S&P Global Ratings today changed its outlook to stable from negative on Swiss Re and its main subsidiaries, as well as affirming the ratings of these entities.
According to the rating agency, the change in outlook to stable reflects improvements in Swiss Re’s underwriting performance since 2021 and its expectation that the company will continue to post strong and improving underwriting results in 2023-2024.
This rating step also recognizes the strong underwriting results in the corporate solutions segment (combined ratio of 91% in the first half of 2023) and property and casualty reinsurance (94.7%), and the improvement in life and health reinsurance results, often reflecting a reduction in COVID – 19 death losses.
Adding investment income, analysts forecast net income of more than $2.8 billion and $3 billion for 2023 and 2024, respectively. These figures are likely to translate into a return on equity (ROE) of around 20% for 2023 and 2024, which will be raised in the coming years by the recent decrease in shareholders’ equity.
In addition, combined with the strong performance of this segment of corporate solutions, the rating agency expects that the group should record consolidated ratios below 95% in 2023-2024.
All this is due to the continued improvement in Swiss Re’s non-life underwriting performance, in line with S&P’s expectations, driven by management’s corrective actions in recent years and a significantly improved pricing environment.
In the first half of 2023, the reinsurer reported a net profit of $1.4 billion and a total combined ratio (losses and expenses) for the combined non-life segments of 94%.
As S&P expects the group to maintain its risk-based capital management at the ‘AA’ level in the period until 2025, it changed the outlook to stable from negative and affirmed the ratings ‘AA-‘ of Swiss Re’s principal subsidiaries.
“We may take a negative rating action on Swiss Re over the next 24 months if the group is unable to maintain profitability levels in line with its closest peers or if we believe its capital levels will fall consistently below the ‘AA’ level,” S&P concluded.
Adding: “We believe that a positive rating action is unlikely in the next 24 months. Any rating improvement will depend on capital growth above our ‘AAA’ level in the same group time ahead of their fellow groups.