Swiss Re Earnings: Full-Year Targets Look Like a Stretch

For activity over the first quarter of 2023, Swiss Re SREN has reported a middling set of results. The broad takeaway is that the full-year targets currently look like a stretch. And we are lowering our fair value estimate to $110 per share as a result. We maintain our rating of no economic moat.

In the business’ largest division, property and casualty reinsurance, the company continues to take advantage of the hardening market to grow gross premium volume by low double digits. Growth has been notably strong in natural catastrophe where we think the business is a better operator than most. Here, volume has been advanced by 17% and growth in specialty lines has also been notably strong. Aviation and marine have been favoured lines while credit and surety have been approached with caution. Geographically, much of the growth has come from Asia as well as EMEA, with volume in Americas down 2%. In the April round of renewals, the business achieved price increases of 19% and that takes them to 18% year to date. Much of this has taken place in natural catastrophe due to the larger loss trend, as the business is incorporating 13% higher loss assumptions. The large loss budget stands at USD 1.9 billion for 2023, but with the losses from the earthquakes in Syria and Turkey costing the company $426 million, Swiss Re is over budget. This has been the largest insured loss for an earthquake in Europe. This quarter the division reported a 97.2% combined ratio and that is versus the 95% or better full-year target. Our forecast is 97.4%.

Excess United States mortality is starting to return to prepandemic levels and so this division has moved to a profit of $174 million versus the prior comparable quarter loss. Yet while the first quarter typically includes higher claims because of viruses that have spread over winter months, the net income target of around $900 million looks rough.