Swiss Re: Continued Rise in Economic and Insured Natural Catastrophes Should Provide Tailwind

Economic and insured losses from natural catastrophes are increasing by at least midsingle digit percentage points annually. This is likely to provide a volume tailwind in the near term for Swiss Re, which is probably one of the largest reinsurers of natural catastrophes globally. Natural catastrophe reinsurance is volatile and a company has to be able to withstand heavy loss years. However, when written well it can be nicely profitable, assuming the business has the expertise to do it and a solid balance sheet. We think Swiss Re is one of the better underwriters in the industry and is likely to benefit more than others from this natural catastrophe tailwind. We maintain our no moat rating for Swiss Re. Our fair value estimate is CHF 135 per share and shares are fairly valued at current levels.