Ladies and gentlemen, welcome to the Swiss Re's nine months 2023 results conference call. I am Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Monika Sasse, Media Relations. Please go ahead, madam.
Thank you. Good morning, everyone, and welcome to our media conference call on the nine-month results for 2023. I'm Monika Sasse from the Media Relations and Corporate Reporting team, and I'm joined today by our Group CFO, John Dacey, who will give you a brief overview of our results and then answer your questions. John, please, over to you.
Thank you, Monika, and good morning to everyone on the call. In the first nine months of 2023, Swiss Re achieved a strong result. Net income for the period stood at $2.5 billion, compared to a loss of $285 million in the first nine months of 2022. This is a significant improvement to which all our businesses contributed. For the third quarter, the group reported a profit of $1 billion. Thanks to our underwriting quality and discipline renewals, we were able to further strengthen our resilience in a challenging environment. The improved performance was supported by a further rise in interest rates, which has a positive impact on the recurring income yield and thus on our overall investment results.
We maintain the guidance for full year targets, including a group net income of more than $3 billion for all of 2023. Let me highlight some key developments in this nine-month period before discussing the business in more detail. The strong improvement in Property & Casualty Re's combined ratio to 94.3 for the first nine months of 2023 reflects the improved underwriting performance supported by successful renewals. Corporate Solutions sustains its strong underwriting profitability and benefited from low exposure to natural catastrophe events in the first nine months of the year. The fixed income reinvestment yield reached 4.9% in the third quarter as interest rates continued to rise. Recurring income from investments increased by approximately $600 million in the first nine months of the year compared to the prior year period.
And lastly, our capital position remained very strong, with a Group SST ratio of 314% as of July 1, 2023. Let's now turn to the results for the individual businesses. Property and Casualty Reinsurance reported significant improvement of net income to $1.5 billion for the first nine months of 2023, driven by this underwriting performance and the rising investment income. This compares with a net loss of $283 million in the prior year period. Large natural catastrophe claims in the first nine months amounted to $1.1 billion and were slightly lower than expected, despite significant industry losses estimated to be in excess of $80 billion for the first nine months.
In the third quarter, P&C Re achieved a combined ratio of 93.7%, with $421 million of large natural catastrophe losses, including the wildfires in Maui, the earthquake in Morocco, storms and related flooding in Italy and Slovenia, as well as Typhoon Saola. Net premiums earned increased to $17.4 billion, an increase of 5.4% at constant foreign exchange rates. P&C Re's combined ratio was 94.3% for the first nine months and is on track to achieve a combined ratio of less than 95% for the full year. Turning to Life & Health Reinsurance , the business segment reported a net income of $634 million for the first nine months of 2023.
This is a significant increase from $221 million for the prior year period and was mainly driven by the strong decline in mortality claims related to COVID-19 losses year over year. The third quarter of 2023 was impacted by elevated large individual claims, which were all set by a strong investment result. This led to a profit of $241 million for the quarter. Net premiums earned and fee income increased to $11.7 billion. At constant foreign exchange rates, the increase of net premiums earned in fee income amounts to 6.1% year on year. L&H continues to target net income of $900 million for the full year.
Now, looking at Corporate Solutions, the business unit continued its strong underlying business performance and achieved a net income of $492 million in the first nine months of 2023. The increase in profit from $356 million, the prior year period, was supported by contained large natural catastrophe losses and a higher investment income. Net premiums earned decreased slightly to $4.0 billion, reflecting the partial sale of elipsLife business in mid-2022. At constant foreign exchange and excluding the impact of the elipsLife sale, the increase of net premiums earned amounts to 7.4%. Corporate Solutions' Combined Ratio was 91.3 for the first nine months of 2023. With that, the business is clearly on track to achieve a Combined Ratio of less than 94% for all of 2023.
Finally, let me touch on the iptiQ results. In the first nine months of 2023, iptiQ delivered focused growth compared with prior year period, the business increased its gross premiums written by almost 19% to $771 million. To sum up, the overall strong result for the period reflects the group's good positioning in a heightened risk environment that continues to be characterized by significant loss events for the industry. After the first nine months of the year, we've achieved 80% of our full year target net income, which is in line with our guidance. And with that, I'd like to hand it back to Monika.
Thank you, John. We will now open the line for questions. Operator, could we please take the first one?
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only hands while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from the line of Ben Dyson, S&P Global Market Intelligence. Please go ahead.
Hi, good morning. Thanks. Yeah, I just wanted to ask a bit about the reserve strengthening in P&C Re casualty. I just wanted to check, first of all, when that was. Was that all booked in the third quarter? And also, is that a gross number for the casualty reserving, or is that a net reserve development number, which results from a much bigger casualty reserving number you've done in the quarter? And yeah, I suppose just to add as well, do you feel like you've addressed all that needs to be done there in casualty, or do you think there might be more to come in subsequent quarters and periods? Thank you.
Thanks for the question. You're referring, I think, to the note that we put out the prior year developments for the quarter in P&C Re was $150 million. If I can step back, one of the things we've done for this year is to change our combined ratio target for P&C Re from a normalized target to a reported target, which means it includes not only the current year events, but any reserve strengthening that we might be doing as well. And that target is to land at a better than 95 combined ratio. As we went through the third quarter, one of the things we've done and we continue to do is just evaluate the overall reserve positions.
There are places where we have redundancies and the places where we saw the opportunity to do some further strengthening. In the third quarter, with respect to U.S. Casualty, that strengthening was largely actually the vast majority of it was based on more pessimistic assumptions of ultimate loss cost. So these go into what we refer to as IBNRs, Incurred But Not Reported, positions. It reflects, as I said, a view that ultimate cost in this portfolio may be worse than what we might have expected some time ago. Some of those assumptions were driven by experiences that we saw and discussions with clients in the first half of the year, where we also did some strengthening.
At six months, most of that was, or almost all of it was covered by the release of redundancies in other parts of the portfolio. In the third quarter, we just saw the opportunity to put up these IBNRs on assumption basis, to just be more comfortable with the overall level reserves. On forward-looking, I'm not prepared to say that we couldn't do more, but I you know take very seriously the targets we've got out in the market that says we will deliver a better than 95% Combined Ratio for P&C Re, and we'll continue to evaluate where the reserve levels are as we go through quarter by quarter.
Okay. So sorry, John, would you be able to say what the gross number is for the reserve strengthening, presuming that that's $151 million is a net number when you've taken releases from elsewhere into account?
Yeah, we're actually, that's a level of detail that we're not disclosing. What I can point you to is the, in the slide deck that we've delivered along with the press release on page 19, there's by line combined ratios for the quarter and year to date. And what you'll see is a pretty big spike in the casualty combined ratio. So you could probably back out what the number might look like there.
Okay, thanks.
The next question comes from the line of Nathalie Olof-Ors, AFP. Please go ahead.
Hi. I will have two questions. One is on this, on the Storm Ciarán, that went across UK, France, and a bit of Belgium yesterday. I'm sure it's too early to have any form of estimates, but could you let us know what you're seeing so far? How does that compare to other storms that you've experienced in the past? And I would like to see as well, if you could give us a bit more detail on the losses during the summer. How it materialize, where did the claim come from? Was it wildfires or in practice, what drove the losses due to the weather events during the summer in Europe?
Yeah. So, it's. I've got no information yet on this week's winter storms. You know, it's clear that there's some damage. I simply couldn't say to what degree that the level of insured damage would reach the retentions for reinsurance. But, I'm sure over the coming weeks, we'll be working with our clients to understand what losses might be borne by them and ultimately by the reinsurance industry behind them.
With respect to the summer storms, you know, there were a series of large storm systems which provoked flooding across northern Italy, storms that another set that ran up the Adriatic and impacted Slovenia seriously, and some more positions across Western Europe more broadly. I think all of these combined for Swiss Re contributed to the $420 million of nat cat losses. The other significant event outside of Europe was the wildfires in the island of Maui in Hawaii, and which destroyed a town on the water's edge there.
I think, again, we've been talking for years about the risks of secondary perils related to global warming, the increased frequency, and in some cases, severity of extreme weather events, like large storm systems and associated flooding, wildfires, and other land-based windstorms. And we continue to view this as a set of perils which will do more damage in future years, and needs to be appropriately considered in terms of both the pricing of primary insurance policies and ultimately the reinsurance that stands behind them.
Mm-hmm.
Thank you.
Thank you.
The next question comes from the line of Rico Kutscher with Moneycab. Please go ahead.
Yeah, good morning, everybody, and it's probably more fun to present profits like this for the CFO than the losses all the time. I have three small questions. So, how long do you think the primary insurance will still buy the story that the reinsurance need to increase the premiums? And, when do you think more venture capital will comes into the reinsurance market to see these billions of profits? That's the first question. The second question I have, so Goldman Sachs reported recently that the bond renewal goes very slow because the companies and the government secured the low interest rates. Do you see this on your bond portfolio as well? And the third small question is, is inflation still a topic?
All right, let's see if I can get those in the order. We're not selling the story to the primary companies, we're simply presenting the facts of what loss costs are, and as a result, the need for more premium to cover the losses. And you're exactly right with your... before you started your questions, that it's more comfortable reporting a profit than a loss. And one of the reasons for that profit is frankly, because we think we're now getting close to adequate pricing in many parts of the market. And we expect to continue to need some rate adjustments in portfolios to be sure that those future loss costs are covered.
I referenced in the very first question, the challenge we've got, especially in the casualty lines of businesses, U.S., first and foremost, but not only, and we would expect major price increases to continue there, for example. That also ties to the third question: Inflation still is a factor in our judgment of what the insurance industry will ultimately pay, whether it's for a motor damage or a replacement of homes that are flooded or a cost of business interruption because of supply chain challenges that still might be out there in one form or another. And so, you know, part of this increase in rates is reflecting the impact of inflation as it goes through the various value chains.
We think it's subsiding in some of the real inflationary peaks on motor insurance, for example, that arrived 18 months ago with the start of the war in the Ukraine, are less severe today, but they're not back to any level that we saw two years ago. The last question with respect to the situation in fixed incomes, I don't think the market is determined by the willingness of governments to issue new bonds or not. I think the reality is interest rates have moved up in a major way on not just government debt, but all corporate debt.
While I'm not an expert at predicting in future interest rates, what I can say is the current level is a very different position than we were looking at two years ago. As a result, we are able to reinvest the funds that we receive as premiums at higher rates, and this has been a significant contributor to the profits also for the year. So I think this will continue to have a positive benefit to Swiss Re's results as we go into 2024.
Mm-hmm. And do you see any venture capital coming into the reinsurance market already, or it's still charity?
Sorry, I didn't address that. At the moment, there's not been a big flow of outside capital into the industry in any meaningful way. We are active participants in what's referred to sometimes as the alternative capital segments, of the market. This has been a space where the amount of capital deployed has plateaued now for about almost three years, partly because people had to endure significant losses over the last five years, and partly because of other opportunities for investments. I think at some point of time, there may be a slight growth, but we haven't seen that pick up in any meaningful way, in the space that we're active in.
Thank you very much, Jim.
Sure.
The next question comes from the line of Thomas Pohl with AWP. Please go ahead.
Yes, good morning. I also would like to ask about some recent events. Can you tell a little bit about the impact maybe of, or the damages of Hurricane Otis for your business? And maybe also about the impact of the Gaza Wars of damages in Israel. And the second question would be maybe the higher SST ratio. Is there -- do you see maybe, is this a record high? It's very high. It looks very high. And does this maybe do you expect calls for raising of dividends or from investors who would like to have a share on it? Thank you.
Sure. Let me address those two sets of questions. The first one, with respect to events which are now fourth quarter events, so they're not included in our nine-month results. We don't yet have good data to report on losses related to Hurricane Otis. I'm sure there will be some, but it's taking a fair amount of time to get the information from the primary companies about what their actual losses are and some challenges actually, just to calculate what the industry loss is. Right now, the indications from some market observers put this in a $1-$9 billion and that intuitively, with what we've seen, feels correct.
But we really don't have better data to provide at this point in time. I'm sure we will, as soon as the primary companies provide some additional information. With respect to the war in the Middle East, we're obviously saddened by the events in the regions and are concerned for the welfare of everyone there, including our employees. We've got a small office in Tel Aviv, which is open and operating, but we're monitoring the situation very closely. It's premature to talk about related losses associated with the events there, at this point of time.
Your second question with respect to the SST ratio, yes, I mean, the group's position is very, very strong. We think that's frankly appropriate. It's been bolstered by this steep rise in interest rates. And so the sort of macroeconomic conditions flatter this a little bit. On the other hand, having a considerable amount of capital at our disposal means that the opportunities for us to continue to grow our businesses is very real, and that's what we're looking to do as soon as we get the prices that we think are appropriate, as we go into the January one renewal season. With respect to the capital management, you know, we've not changed anything in it.
We want to remain a very, very strongly capitalized participant in the insurance space. I think we've demonstrated that that's where we are. The second pillar of our capital framework is to increase or at least maintain the dividend. The last couple of years we've been maintaining that, in part because the earnings of the group have been limited, largely because of the pandemic-related losses. This year, as we return to a stronger profitability, I think people should assume that the focus will be on seeing at what point and what amount of potential increase would be possible. But again, that will be the decision of the board when we have the full year results in front of us.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Star followed by one. There are no more questions. Sorry, we have a follow-up question from Mr. Pohl, AWP. Please go ahead.
Just a short question. The goal of $3 billion for the full year, it seems now very much in reach. Didn't you consider to raise the bar a little bit?
Again, our goal is to be at or above $3 billion. As you say, it's within reach with us being at $2.5 on three quarters. But I think that's given the challenges we've had in recent years and the reality of we have two months left of potential events coming at us. There's no seasonality in earthquakes in the world. There's lots of geopolitical tensions which might or might not create some issues for us. And so I'd much rather keep the targets we have and deliver against them. So that's where we are.
Okay, thank you.
There are no more questions at this time. Back to you for any closing remarks.
Thank you all for participating in today's media conference call. A quick reminder that we will also be holding a Q&A session for analysts and investors at 2:00 P.M. Zurich time today, and journalists can follow this session in listen-only mode. Please reach out to media relations if you do have any further questions today, and thank you again, and have a good day.
Thanks, everyone.
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