2024-02-16 15:04:00
The reinsurance group benefited from good investment results and lower catastrophe losses than in 2022. Profits are expected to continue to rise in the current year.
The bottom line was a net profit of $3.2 billion in 2023, after an increase of $472 million in the previous year, as Swiss Re announced on Friday. The group has thus exceeded its self-imposed target of an annual profit of $3 billion.
The group’s net premiums earned and fee income rose 4.4 percent year-on-year to $45.0 billion. The investment result also provided a tailwind, with the insurer achieving a clearly improved return of 3.4 percent (previous year: 2.0 percent).
Turkey earthquake and hurricane
In property and liability reinsurance (P&C Re) there was a profit of 1.9 billion dollars after just 312 million in the previous year. This is due not least to “robust underwriting performance and disciplined contract renewals,” it said.
At $1.3 billion, the costs for major losses from natural disasters were well below the budget of $1.7 billion. The biggest event was the earthquake in Turkey and Syria at the beginning of the year, which cost Swiss Re $500 million. Hurricane “Otis” in Mexico in the fourth quarter caused a loss of around 150 million.
The reinsurer made more provisions in liability reinsurance business. This is about the increasingly expensive compensation and penalty payments for companies in the event of events such as environmental pollution. There are also similar developments in the motor vehicle sector: “Payments after traffic accidents, for example, have become more and more expensive because juries are awarding victims ever larger sums,” said CFO John Dacey in an interview with AWP.
In life reinsurance (L&H Re), Swiss Re exceeded its own targets with a profit of $976 million (previous year: $416 million). In this business too, Swiss Re was able to benefit from strong investment performance.
Further price increases
The prospects for Swiss Re are good, as the positive price trend for reinsurers in recent years continues. In the January round, which is important for contract renewals, Swiss Re increased the premium volume up for renewal in the P&C Re business by 9 percent to $13.1 billion. Overall, price increases of 9 percent were also achieved, it was said.
The group also confirmed the financial targets for the new year that were announced in December: in 2024, Swiss Re wants to post a consolidated profit of over $3.6 billion using the new IFRS balance sheet. The return on equity should be more than 14 percent over the next year.
Shareholders should benefit from the increase in profits through a 40 cent increase in dividends to $6.80 – although for Swiss shareholders the increase will be offset by exchange rate developments.
Swiss Re’s profit figures are roughly in line with expectations. However, some analysts had hoped for an even better performance. On an overall friendly stock market, Swiss Re stocks were clearly the weakest SMI stocks on Friday afternoon, with a decline of 1.2 percent.
This is how Swiss Re shares react
Swiss Re shares are significantly lower on Friday. The reinsurer exceeded its own profit forecast last year thanks to a low claims burden in the final quarter and significantly increased its dividend. However, some analysts had hoped for an even better performance.
At times, Swiss Re lost 1.79 percent to 101.75 francs after the shares fell to 100 francs at the start of trading. At Swiss Re, traders point to the good price development in the current and last year and see profit-taking as a reason for the current charges.
Swiss Re ended 2023 with premium income and a dividend proposal above expectations. On the other hand, the profit was slightly lower than consensus estimates, although developments in liability reinsurance were criticized. Analysts rate the new business and the turnaround at the former problem child CorSo as positive.
Overall, Swiss Re’s profitability has developed favorably as expected, says Georg Marti from ZKB. The investment result was also good and the reinsurer’s balance sheet situation remains very solid.
According to Vontobel analyst Simon Fössmeier, Swiss Re’s results last year were only in line with expectations, but were still pleasing and reassuring at the same time. Fössmeier therefore feels confirmed in his purchase recommendation.
JPMorgan also says that the profit development can be seen as a success after the difficult years between 2017 and 2022, including the Covid pandemic. However, analyst Kamran Hossain is somewhat concerned about the significant increase in reserves in US liability reinsurance in the final quarter. Swiss Re expects higher claims volumes in the future.
tp/mk
Zürich (awp)
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