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Swiss Re(SSREY) - 2024 Q2 - Earnings Call Transcript
SSREYSwiss Re(SSREY)2024-08-22 17:53

Financial Data and Key Metrics - The company reported a net income of 2.1billionforthefirsthalfof2024,puttingitontracktoachievethefull−yeartargetofover2.1 billion for the first half of 2024, putting it on track to achieve the full-year target of over 3.6 billion [3][9] - The P&C Re combined ratio for the first half was 84.5%, reflecting disciplined underwriting and low large NatCat losses [9] - The Life & Health Re business reported a net income of 883millioninthefirsthalf,drivenbyin−forcemarginsandrecurringinvestmentincome[12]−CorporateSolutionsachievedacombinedratioof88.7883 million in the first half, driven by in-force margins and recurring investment income [12] - Corporate Solutions achieved a combined ratio of 88.7% for the first half, with a full-year target of below 93% [12] - The return on investments (ROI) for the first six months was 4.0%, with a reinvestment yield of 4.8% in Q2 [13] Business Line Performance - P&C Re increased loss assumptions by 11% on top of a 13% increase last year, reflecting a more prudent approach to underwriting [5] - Life & Health Re reinforced in-force mortality assumptions to account for potential medium-term pandemic impacts, increasing the resilience of its CSM (Contractual Service Margin) [7] - Corporate Solutions saw a strong underlying performance, with a benign manmade loss experience in the first half, offset by an allowance for potential claim seasonality later in the year [12] Market Performance - The P&C Re market experienced insured NatCat losses of 60 billion in the first half, with the majority related to smaller events assumed by the primary industry [9] - The company's own losses for large NatCat events came in below 100million,significantlylowerthanthebudgeted100 million, significantly lower than the budgeted 600 million [10] - Premium volume growth in the July renewals was 7%, with Property & Specialty premiums growing by 11% [11] Strategic Direction and Industry Competition - The company is focused on enhancing the overall resilience of the Swiss Re Group, with a particular emphasis on disciplined underwriting and prudent initial loss assumptions [4][6] - The exit from iptiQ is proceeding as planned, with a write-down of all related intangibles to zero in the first half results [7] - The company is committed to growing the regular dividend based on underlying earnings and will return excess capital to shareholders if deployment opportunities are limited [8] Management Commentary on Operating Environment and Future Outlook - The company remains vigilant as it enters the hurricane season, which is the most active part of the year for natural catastrophes [3] - Management emphasized the importance of maintaining a strong capital position, with the SST ratio remaining above 300% at midyear [13] - The company is optimistic about achieving its full-year financial targets, despite the uncertainties in the operating environment [9][13] Other Important Information - The company introduced a reserving uncertainty allowance across all P&C businesses to enhance reserving strength [6] - The U.S. liability reserves were increased by around 650millioninthefirsthalf,withthemajorityallocatedtotheproblematicyearsof2014to2019[11][17]−Thecompanyexpectstoaddanother650 million in the first half, with the majority allocated to the problematic years of 2014 to 2019 [11][17] - The company expects to add another 0.5 billion to reserves during the course of the year due to the uncertainty load on new business [24] Q&A Session Summary Question: Priorities and U.S. Liability Reserves - The CEO clarified that the current situation is different from 2019, with no need for drastic actions, but the company is addressing specific focus areas [15][16] - The CFO explained that the U.S. liability reserve additions were primarily for the years 2014 to 2019, with some allocations to earlier and later years [17] Question: NatCat Reserving and Liability Reserves - The CFO discussed the low NatCat losses in the first half and the decision to set aside 300 million in IBNR reserves for potential late-reported claims [21][22] - The CEO elaborated on the reserving philosophy introduced in CorSo, which has been extended to the P&C Re business to reduce volatility [23] Question: Life & Health Re Expenses and CSM Release - The CFO addressed the increase in other expenses in Q2, attributing it to comparability challenges with 2023, and expects a more normalized number in the second half [28] - The CSM release in Life & Health Re was higher in Q2, but the company expects it to normalize over time [28] Question: Life & Health Assumption Updates and CorSo Performance - The CFO explained that the negative experience variance in EMEA was due to specific geographies and not a worrying trend [31] - The CEO noted that CorSo had some NatCat losses but remains cautious as the hurricane season progresses [32] Question: NatCat Losses and U.S. Casualty Reserves - The CFO highlighted the disciplined underwriting in P&C Re, which has reduced exposure to high-frequency events and focused on tail risk [39] - The U.S. casualty reserve additions were driven by notifications from the primary industry about increased losses, particularly in umbrella casualty and commercial motor lines [39] Question: Reserve Additions and Combined Ratios - The CFO clarified that the majority of the 650 million reserve additions were IBNR, reinforcing the overall reserving position [40] - The company will provide sub-line combined ratios for the full year, with casualty lines seeing significant price increases [40] Question: Corporate Solutions and NatCat Exposure - The CFO noted that Corporate Solutions had minimal losses from U.S. tornadoes, with most losses coming from other regions [43] - The company expects a solid performance from Corporate Solutions in the second half, with a combined ratio likely below 93% [45]