The reinsurer closes 2022 with a small profit.
(Photo: Reuters)
Zurich The reinsurer Swiss Re ended the past financial year in the black after all: the group generated a net profit of around 470 million dollars for the full year 2022. That is 67 percent less than in the previous year – but in the first nine months of the year the second-largest reinsurer in terms of market capitalization had still recorded a minus. The loss balance of natural catastrophes such as Hurricane “Ian” and higher mortality in connection with the corona pandemic clouded the Group’s result.
CEO Christian Mumenthaler said: “2022 was a year full of challenges, marked by the war in Ukraine, rising inflation, the aftermath of the Covid 19 pandemic and high natural catastrophe losses.” However, the group managed to maintain its strong capital base.
However, the current round of contract renewals with primary insurers is promising. For the current year, Mumenthaler announced a net profit of three billion dollars.
In his seventh year as CEO of Swiss Re, Mumenthaler wants to close the increasingly wide gap to German reinsurers. For comparison: Hannover Re, which is significantly smaller in terms of market capitalization, presented a net profit of 1.4 billion euros at the beginning of February. The larger Munich Re had posted a profit of 527 million euros in the third quarter of 2022 alone, dwarfing Swiss Re’s annual profit.
For years, Swiss Re’s net profit has lagged behind its German competitors. This is also reflected in the share price performance: Munich Re shares have risen by almost 80 percent over the past five years, while Hannover Re has gained around 70 percent over the same period. Swiss Re under Mumenthaler is slightly in the red over a five-year period.
Group restructuring to increase efficiency
Swiss Re generated value for its shareholders primarily through the above-average dividend yield. Since 2017, the group has always paid out an amount that is many times higher than earnings per share.
The CEO of the reinsurer Swiss Re is under pressure to catch up with the German competition.
(Photo: Swiss Re)
It is also clear to those responsible that this cannot be a permanent state of affairs. At the end of 2022, the Chairman of the Board of Directors, Sergio Ermotti, called for more profit: “We cannot be satisfied with our current profitability,” he told the “Handelzeitung.”
That is about to change: At the beginning of February, CEO Mumenthaler announced a restructuring of the company that is intended to increase efficiency. The core business is to be split into two areas, the reinsurance business for property insurance and for life insurance.
The new determination is also well received by the analysts. The results for the fourth quarter look good, says Vontobel analyst Simon Foessmeier. The targets for 2023 and the current market environment are also positive and should support the share.
More: Swiss-Re boss Mumenthaler – “There is no choice but to increase prices”