Swiss Re Q1 net zooms 21%, reinsurance strong

Life & Health Reinsurance saw flat profits whereas Admin Re demonstrated an improving underlying earnings capacity

May 02, 2013 10:57 IST | India Infoline News Service
Swiss Re reports a very strong Group net income of USD 1.4 billion for the first quarter of 2013, 21% higher than the USD 1.1 billion net income reported in the prior year period. Very strong underwriting performances across Swiss Re's Property & Casualty Reinsurance and Corporate Solutions businesses were the key drivers of this performance. Life & Health Reinsurance saw flat profits whereas Admin Re demonstrated an improving underlying earnings capacity.

Michel M. Liès, Swiss Re's Group Chief Executive Officer, says: "We are starting our 150th
 anniversary year with a very strong first quarter result. It demonstrates we have the right strategy and structure in place to reach our 2011-2015 financial targets. The successful April renewals are another proof of Swiss Re's ability to perform and grow despite economic headwinds and a continuous low interest rate environment." 

Excellent Group combined ratio of 72.4%; good investment performance
In the first quarter of 2013, Swiss Re's Group net income increased 21% to USD 1.4 billion from USD 1.1 billion in the prior-year period. Premium and fee income increased 9% to USD 6.8 billion (vs USD 6.2 billion in the first quarter of 2012) as a consequence of organic growth, the expiry of a 20% quota share agreement with Berkshire Hathaway and comparatively low losses from man-made and natural catastrophes during the first three months of 2013. The Group combined ratio was 72.4%, continuing the long-term improving trend seen over the past years. This shows that Swiss Re has established a successful track record to underwrite risks prudently across all business lines, also in a difficult economic environment.

The annualised return on investments was 3.4% in the quarter (vs 4.0% in the same period last year).

George Quinn, Swiss Re's Group Chief Financial Officer, says: "The Group portfolio is fundamentally in very good shape but we will continue to focus on areas of underperformance. We will not hesitate to take decisive action to further improve overall returns."

Earnings per share increased to USD 4.02 or CHF 3.72 during the first three months, compared to USD 3.33 or CHF 3.08 in 2012. Shareholders' equity slightly increased by USD 761 million to USD 34.8 billion. The return on equity further improved to 16.6% in the first quarter of 2013, up from 15.3% in the prior-year period. Book value per common share increased from USD 95.87 or CHF 87.76 at 31 December 2012 to USD 97.80 or CHF 92.84 at 31 March 2013.

Property & Casualty Reinsurance net income up 53% 
P&C Re net income increased by 53% to USD 1.0 billion from USD 660 million a year ago. The primary driver for this performance was a very strong underwriting result. In addition, reserve releases and lower than expected claims due to the absence of major man-made or natural catastrophes contributed to the result.

Premiums earned during the first quarter rose by 15% to USD 3.5 billion (vs USD 3.1 billion in the prior year period), mainly due to the expiry of a 20% quota share agreement with Berkshire Hathaway at the end of 2012 and premiums earned from large transactions concluded in the course of last year.

The P&C Re combined ratio during the first three months was 69.7%, a significant improvement over the 85.0% reported last year.

Life & Health Reinsurance profit largely flat 
Net income for the first three months was USD 222 million vs USD 209 million in the prior-year period. This increase includes a one-off net gain of USD 75 million from the recapturing of certain treaties.

Continued growth in the global Health segment, particularly in Europe and Asia, as well as increased longevity premiums led to a 6% increase in premiums earned and fee income to USD 2.3 billion (vs USD 2.2 billion). The benefit ratio for the first three months rose to 78.5% compared to 74.4% in the same quarter last year.

Profitability in the traditional life business remains under pressure amid a low interest rate environment and continued subdued demand. Swiss Re is determined to address this challenge.

Corporate Solutions reports strong earnings and continued growth 
Swiss Re's commercial insurance Business Unit, Corporate Solutions, generated a 20% higher first-quarter net income of USD 101 million (vs USD 84 million), driven by a 15% increase in premiums earned to USD 613 million (vs USD 531 million). The Business Unit's combined ratio was 87.6%, slightly higher than the 84.7% reported a year ago.

Corporate Solutions is successfully delivering against its target of generating profitable growth for the Group.

Admin Re cash generation in-line with expectation 
Net income of USD 78 million was generated in the first quarter of 2013 compared to USD 174 million in the prior-year period, with the decline due to the absence of a tax benefit and other one-off items which boosted last year's first quarter results. The underlying business delivered a gross cash generation of USD 63 million, in-line with expectations and comparable with last year's first-quarter result of USD 71 million which included the US business of Admin Re, sold in the third quarter of 2012.

Successful P&C Re April renewals show moderate growth 
The April treaty renewals – mainly focused on business in Asia – concluded successfully and showed moderate growth. The price quality of the portfolio remained strong. The renewals also showed a measured move into some casualty segment business lines and are a positive indicator for the upcoming July renewals.

Swiss Re on track to reach financial targets despite headwinds 
Amid a weak growth outlook for 2013 and the continued low interest rate environment, Swiss Re remains on track to deliver its 2011-2015 financial targets.

Kurt Karl, Swiss Re's Chief Economist, says: "Growth in the advanced economies will remain subdued and this is a challenge for our industry. High growth markets, however, remain a bright spot and many opportunities are intact. Re/insurance premiums in these economies will continue to be sustained by economic activity and increased penetration."

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