Investing.com -- Swiss Re AG (SIX:SRENH) delivered strong second quarter results, continuing the positive momentum established in the first quarter.

The company reported a net income of $996 million, which surpassed consensus estimates by 7.6%, reflecting robust underwriting and investment performance across all its segments.

Although the reinsurance segments experienced lower-than-expected revenue, these shortfalls were effectively offset by better-than-anticipated margins, highlighting Swiss Re’s resilience and operational strength.

The company achieved a Return on Equity (ROE) of 20.1% for the first half of 2024, underscoring the underlying strength of the reinsurance market and the favorable impact of higher interest rates.

“While undoubtedly some investors will argue that continued strengthening is disappointing, we continue to believe that Swiss Re is improving the underlying reserve adequacy, with the new CEO evidently maintaining the strategy established by his predecessor last year,” said analysts from Jefferies.

In the Property&Casualty Reinsurance (P&C Re) segment, Swiss Re reported insurance revenue of $4.815 billion, which was 5.2% below expectations.

However, the segment's performance was bolstered by a combined ratio of 84.4%, better than anticipated due to a significant discounting benefit of around 11 percentage points, compared to the 7 percentage points expected.

Natural catastrophe losses were also significantly lower than expected, coming in at $70 million against a forecast of $360 million. Despite notable reserve additions, particularly $0.65 billion for US liability, these moves are seen as strategic efforts to enhance the underlying reserve adequacy, which should support long-term stability.

The Corporate Solutions (Cor So) segment showed solid results with insurance revenue of $1.961 billion, exceeding consensus by 2.6%. The segment's combined ratio of 87.6% was significantly better than the expected 92.0%, benefiting from favorable premium volume developments and a benign claims environment. This performance underscores the segment's improved operational efficiency and strategic execution.

In Life&Health Reinsurance (L&H Re), Swiss Re reported insurance revenue of $3.893 billion, which was 10.0% below expectations. However, the segment’s net income was a standout, reaching $471 million, 15.2% ahead of consensus estimates.

This was driven by positive mortality experience in the US, demonstrating the segment's resilience despite the revenue challenges.

Swiss Re's first-ever IFRS 17 half-year results underscore the company's robust profitability, with a 20.1% ROE for the first half of 2024.

Despite challenges such as reserve additions and lower-than-expected revenues, the company maintained strong profitability, underpinned by effective underwriting and investment strategies.

“We suspect most of these additions are indeed buffers which should continue to strengthen SREN's earnings outlook. FY guidance has been maintained, as was the case with peers reflecting conservatism ahead of hurricane season,” said analysts at RBC Capital Markets.

The management has reiterated the 2024 target of $3.6 billion in group net income, signaling a stable and optimistic outlook despite potential challenges.

Both RBC Capital Markets and Jefferies support the CHF 114.00 price target for Swiss Re, grounded in a thorough valuation model.

While upside potential includes the possibility of capital returns, downside risks are associated with natural catastrophes and the potential impact of prolonged low fixed-income yields on investment returns.

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