Global reinsurance giant Swiss Re has today announced net income of $472 million for the full year 2022 compared with $1.4 billion a year earlier, as the impact of economic inflation on expected claims impacted its P&C businesses, and large natural catastrophe losses exceeded expectations at $2.7 billion.
The group’s full year 2022 net income was supported by fourth-quarter net income of $757 million, while the return on equity (ROE) achieved for the year hit 2.6%, compared with 5.7% in 2021.
Across the business, Swiss Re says that net premiums earned and fee income increased by nearly 1% to $43.1 billion in 2022, although growth was negatively impacted by adverse foreign exchange developments.
Within its property and casualty (P&C) reinsurance arm, net income for the year reached $312 million and was supported by Q4 2022 net income of $595 million. The reinsurer says that its full year P&C result was negatively impacted by higher than expected economic inflation, for which it reserved $1 billion.
At the same time, cat losses came in above expectations at $2.7 billion in 2022, mostly from Hurricane Ian, the floods in Australia and South Africa, hailstorms in France, winter storms in Europe and the U.S., and some other events.
P&C Re net premiums written rose slightly year-on-year to $22 billion, supported by continued price improvements.
However, the large catastrophe loss experience has seen the P&C Re combined ratio weaken from 97.1% in 2021 to 102.4% in 2022. On a normalised basis, the combined ratio for 2022 was 96.9%, which is above the target of less than 94%, mostly as a result of the impacts of economic inflation.
“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,” said Christian Mumenthaler, Group Chief Executive Officer (CEO).
At the January 1st, 2023, reinsurance renewals, the firm renewed treaties with $10.2 billion in premium volume. This actually reflects a 13% increase compared with the business that was up for renewal. Swiss Re says that it achieved growth of 21% in its natural catastrophe book.
All in all, P&C Re achieved price increases of 18% at 1/1, with improved rates in all lines of business, which more than offset higher loss assumptions of 13%.
Swiss Re’s Group Chief Financial Officer (CFO), John Dacey, added: “Throughout the year, Swiss Re took measures to add USD 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 USD 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.”
Swiss Re’s life and health (L&H) reinsurance business recorded net income of $416 million for 2022, a huge improvement from the net loss of $478 million in 2021. The unit’s Q4 net income hit $200 million for the third consecutive quarter, which enabled the full year target of $300 million to be exceeded.
Within L&H Re, claims related to the COVID-19 pandemic fell to $588 million in 2022 compared with almost $2 billion in 2021. Net premiums earned and fee income for the year were largely unchanged, year-over-year, at $15 billion.
At Swiss Re Corporate Solutions, net income declined from $578 million in 2021 to $486 million in 2022, and was impacted by elevated large man-made loss activity including impacts related to the war in Ukraine and significantly less favourable prior-year developments. However, the business unit did improve its resilience to future claims inflation, with $100 million in additional reserves.
Net premiums earned jumped 2.6% to $5.5 billion on the back of new business growth in selected focus portfolios and the continuous earn-through of previously realised rate increases.
The division’s combined ratio for the year weakened from 90.6% in 2021 to 93.1% in 2022, but remains above the target of less than 95% for 2022.
Turning now to Swiss Re’s iptiQ, and the firm notes that it continued to successfully grow its business during the year, increasing its in-force policies to more than 2.1 million from 1.6 million in the prior-year period. Gross written premiums spiked by almost 18% to $851 million.
Looking forward, Swiss Re expects to achieve net income of more than $3 billion in 2023, supported by attractive market conditions, an expected decline in COVID-19 claims, higher interest rates, and cost discipline.
The Group says that P&C Re will move away from its normalisation approach to target a reported combined ratio of less than 95% for 2023. While L&H Re will aim for a net income of roughly $900 million, and Corporate Solutions will target a reported combined ratio of less than 94% for the year.
“2023 has started well, 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,” said Mumenthaler.
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