Posted on 21 Feb 2013 by Neilson
Swiss Re has delivered a net income of USD 4.2 billion for 2012. The result was driven by very strong profitability in Property and Casualty Reinsurance and an excellent investment result. Swiss Re's Board of Directors will propose a regular dividend of CHF 3.50 per share and, in addition, a special dividend of CHF 4.00 per share, amounting to a total return of capital to shareholders of approximately USD 2.8 billion.
Michel M. Liès, Swiss Re's Group Chief Executive Officer, says: "This result shows that our strategy is effective and that we remain well on our way to achieving our 2011-2015 financial targets. We have seen a particularly strong performance in our P&C Re business and our investment results were excellent. The underlying business performance of the Group was clearly very strong and the result included positive reserve development from prior year business and realised gains on investments. 2012 was the first full reporting year under our new corporate structure and all units have contributed positively to this very pleasing result."
Excellent full-year Group results
Net income was USD 4.2 billion in 2012 (vs USD 2.6 billion in 2011). The result was driven by strong premium and fee income growth of 15% from USD 22.2 billion in 2011 to USD 25.4 billion in 2012 and by favourable prior year development in the P&C businesses. Furthermore, investment income was a very impressive USD 4.5 billion for the year, with a return on investments of 4.0% (vs 4.4%). Investment-related net realised gains amounted to USD 1.5 billion in 2012.
The Group combined ratio was excellent at 83.1%, significantly better than the projected 94% for 2012. This includes the unchanged claims estimate of USD 900 million from Hurricane Sandy as communicated at the end of November 2012. Adjusting for prior year reserve releases and slightly lower than expected natural catastrophe losses, the underlying combined ratio for the year was 91.1%. Measured over a longer period to remove some of the random volatility, the Group's five-year average combined ratio has improved from 98.3% in 2007 to 95.4% in 2012. This underlines the strength of the Group's portfolio of property and casualty risks.
Earnings per share were USD 11.85 or CHF 11.13 (vs USD 7.68 or CHF 6.79 in 2011). Shareholders' equity rose by USD 4.4 billion to USD 34.0 billion. Book value per common share increased to USD 95.87 or CHF 87.76 at the end of December 2012, compared to USD 86.35 or CHF 80.74 at the end of 2011.
As a result of the strong Group capital position, Swiss Re's Board of Directors is pleased to propose at the Annual General Meeting an increased regular dividend for 2012 of CHF 3.50 per share from CHF 3.00 in 2011. In addition, the Board of Directors will propose a special dividend of CHF 4.00 per share. Together, the dividend payments will result in a total return of capital to shareholders of approximately USD 2.8 billion. The payments will be made in the form of Swiss withholding tax exempt distributions out of legal reserves from capital contributions and will be made after shareholder approval at the Annual General Meeting.
George Quinn, Group Chief Financial Officer, says: "The commitment to our capital management strategy remains a top priority. We announced the possibility of a special dividend one year ago and we are now in a position to make a significant distribution to shareholders.
"Our capital management priorities remain unchanged for the coming years - first, we aim to grow the regular dividend, then we will grow our business where new opportunities meet our profitability expectations. The Group intends to continue to maintain high levels of capital adequacy."
Very strong P&C Re result
P&C Re net income rose to USD 3.0 billion in 2012, an increase of USD 1.9 billion from 2011. This very strong result was due to the combination of a 21.6% increase in net premiums earned to USD 12.3 billion (vs USD 10.1 billion), improving margins, favourable prior year reserve development and realised gains on investments. The result also includes the natural catastrophe loss from Hurricane Sandy.
The P&C Re combined ratio was 80.7% in 2012 (vs 104.0%). Adjusted for expected natural catastrophes and prior year reserve releases, the combined ratio was 90.1%.
Life & Health Reinsurance net income of USD 739 million
L&H Re delivered a net income of USD 739 million for 2012 (vs USD 1.7 billion). The lower result was due to a lower investment return.
2012 saw a number of successful, innovative transactions and strong global growth in the Health segment. Premiums earned and fee income increased by 8.5% to USD 9.1 billion (vs USD 8.4 billion). The benefit ratio for the year was 75.5%, slightly higher than the 74.5% in the prior year.
Corporate Solutions delivers profit and growth
Corporate Solutions delivered a good net income of USD 196 million for 2012, up significantly from USD 81 million a year earlier. Gross premium written net of intra-group transactions grew by an exceptional 38.1% to USD 3.5 billion, supported by organic growth across all major lines of business. The combined ratio improved to 96.2% from 107.9%. This includes the impact from Hurricane Sandy, which was partly balanced by positive prior year reserve development.
Corporate Solutions remains committed to growing as a lean global player in the corporate insurance market and is well on track to achieving its targets of growing the book of business to USD 4-5 billion and delivering a ROE in the range of 10-15%.
Admin Re® with very strong gross cash generation
Admin Re® delivered net income of USD 183 million for the full-year (vs USD 329 million). This figure reflects the sale of the Admin Re® US business. Excluding the effects of the sale, net income would have reached USD 582 million. The result includes gains on investments and benefited from positive business run-off.
Gross cash generation was significantly stronger than anticipated at USD 1.2 billion. Group CFO George Quinn says: "The gross cash generation strength of Admin Re® has further improved with the actions taken in 2012, including the sale of the Admin Re® US business. We continue to look for opportunities to grow our Admin Re® business and to further enhance the gross cash generation capacity."
Successful January renewals
The January P&C treaty renewals were successful, allowing Swiss Re to achieve profitable growth of 11% while maintaining a high-quality portfolio. The portfolio saw price increases of 2% before taking into consideration the economic impact of lower interest rates. Including these, the risk-adjusted price quality of the portfolio was maintained at last year's level. Growth was driven by demand for tailored solutions and solvency relief transactions in Europe and the Americas.
In December 2012, a five-year 20% quota share agreement with Berkshire Hathaway expired. This effect alone is expected to lead to a significant increase in net premium income in our P&C Re and Corporate Solutions businesses for 2013.
Swiss Re on track to reach 2011-2015 financial targets
Swiss Re is well on track to deliver on its 2011-2015 financial targets. In 2012, return on equity was 13.4% and earnings per share grew by 54%. Economic net worth per share figures will be reported with the publication of the 2012 Annual Report in March 2013.
150 years of enabling growth and market development
Swiss Re celebrates its 150 Year Anniversary in 2013 in a series of events around the world. Founded in 1863 after a fire destroyed the Swiss township of Glarus, Swiss Re has established a successful track record in the business of protecting society against major risk events and enabling the growth of a private sector approach to managing risks.
Group CEO Michel M. Liès says: "It is a privilege to lead Swiss Re in its 150th year and we see many excellent opportunities ahead for the Group. In mature markets we will continue to focus on innovation and leveraging our high quality expertise. In our target high growth markets, where we see huge potential for the industry, we will also be proactive in enabling market development and bringing financial protection against risks to help people protect their property and assure their livelihoods. Swiss Re has good reasons to look to the future with optimism."