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Swiss Re Aims for High-Growth Markets as P/C Outperforms Life Segment

Source: BestWire

Posted on 22 Feb 2013 by Neilson

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Property/Swiss Recasualty gains outweighed lower profit in the life and health reinsurance segment for Swiss Re in 2012, as the world's largest reinsurer posted a 60% rise in 2012 net income.

Net income for the year rose to US$4.2 billion from $2.63 billion a year earlier. Swiss Re's property/casualty reinsurance net income for the year rose to $2.99 billion from $1.01 billion, while life/health net income fell 56% to $739 million.

Group Chief Executive Michel M. Lies said Swiss Re achieved several goals in 2012, including a simpler and more transparent management structure, increased profitability and growth in property/casualty underwriting and "a meaningful contribution from high-growth markets.

In a video presentation, he said the group's sale of the U.S. segment of its Admin Re life insurance management business showed that "we walk the talk" in terms of capital management. "We set hurdles for financial performance and it just didn't get there," he said of the U.S. business.

Lies said between 10% and 15% of the group's premium volume comes from high-growth markets."By 2015, we aim to double this, with 20% to 25% of our revenue coming from the high-growth markets," he said.

For the property/casualty segment, Swiss Re cited strong underwriting performance coupled with favorable developments for prior-year reserves. A big difference in catastrophe loss experience in 2012, compared with the previous year, showed in the combined ratio, which improved to 80.7 from 104 in 2011.

Chief Financial Officer George Quinn said in a video presentation that the segment enjoyed both rising prices and rising demand in 2012. Quinn noted catastrophe losses in 2012 came in below expectations, even with an estimated $900 million loss associated with Hurricane Sandy in the fourth quarter.

"We saw positive reserve run-off of almost $1 billion in 2012, or about 8.1 percentage points of the combined ratio," said Quinn. "The source of these releases was mainly from casualty and special lines."

Including the corporate solutions business, the overall combined ratio improved to 83.1 from 104.7. Corporate solutions, which serves large corporations, boosted its net income to $196 million in 2012 from $81 million a year earlier.

The life and health segment suffered from lower investment income and continued negative performance for business written in the Americas prior to 2004. Swiss Re also noted in 2011 the result "included exceptionally large mark-to-market gains on the foreign exchange portfolio that was designated as trading."

"Over the last couple of years, it has become clear how the low interest-rate environment has been challenging the life insurance industry," said Quinn. While lower yields led to a slight drop in net investment income, unfavorable foreign exchange rates produced a sharp drop in realized investment gains, he said.

Health reinsurance is one of a number of areas identified by Swiss Re as high-growth markets. Quinn noted health premiums rose 23% in 2012 for Swiss Re.

In Swiss Re's 2012 financial report, high-growth markets are identified as health, China, India, Indonesia, Brazil and Mexico, among others in Asia and Latin America. Health insurance markets in Asia have been touted by Swiss Re as promising growth areas.

Swiss Reinsurance Co. Ltd. currently has a Best's Financial Strength Rating of A+ (Superior).