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Investing.com -- Swiss Re ’s (SIX:SRENH) fourth-quarter results for 2024 delivered a reassuring performance, with net income coming in 12% ahead of consensus, sending its share up by over 1% on Thursday.
This was driven by stronger-than-expected results in Property & Casualty (P&C) businesses, which benefited from a lower combined ratio and benign natural catastrophe experience in the quarter.
However, Life & Health (L&H) results were softer due to a $1.1 billion Contractual Service Margin (CSM) hit from assumption changes. Despite these challenges, Swiss Re’s full-year net income of $4.4 billion remained ahead of expectations.
A key highlight was Swiss Re’s estimate of its exposure to the recent California wildfires, which stands at under $700 million based on a broader market loss of $40 billion.
This figure is lower than Munich Re’s reported $1.2 billion exposure and aligns closely with Hannover Re’s range of €500 million to €700 million.
Analysts at Jefferies and Barclays (LON:BARC) suggest that Swiss Re’s approach remains conservative despite the lower estimate.
Morgan Stanley (NYSE:MS) analysts noted that Swiss Re’s wildfire exposure represents under 35% of its FY25 natural catastrophe budget, a better position than Munich Re’s 40%.
Swiss Re’s insurance revenue exceeded consensus expectations by 1.9% in the fourth quarter and 0.5% for the full year.
The investment result also edged 1.9% ahead of forecasts, boosting the annual figure by 0.4%. Return on investment stood at 4%, slightly ahead of consensus by 0.1 percentage points both for the quarter and the full year.
The dividend per share came in at $7.35, slightly above the $7.29 consensus, implying a yield of just over 5%.
Within the Property & Casualty Reinsurance segment, insurance revenue fell 8% short of market expectations in the fourth quarter.
However, the combined ratio of 80.9% was notably stronger than expected, improving by three percentage points. The impact of discounting came in at around 9.5 percentage points, 1.1 points above expectations.
The amount of natural catastrophe losses was lower than expected, at just $185 million compared with $450 million expected.
Barclays’ estimate of 80% was significantly less than normalized combined ratio, providing ample headroom to achieve FY25’s target of 85%.
P&C Re’s insurance revenue saw a 7% growth despite a -1.5% risk-adjusted price change. January renewals were reasonably positive, with volume growth focused on non-cat property lines.
In the Corporate Solutions division, insurance revenue outperformed by 15.7% in the fourth quarter and 4% for the full year.
The combined ratio of 90.3% was better than expected by 1.1 percentage points. Swiss Re’s insurance service result in this segment was 78% above Barclays’ forecast, though this was partially offset by a weaker investment result.
The Life & Health Reinsurance segment saw a slight dip in insurance revenue, coming in 0.5% below expectations in the fourth quarter.
Net income trailed estimates by 10.6% in the fourth quarter, impacted by a $1.1 billion CSM charge. The CSM stock ended 10% below expectations at $17.4 billion.
Morgan Stanley analysts found the L&H net income of $328 million underwhelming relative to the consensus estimate of $367 million and suggested this could be a key area of focus in Swiss Re’s upcoming conference call.
Swiss Re’s Swiss Solvency Test (SST) ratio declined significantly to 257% from 284% in the first half of 2024, landing just above the company’s 200-250% target range.
This drop reflects reserving actions in both P&C Re and L&H Re, which were not previously quantified in December but had a more pronounced impact on the SST than on the IFRS bottom line.