• Net Income: $2.2 billion for the first nine months of 2024; $102 million profit in Q3.
• P&C Re Combined Ratio: 92.8% for the first nine months, including $2.8 billion reserve strengthening.
• Large Net Cat Losses: $800 million for the first nine months; $750 million in Q3.
• Life & Health Re Net Income: $1.2 billion for the first nine months.
• Corporate Solutions Combined Ratio: 89.4% for the first nine months.
• Return on Investments: 3.9% for the first nine months.
• Recurring Income Yield: 4% for the first nine months; 4.6% reinvestment yield in Q3.
• Group SST Ratio: 284%, above the targeted long-term range.
• 2024 Net Income Outlook: Expected to exceed $3 billion, assuming normal loss activity.

• Warning! GuruFocus has detected 4 Warning Signs with HROW.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Swiss Re AG (SSREF) reported a group net income of $2.2 billion for the first nine months of 2024, with a third-quarter profit of $102 million, despite significant reserving actions.
• The company has strengthened its P&C Re's US liability reserves by $3.1 billion for the first nine months, positioning itself at the 90th percentile of the best estimate range, enhancing overall resilience.
• Swiss Re AG (SSREF) expects its group net income to exceed $3 billion for the full year 2024, assuming normal natural catastrophe experience.
• Corporate Solutions continues its strong performance with a nine-month combined ratio of 89.4%, reflecting favorable premium volume developments and benign man-made experience.
• The company's capital position remains robust with a group SST ratio of 284%, above the top end of its targeted long-term range, indicating strong financial stability.

Negative Points

• Swiss Re AG (SSREF) had to significantly strengthen its US liability reserves, adding $2.4 billion in Q3, reflecting adverse future scenarios and industry-wide loss developments.
• The company faced a number of significant natural catastrophe events in the third quarter, resulting in large Net Cat losses of approximately $750 million.
• Life & Health Re reported some headwinds from out-of-period adjustments, impacting the insurance service result by about $80 million in the third quarter.
• The company has been cautious on new business, evidenced by a 21% pruning of its book at this year's renewals, due to ongoing loss developments in the US liability sector.
• Swiss Re AG (SSREF) had to adjust its financial targets, acknowledging that the $3.6 billion income target for the full year is no longer valid due to the reserving actions.

Q & A Highlights

Q: How should we interpret the nine-month results when considering guidance for 2025? A: John Dacey, Group CFO, explained that while the nine-month results are strong, especially in P&C, the full-year guidance for 2025 will be provided in December. The current market is attractive for P&C business, and they expect robust demand for reinsurance. The company is cautious about US liability reserves but confident in their current position.

Q: What motivated the change in the SST methodology? A: John Dacey stated that the change was driven by the need to reduce volatility related to interest rate changes, aligning more closely with Solvency II standards. This adjustment was made in consultation with FINMA, the regulator, to ensure a more stable capital position.

Q: Can you elaborate on the reserve addition in US liability and its impact on SST? A: The reserve addition of $2.4 billion was primarily IBNR, moving to a more prudent position at the 90th percentile. This action is not expected to have a material negative impact on the SST ratio, as the company continues to generate profits in other areas.

Q: How does Swiss Re view the potential for social inflation outside the US? A: John Dacey noted that while there might be some incremental movements in Anglo-Saxon countries, the nuclear verdict experience seen in the US is unlikely to replicate elsewhere. The company is monitoring these trends and adjusting pricing accordingly.

Q: What are the expectations for the P&C Re combined ratio and future reserve releases? A: The underlying combined ratio for P&C Re is approximately 80%. Swiss Re expects to maintain conservative reserves for new business, with no immediate plans for reserve releases. The focus is on ensuring adequate pricing and reserving for future loss developments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.