Ladies and gentlemen, welcome to the First quarter 2023 media conference call. I'm Alice, the corporate operator. I would like to remind you that all participants will be listen only mode. Any 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, Senior Media Relations Manager. Please go ahead, madam.
Good morning and welcome to our first quarter 2023 results media conference call. I'm Monika Sasse from Media Relations and Corporate Reporting. I'm here with our Group CFO, John Dacey, who will give you a brief overview of our results and then answer your questions. John, over to you.
Thank you, Monika, good morning to everyone. In the first quarter of 2023, Swiss Re achieved a net income of $643 million. Profitability improved in all our main businesses, supported by adequate pricing, higher investment results and cost discipline. This helped us absorb large natural catastrophe losses and seasonally higher mortality in the quarter. The return on investments increased to 2.8% in what can be described as a turbulent quarter, demonstrating the quality of our asset portfolio. The recurring income yield rose to 3.1% and is set to continue benefiting from higher interest rates. Now let's turn to the individual businesses. Let's start with P&C Re, which re-reported a net income of $369 million for the first quarter, compared with a net income of $85 million in the same period in 2022.
The business unit absorbed large natural catastrophe losses, including the earthquake in Turkey and Syria, for which we booked $426 million in net claims, as well as Cyclone Gabrielle and the flooding in New Zealand in the first quarter. The increase in net income was driven by robust price improvements and higher investment results. The combined ratio was 97.2% for the first quarter. Considering that the business earns the majority of its natural catastrophe premiums in the second half of the year, P&C Re confirms its full year target for a combined ratio below 95%. P&C Re also achieved good results at the April 2023 renewals. The business renewed contracts with $2.6 billion in treaty premium volume, which represents 5% volume increase compared to the business that was up for renewal.
Overall, P&C Re achieved a price increase of 19% in this renewal round, more than offsetting the higher loss assumptions of 13%. Turning to Life & Health Re, the business unit reported net income of $174 million in the first quarter, compared with a net loss of $230 million in the prior year period. The result benefited from a strong decline in COVID-19 claims as well as higher investment income. Considering the seasonality elevated mortality during the winter months, Life & Health Re continues to target net income of approximately $900 million for all of 2023. The Corporate Solutions business unit reported a net income of $168 million in the first quarter, compared with $81 million in the prior year period.
The result is driven by sustainable underlying business performance due to continued disciplined underwriting, careful risk selection and adequate pricing. The combined ratio was 90.3 for the first quarter of 2023, well on track towards our target of achieving a combined ratio below 94% for the full year. Finally, let me touch on the iptiQ results. In the first quarter of 2023, iptiQ reached gross premiums written of $218 million. The slight decrease of 5.2% from the $230 million in the prior year period was mainly due to the business shifting its focus to achieving profitability. At stable foreign exchange rates, the decrease was a minimal 1.6%. To sum up, while the first quarter was not without its challenges, we're pleased with the results delivered by our businesses.
We are confident in the outlook underpinned by successful renewals year to date, and we continue to focus on achieving our ambitious profit target of more than $3 billion for the group in 2023. With that, I'd like to hand it back to Monika.
Thank you, John. We now open the line for questions. Operator, could you please take the first question?
Anyone who has a question may press star and one at this time. Our first question comes from the line of Ben Dyson with S&P Global Market Intelligence. Please go ahead.
Hello. Hi, good morning. Yeah, I've got a couple of questions. One was just on the catastrophe losses in P&C Re. I was just basically wondering if you could say what the actual number was for the catastrophe losses. I think the presentation says it's 11 points on the combined ratio. If you could give a number then that would be good. Also if you could say something about where that came in versus your expectations and what that means. The second question I had really was just around your sort of approach to upcoming renewals, particularly Florida.
I guess what's your expectation there and what your approach will be realizing whether you plan to write more or less given the sort of the changes we've seen in Florida. Thank you very much.
Thank you, Ben, for the questions. In the first case, vis-a-vis the nat cats in the first quarter, the total losses for P&C Re was just below $600 million, $597, I think, was the total when you add the New Zealand losses together with the Turkey earthquake. Maybe just a little bit of color there. The earthquake in Turkey, we estimate to have a industry loss of about $5.3 billion. That's a way to think about the $426 that Swiss Re has booked for the quarter.
The nature of the loss is still developing in the sense that our estimate, we believe is a good estimate of what the ultimate cost will be for us, but the data has been slow in coming out in terms of the primary companies and some of the specific pools in Turkey, which will manage these losses in the first case. Just for reference, this is by far the most costliest earthquake in Europe ever in terms of the insured loss related to it. It's probably seven times, for example, the insured loss associated with the 2009 earthquake in L'Aquila, Italy, from a point of reference. You get a sense of just how big this has been.
The thousands of structures destroyed in Turkey and unfortunately also in Syria as well, where the losses were typically not insured. Versus expectation, the total of approximately $600 million is more than we would expect in a first quarter. It's a fraction of the total nat cat budget we have for the full year. In the first quarter, we would expect somewhere closer to 20% of the $1.9 billion to be incurred during the first quarter. We'll see how that plays out in the rest of the year. We have no reason to expect the following quarters will be either worse or better than our expectations.
The first quarter was a little bit of a higher than expected loss. On renewals, as you say correctly, in June, there's focus on the Florida market, in July, the rest of the United States. We observe the changes in Florida. It's not entirely clear what the impact will be for insurance companies. On balance it's probably better, as we've said for a number of years, we thought the Florida market was underpriced. We were underweight as a result of that. I don't expect us to be particularly enthusiastic in this space. We'll evaluate the risks and the pricing that we can achieve. What I would say is the 18% year-to-date price increases that we've seen on our reinsurance book, we expect to continue.
For some of the loss impacted portfolios that get renewed in June and July, we would expect the price increases to be substantial. We'll evaluate what is the market as we go into it, but the expectations are clearly that we expect a continued firm pricing in the reinsurance market overall.
Okay. Thank you very much.
The next question comes from the line of Mark Hoffman with AWP. Please go ahead.
Good morning. My question goes to inflation trends and how did inflation trends so far this year play in the Swiss Re's business model? What were main challenges and how you cope with these challenges, of course, also with higher prices. Can you tell something about the inflation and Swiss Re?
Sure, Mark. Happy to. We started moving, both on pricing and reserving vis-a-vis inflation in 2021. In 2022, we did substantial increases, both on price, but also on the reserves required, for ultimate loss costs of claims. We've continued to evaluate, the impact, as we come into 2023. What you see in the discussion on the renewals is a, increase in the loss picks of 13% year to date. The major part of that is inflation related. There are also some model changes on some specific perils around the world which contributed to that increase. I think it's safe to say, at least two-thirds of that is linked to our view on inflationary trends on claims costs.
We'll continue to not just monitor, but proactively move on what's required making sure that we take in sufficient premium to cover all loss cost in the future. I think the actions of the central banks clearly have had an impact in CPI. That's one important part of the claims inflation dimensions, but as we've described in the past, there are a number of other important dimensions which we monitor and price for, including medical costs, including specific what's referred to as social inflation issues in the United States, in particular with respect to liability and casualty. As we go forward, we'll continue to evaluate that even if the CPI numbers seem to be coming down systematically in most markets.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone, s tar followed by one. There are no more questions at this time. Sorry, we have a last-minute registration from the line of Mr. Jonas Tauber, Monitor. Please go ahead.
Yeah. Thank you very much. I just wondered if you could say when you expect iptiQ to be profitable. You're right that you are on the way on profitability. When do you expect this to happen? Thank you.
So we've explained in the past our objective is to reach a break even in 2025. That continues to be our target. As I say, we've, we continue to grow in certain products, certain lines, and when we've pulled back in others where we didn't see the midterm profitability for us. I think this business is a dynamic business. We continue to invest in it. 2025 is the target we put for ourselves, is to reach a break even position with it.
Thank you.
The next question comes from the line of Thomas Hengartner with Finanz und Wirtschaft. Please go ahead.
Yes. Good morning. Question goes to Corporate Solutions, where there is a sort of a flat-ish or stagnant volume. How are your ideas on growing or steering that sort of business? Thank you.
Thanks for the question, Thomas. The published results, actually, as you say, show a modest actual growth. When you go into the details, what you see is in 2022, we still owned what was a business called elipsLife. elipsLife was sold during the course of 2022 to Swiss Life. As a result, the Q1 to Q1 is not exactly a fair comparison. When you look forward to what was done on a basis that is more like for like, you see, in fact, that we were able to grow the business more materially. I think the overall view is, we're on a nice growth path.
We're cautious on certain lines, where we've seen less than adequate pricing in the corporate risk positions and others, which are performing very well. We continue to grow, even at a double digit rate. On balance, the growth continues, but I think we're still being prudent on a few specific lines of business which where the rate adequacy is not where it should be.
Thank you.
Once again, to ask a question, please press star and one on your telephone. We have a follow-up from Mr. Hengartner , Finanz und Wirtschaft. Please go ahead.
Yes. I wonder how you sort of steer your own reinsurance or sort of transfer away from your balance sheet some of the some parts of business that you don't really like. How do you go about that? Thank you.
Thanks, Thomas. We are active in the retrocession market. I suggest that it's not that we try to steer away from businesses we don't like. Our goal is to underwrite businesses which we think are appropriately priced and will perform as expected. What we do in some cases, share that risk for one of two reasons. The first case, there are certain peak risks that we have, and the most obvious one is the North American windstorm risk, where our clients are looking for more covers than we are comfortable holding on our own balance sheet.
We've got some specific instruments in place to have the capital markets absorb some of that risk and manage it themselves, but in a very transparent way and typically sharing the same results that Swiss Re does. The major form for that risk transfer is what we call a sidecar, where we have external investors on a set of specific and well-defined catastrophe risks, where their fortunes and our fortunes operate in very similar ways. When we have a good year, they've got a good year. When we've got a less good year, they've got a less good year.
There are specific catastrophe bonds which we also issue ourselves, which allow further very specific risk transfer on named perils losses which are substantial in size. Overall, we're important players in this market. We actually structure and we'll place catastrophe bonds for some of our primary clients as well. Lastly, we have our own portfolio of catastrophe bonds which we actively manage and most recently for institutional investors as well.
Swiss Re is a major player in what's referred to as the alternative capital market space, with ambitions to continue to grow both in scale, but also in the dimensions in which we're operating in this space with a very talented team that's based across Switzerland, London, and New York.
Okay, John. Maybe, a last question on that. These transfers or these risk-sharing processes, how have they developed, for example, from last year to this year? Have you done more of those sort of transactions, or about the same or less than in the past?
The overall market for this alternative capital has been fairly flat now for probably two years. Swiss Re itself has been able to expand its retrocessional capabilities. We've found a number of investors who are interested in either taking larger shares or new investors coming on to share these risks with us. We've been increasing our own retrocession capabilities, and that allows us to increase the amount of business we write, especially on some of these very specific large catastrophe exposures, so that our while our gross writings increase, our net is maintained in a dimension which is comfortable on our own balance sheet.
Thank you.
Hope that helps.
Another one.
There might be some specific information you can glean from the Management Dialogues that we did in London in March, I think, February or March of this year, where we had a specific session on alternative capital partners. The team that does this for us. You'll can find that on our website.
Thank you.
Berger?
We have another follow-up from Mr. Tauber, Versicherungsmonitor. Please go ahead.
Yeah, another one for me on cyber. Can you say how the premiums are developing? Like, what's the premium volume of Swiss Re right now in cyber? What's your vision with this insurance? Like, is it like, do you have like a goal? How much it should be of your business in so and so many years? How do you look at this? Is it insurable at all? Maybe a short comment on this.
The cyber insurance market has seen two years of significant rate increases in reunderwriting to bring it back to profitability. These measures were a necessary reaction to the heightened ransomware activities, which impacted the line, but also caused substantial economic losses. We think the pricing today is probably adequate. We think the risk is challenging, and in particular, the part of the risk that a global reinsurer like Swiss Re has to pay enormous attention to is the accumulation risk. The fact that losses in cyber are not contained to specific geographies or even specific industries, but they can cut across those geographies and industries and accumulate up based on the underlying source of the cyber losses.
It, it also unfortunately is highly dependent on human behavior, both the people that are attempting cyberattacks, but also people that are trying to protect themselves and their businesses from those attacks. We view this as a challenging space. We think we are underweight. We at year-end had wrote about $600 million of premiums across our businesses. We're not particularly interested in growing to a larger market share on that. We think prices, continued price improvements are required for the nature of this risk.
h our primary clients, in particular from the reinsurance side, with the corporate clients from CorSo side, to find better ways to focus on risk mitigation on the ability to partner with key players in this space that can help manage the identification of cyber attacks early and minimize the actual economic loss and insured loss associated with it. I think if there's one word I'd use for Swiss Re in cyber, it's cautious. We participate, but we have an enormous respect for the various risks in this line of business
Thank you very much. That was the last question. Back to you for closing remarks.
Very good. Thanks, everyone for your questions. Again, a solid quarter from Swiss Re following on a solid fourth quarter, as we continue to drive towards our targets for the full year. I look forward to seeing you in three months. Thanks very much.
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