Ad hoc announcement pursuant to Article 53 LR
- Property & Casualty Reinsurance (P&C Re) net loss of USD 283 million; combined ratio of 106.1% and normalised1 combined ratio of 96.2%
- Life & Health Reinsurance (L&H Re) net income of USD 221 million
- Corporate Solutions net income of USD 356 million; combined ratio of 93.1%
- Return on investments (ROI) of 1.6%, reflecting negative mark-to-market impacts on listed equity investments; Q3 recurring income yield increased to 2.8%
- Very strong capital position with a Group Swiss Solvency Test (SST) ratio of 274% as of 1 July 2022
Swiss Re reported a net loss of USD 285 million for the first nine months of 2022, driven by a USD 442 million net loss in the third quarter. While P&C Re was impacted by Hurricane Ian and an increase in small- and mid-sized claims in the third quarter, L&H Re and Corporate Solutions continued to deliver strong results and remain on track to meet their full-year targets.
Swiss Re's Group Chief Executive Officer Christian Mumenthaler said: "The first nine months of this year were marked by a confluence of events affecting Swiss Re's financial performance: from turbulence in the financial markets, to an increase in natural catastrophe claims, surging inflation and the war in Ukraine. While P&C Re has been significantly affected by these headwinds, all other businesses are performing well and are on track to reach their 2022 financial targets."
Swiss Re's Group Chief Financial Officer John Dacey said: "We have bolstered reserves by USD 0.7 billion over the past 12 months to address the impact of economic inflation. Rising interest rates are already helping to compensate for this impact, with the recurring contribution from our fixed-income portfolio rising by around USD 100 million in the third quarter alone. Most importantly, despite the challenges this year, we have maintained our very strong capital position and remain committed to our capital management priorities."
Group results reflect headwinds
Swiss Re reported a net loss of USD 285 million and a return on equity ROE of –2.1% for the first nine months of 2022, compared with a net income of USD 1.3 billion and an ROE of 6.6% for the same period last year. The decline was mainly driven by significantly lower investment results, large natural catastrophe claims of USD 2.7 billion as well as first-quarter reserves of USD 283 million related to the war in Ukraine.
Net premiums earned and fee income for the Group rose 1.3% to USD 32.4 billion in the first nine months of 2022 compared with the same period last year. Growth was negatively affected by adverse foreign exchange developments, while at stable foreign exchange rates, the increase amounts to 5.2%.
Very strong capital position and rising recurring investment income
Swiss Re's ROI of 1.6% was affected by negative mark-to-market impacts on listed equity investments. Credit impairments remained low. The recurring income yield increased to 2.4% for the first nine months of 2022 from 2.2% for the same period last year, benefiting from targeted reinvestments in the rising interest rate environment. In the third quarter, the recurring income yield rose to 2.8%, while the fixed income reinvestment yield reached 4.1%.
Swiss Re's capital position remained very strong, with a Group Swiss Solvency Test (SST) ratio of 274% as of 1 July 2022.
P&C Re results impacted by natural catastrophe claims in Q3
P&C Re reported a net loss of USD 283 million for the first nine months of 2022, compared with net income of USD 1.5 billion in the same period in 2021, impacted by natural catastrophes and lower investment results. Large natural catastrophe claims of USD 2.5 billion in the period were higher than expected and mainly relate to Hurricane Ian, floods in Australia and South Africa, hailstorms in France as well as a series of other smaller events around the world.
The business also absorbed a negative impact from prior-year events, driven by reserving actions on economic inflation and a large prior-year loss in specialty. Moderate strengthening in the liability segment was in line with the previous year and mostly offset by redundancies in other areas.
Net premiums earned increased slightly to USD 16.6 billion, supported by continued price improvements. Calculated at stable foreign exchange rates, the increase of net premiums earned amounts to 4.4%.
The combined ratio was 106.1% for the first nine months of 2022 due to significant natural catastrophe losses and economic inflation impact. On a normalised basis, the combined ratio was 96.2%. Due to an increase in small- and mid-sized claims, driven mostly by economic inflation, the business is unlikely to reach its normalised combined ratio target of less than 94% in 2022.
L&H Re profitability rebounds
L&H Re reported a net income of USD 221 million for the first nine months of 2022, compared with a net loss of USD 32 million for the first nine months of 2021, as COVID-19-related claims decreased from USD 1.2 billion to USD 608 million. While the first quarter of 2022 was still strongly impacted by COVID-19-related claims, the business returned to profitability in the second and third quarters, supported by a large transaction and despite significantly lower investment results this year.
Net premiums earned and fee income remained largely unchanged at USD 11.2 billion for the first nine months of 2022 compared with the prior-year period. Calculated at stable foreign exchange rates, the increase of net premiums earned amounts to 4.0%.
L&H Re is on track to reach its net income target of approximately USD 300 million for 2022.
Corporate Solutions continues strong performance
Corporate Solutions reported a net income of USD 356 million in the first nine months of the year, compared with USD 425 million in the prior-year period. The continued solid result confirms improved resilience of the underlying business and was achieved despite reserves related to the Ukraine war and large natural catastrophe losses of USD 187 million, mainly relating to Hurricane Ian and flooding in Australia. In addition, the Business Unit benefitted significantly less from favourable prior-year development and absorbed lower investment income compared with the first nine months of the prior-year period.
Net premiums earned increased by 4.6% to USD 4.1 billion for the first nine months of 2022, driven by new business growth in selected focus portfolios along with continuous earn-through of previously realised rate increases, partly offset by the reduction in premiums as of the third quarter, following the sale of the ElipsLife business. Calculated at stable foreign exchange rates, the increase of net premiums earned amounts to 9.2%.
Corporate Solutions' combined ratio of 93.1% for the first nine months of 2022 is well on track to reach the full-year target of less than 95%.
iptiQ continues to grow its business
iptiQ's gross premiums written increased 25% to USD 650 million in the first nine months of 2022, with growth being achieved across all regions.
Outlook
As disclosed on 18 October 2022, Swiss Re is unlikely to reach its Group ROE target of 10% in 2022. Nevertheless, Swiss Re remains confident in the mid-term outlook and committed to its goal of boosting US GAAP Group ROE to 14%2 in 2024.
Swiss Re's Group Chief Executive Officer Christian Mumenthaler said: "While we are disappointed that the Group ROE target is unlikely to be reached this year, we remain confident in our mid-term outlook. In this volatile environment, risk aversion and the need for protection will continue to increase. Our strategy and very strong capitalisation put us in a favourable position for the upcoming renewals amid rising prices and constrained market capacity. We remain committed to drive profitability and create value for our shareholders, clients and employees, as reflected in our 2024 financial targets."
