Swiss Re AG's property and casualty reinsurance unit added $650 million to US casualty reserves and a further $500 million to provisions for property and specialty business in the first half of 2024.
The US casualty reserve strengthening was split roughly evenly between the first and second quarters, CFO John Dacey told journalists on an earnings call. While some of the additional buffer was in response to client notifications about new claims or existing claims becoming larger than originally expected, the reserve level for incurred but not reported claims increased in the first half.
"We're continuing to build resiliency and looking to be sure that we have what we need for covering ultimate cost in what is a challenging part of the US insurance market," Dacey said. He added that the reinsurer was comfortable with its US casualty reserving position at the half-year stage, but would continue to evaluate the reserve needs for the business each quarter.
"It's pretty obvious with these kinds of significant additions that we're in better shape, the company is more resilient, and ... our ability to absorb bad news continues to increase," Dacey said.
US casualty has been a troublesome business line for insurers and reinsurers in recent years because claims inflation means that reserves established several years ago may no longer be adequate. Swiss Re's property and casualty reinsurance division added $2 billion to overall casualty reserves in 2023.
The $500 million reserve hike for property and specialty business included the addition of a "significant" buffer for incurred but not reported claims in the second quarter, Dacey said, "which will allow us to absorb any late reported losses for some of the storms that you saw in the first half of the year." The company had strengthened property and specialty reserves in the first quarter for specific events such as floods in Italy in 2023, for which the company had continued to receive claims.
Despite the reserve strengthening, Swiss Re's property and casualty reinsurance unit reported a combined ratio of 84.5% in the first half of 2024 and 84.4% in the isolated second quarter, both in line with the full-year target of below 87%.
The second-quarter combined ratio was better than analysts' expectations of 85.4%, according to consensus from Visible Alpha. The performance was in part due to a low level of catastrophe claims, which Dacey said totaled less than $100 million. The life and health reinsurance division and Swiss Re Corporate Solutions, the company's large commercial insurance unit, both reported higher insurance service results than analysts were expecting in the second quarter.
At group level, Swiss Re reported a profit of $996 million for the second quarter and $2.09 billion for the half, both ahead of analysts' expectations. The company continues to target a profit of more than $3.6 billion for 2024.
Swiss Re's new CEO, Andreas Berger, who took the reins July 1 from Christian Mumenthaler, said part of his plan for the group was to further boost its resilience. "We're striving for resilience in the context of, obviously, capital strength but also in the strength to deliver on our targets consistently," Berger told journalists on the call. "Successfully enhancing the resilience of the Swiss Re group will benefit our earnings over time and the sustainable strength of our reserves and, as a result ... we believe that this will lower our cost of equity."