Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Swiss Re AG (SSREF, Financial) reported a strong net income of $2.1 billion for the first half of 2024, putting the company on track to achieve its full-year target of more than $3.6 billion.
- The P&C Re's first-half combined ratio of 84.5% reflects disciplined underwriting and a low large natural catastrophe experience.
- Life & Health Re reported a net income of $883 million in the first half of the year, driven by in-force margins and recurring investment income.
- Corporate Solutions continues to deliver strong performance with a half-year combined ratio of 88.7%, reflecting a strong underlying business performance.
- The return on investments was strong throughout the first six months of the year, with an ROI of 4.0%, benefiting from higher interest rates.
Negative Points
- Swiss Re AG (SSREF) remains cautious about the potential impact of natural catastrophes, especially as the company enters the active hurricane season.
- The company has taken additional reserve actions, including a $300 million IBNR reserve for potential heightened loss activity, indicating a cautious approach to potential future claims.
- The exit decision on iptiQ resulted in a write-down to zero of all related intangibles, contributing to a loss of $180 million in group items for the first half of the year.
- US liability reserves were increased by around $650 million in the first half, reflecting ongoing challenges in this line of business.
- The company acknowledges that there are still some 'hot spots' or focus areas that need attention, indicating that not all issues have been fully resolved.
Q & A Highlights
Q: Andreas, when you took over at CorSo, you took dramatic actions. Given your experience, do you think Swiss Re needs similar measures?
A: The situation at CorSo in 2019 was different; it was a burning platform requiring drastic actions. Swiss Re Group is not in such a situation. We have a few focus areas, and we've already taken immediate actions like exiting iptiQ. We're still assessing the overall business and will provide updates in due course.
Q: On the US liability additions, was this related to newer years or older ones?
A: We increased IBNRs in US casualty. The majority of the $650 million went to the problematic years of '14 to '19, with some additions to earlier and later years. This helps build our position in the range of reasonable reserving.
Q: Will you continue to defer nat cat benefits to later in the year if it's been benign?
A: We were surprised by the low nat cat losses in the first half. We set aside a large IBNR for potential late-reported claims. This approach may not be repeated next year, but we'll remain cautious.
Q: On Life & Health Re, why did other expenses jump significantly in Q2?
A: The increase is partly due to comparability issues with 2023. The CSM release was higher in Q2, but we expect it to normalize in the second half. The overall CSM remains robust, and we expect modest growth year-on-year.
Q: How do you plan to use the excess capital given the strong SST ratio?
A: We are cautious due to the volatile macroeconomic environment and the upcoming hurricane season. We aim to grow the dividend and will consider additional actions based on year-end results.
Q: On Life & Health Re, why are there negative experience variances in EMEA?
A: We reinforced assumptions for US mortality significantly. The negative variances in EMEA are specific to certain geographies and are being addressed. We are not overly concerned but are making necessary adjustments.
Q: What is the true underlying run rate for CorSo's combined ratio?
A: CorSo had some nat cat losses but remains cautious. The underwriting teams are managing the portfolio well. We expect to maintain strong performance but will reassess after Q3.
Q: How much of the $650 million in reserve additions were IBNR versus case?
A: The additions have reinforced IBNRs more than specific cases. We are comfortable with the prudential reserving approach.
Q: When should we expect to hear about the outcome of your assessment, Andreas?
A: We are conducting a thorough assessment and will discuss hypotheses with managing directors next week. The main focus is to deliver on targets and increase resilience. I will provide updates in due course.
Q: Why didn't CorSo have issues with US tornadoes and severe storms?
A: CorSo had some losses but managed to avoid significant impact due to smart underwriting and portfolio steering. We remain cautious but expect solid performance in the second half.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
