target of less than 94% for the year.
At iptiQ, the firm’s digital B2B2C insurer, growth continued in 2023 with in-force policies rising from 2.2 million to 2.7 million. At the same time, gross premiums written jumped by almost 30% to $1.1 billion in 2023. However, the business still reported a loss of $247 million for the year, although this is narrower than the loss of $362 million reported for 2022.
Looking ahead, Swiss Re has confirmed its financial targets announced back in December, including 2024 group net income of above $3.6 billion under IFRS, and a multi-year IFRS ROI of more than 14%.
For L&H Re, the income target is $1.5 billion, and for P&C Re the combined ratio target for 2024 is less than 87%. The Corporate Solutions business is targeting a combined ratio of less than 93% for the year.
“In 2024, we continue to put emphasis on underwriting discipline as evidenced in the successful January renewals. Our focus on costs and strengthening proximity to our clients also remains paramount. Finally, the accounting transition from US GAAP to IFRS will be beneficial to our earnings and reported balance sheet strength,” said Mumenthaler.
