Swiss Re mulling divestiture options for digital platform IptiQ

Swiss Re has announced that it is exploring options to divest its IptiQ digital platform while reserving $100 million for the March 26 Baltimore bridge disaster, a loss estimate with high uncertainty, according to its CEO Christian Mumenthaler.

Following a strategic review amid changing market conditions, Swiss Re plans to divest its digital platform and explore options for its entities, Mumenthaler said in a conference call. Swiss Re will gauge interest in IptiQ’s assets, including from primary insurers.

Mumenthaler noted that there are valuable elements in IptiQ, but he could not specify when or how the entity would be divested, emphasizing the goal of maximizing shareholder value.

In 2023, Swiss Re took a $250 million charge related to IptiQ and aims for better results this year, expecting the business to break even by the end of 2025, said CFO John Dacey.

As per AM Best, Dacey described IptiQ as a complex “collection of a number of discrete businesses across geographies” and suggested that another owner might extract more value. He also indicated that there might be restructuring charges in the coming quarters.

Mumenthaler explained that when IptiQ was created about 10 years ago, interest rates were near zero, and the market was saturated with capital seeking yields. There was concern about the future of reinsurance and a surge in insurtech investment, which was believed to disrupt the value chain.

Swiss Re invested in white-label digital insurance with IptiQ to allow clients and brokers to enter the primary market, he said.

However, the environment has changed significantly in the past year and a half, with much higher interest rates, improved rates in traditional reinsurance, and slower insurtech growth, Mumenthaler said.

Swiss Re built a valuable platform with $1 billion in premiums, but it “makes no sense to keep it as a strategic option” under current conditions, he said.

The reinsurer also increased its loss estimate by $120 million for the 2023 floods in Italy, raising its industry loss estimate for the event from $3.3 billion to $6 billion, Mumenthaler said.

Large natural catastrophe losses in the first quarter totaled $66 million, mainly from the Noto earthquake in Japan, Dacey reported.

Swiss Re experienced several other man-made losses and has increased reserves for US liability, Dacey said.

Liability reserves were raised in the first quarter as Swiss Re anticipates continued liability exposure in the market, although it has decreased slightly from last year, Mumenthaler said.

Swiss Re has also reinforced reserves in several areas, experiencing minimal catastrophe losses in the quarter, Dacey added. It reduced its casualty book over the first quarter and is pushing for better rates and terms while questioning some primary insurance pricing. Casualty accounted for about one-third of Swiss Re’s book at the January 1 and April 1 renewals, he noted.

First-quarter 2024 net income was $1.09 billion, with insurance revenue at $11.68 billion. The property/casualty combined ratio was 84.7% on May 16, 2024. Swiss Re stated that its first-quarter 2024 numbers are not comparable with the previous year due to this year’s numbers being under IFRS while those of 2023 were under US GAAP.

Mumenthaler said the transition to IFRS was complex, but the new accounting standard will make segments more comparable, especially the life/health segment.

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