Swiss Re Navigates Climate Disruptions and Economic Uncertainty
Swiss Re has showcased remarkable resilience amidst increasing climate-related disruptions and ongoing economic unpredictability. In their recent Letter to Shareholders, Jacques de Vaucleroy, Chairman of the Board of Directors, and Andreas Berger, Group Chief Executive Officer, announced a significant dividend increase for 2024, while managing over $37 billion in claims across the Group.
In 2024, the reinsurer reported a robust full-year net income of $3.2 billion, achieving a 15% return on equity (ROE). This strong performance came as Swiss Re took decisive steps to bolster its Property & Casualty reserves to the higher end of its best-estimate range.
Dividend Increase Amid Rising Challenges
Supported by its earnings power and strong capitalisation, the Group’s Board of Directors proposed an 8% dividend increase. However, the reinsurer faced a year in which natural catastrophe losses exceeded $100 billion for the fifth consecutive year, a threshold now considered the ‘new normal’ by Swiss Re.
In a world increasingly defined by severe wildfires, powerful storms, and geopolitical instability, Swiss Re acted as a critical ‘shock absorber,’ paying out an astounding $37 billion in claims in 2024 alone. The dividend increase to $7.35 per share reflects confidence in the company’s ability to navigate these challenges, although it raises questions about the sustainability of such payouts given the frequency of catastrophic events.
Strategic Reserve Strengthening
Swiss Re’s decision to strengthen its Property & Casualty reserves by $2.6 billion highlights the seriousness of these challenges and underscores its commitment to long-term resilience, despite potential short-term profitability impacts. The company’s strong capital position, reflected in a Swiss Solvency Test (SST) ratio of 257%, provides a buffer against future shocks.
Despite these measures, the company’s warnings about a ‘turbulent start to 2025,’ including the impacts of the Los Angeles wildfires and European winter storms, suggest ongoing challenges.
Investment and Sustainability Initiatives
Swiss Re’s full-year return on investments (ROI) increased to 4.0% in 2024 from 3.2% in 2023, driven by strong recurring income. The fourth quarter reinvestment yield reached an impressive 4.6%, showing continued improvement in the investment portfolio. In its asset management activities, Swiss Re achieved a 50% reduction in the carbon intensity of its investment portfolio, underscoring its commitment to sustainability.
Business Unit Performances
The robust underwriting performance of Property & Casualty Reinsurance (P&C Re) was impacted by net prior-year reserve additions of $2.6 billion for 2024. Nevertheless, the Business Unit reported a net income of $1.2 billion, compared with $1.5 billion in 2023. P&C Re achieved an insurance service result of $1.8 billion versus $2.8 billion in 2023, with a combined ratio of 89.9%, falling short of the target of less than 87% for 2024 after decisive third-quarter reserve strengthening.
Corporate Solutions and Life & Health Reinsurance (L&H Re) also delivered strong performances. Corporate Solutions saw a 26% increase in net income, and L&H Re achieved its net income target of $1.5 billion.
Strategic Business Focus and Future Targets
Swiss Re announced its withdrawal from the iptiQ digital insurance platform, aligning with its focus on core businesses. The company’s commitment to sustainability remains a priority, highlighted by the publication of its Climate Transition Plan in the Sustainability Report 2024.
Berger and de Vaucleroy stated: “Our businesses are well-positioned as we enter 2025, and we remain committed to achieving our 2025 financial targets. Swiss Re aims for a net income of more than $4.4 billion, with L&H Re targeting $1.6 billion. P&C Re aims for a combined ratio below 85%, and Corporate Solutions targets a combined ratio below 91%. The Group maintains its multi-year ROE target of over 14%, aiming for annual dividend per share growth of 7% or more from 2025 to 2027.”
P&C reinsurance pricing is expected to remain attractive, with rising demand for protection in a high-risk environment. On January 1, 2025, P&C Re renewed treaty contracts with $13.3 billion in premium volume, marking a 7% increase compared to the business up for renewal, aligning with the Group’s 2025 financial targets.
“For 2025, Swiss Re remains focused on improving profitability through underwriting excellence and cost discipline. We are determined to enhance key processes, boost efficiency, and meet our clients’ needs as we extend Swiss Re’s leadership in the reinsurance industry,” Berger and de Vaucleroy concluded.
