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Back on Track: Swiss Re Reports First-Quarter Net Income of $1.1 Billion

Posted on 04 May 2012

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Swiss Re reports very strong first-quarter net income of $1.1 billion in comparison to a loss of $-665 million in the year-earlier period. This result was driven by strong underwriting, good investment performance and lower-than-expected major natural catastrophe claims in the period. The three Business Units – Reinsurance, Corporate Solutions and Admin Re(R) – each positively contributed to the Group result.

Michel M. Liès, Group CEO, says: “We had a good start to the year with a very strong result in the first quarter. This reflects our ability to perform and grow as prices rise and an excellent asset management result. But we also benefited from an absence of major claims from natural catastrophes. All Business Units contributed to this result. Going forward, we will now seek to reap the benefits of our cycle management, with a focus on profitable growth.”

Strong Group combined ratio; shareholders' equity rises by USD 1.6 billion
Premiums earned increased by 21.7% to USD 6.2 billion (vs. USD 5.1 billion) as a result of the recent strong renewals. Swiss Re reports a return on investment of 4.0% for the Group as a whole (vs. 3.9%) despite a market environment that continued to be volatile. The return on equity for the first quarter was 15.3%, with a positive contribution from all Business Units. The Group combined ratio was a strong 84.9% (vs. 163.7%) in the first three months of the year. Earnings per share increased to USD 3.33 (CHF 3.08) from a loss of USD -1.94 (CHF -1.84).

At the end of March 2012, shareholders' equity was USD 31.2 billion (vs. USD 29.6 billion at end 2011), following the issuance of two innovative contingent capital instruments that are accounted for as part of shareholders' equity. Book value per common share was USD 87.59 (CHF 79.17) vs. USD 86.35 (CHF 80.74) at 31 December 2011.

Strong Reinsurance results
Net income in P&C Reinsurance was an excellent USD 660 million (vs. USD -632 million), partly due to benign natural catastrophe experience. Net premiums earned increased by a very substantial 38.2% to USD 3.1 billion in the first quarter of 2012 (vs. USD 2.2 billion). This strong growth was driven by the successful January 2012 renewals, which included a substantial contribution from large solvency relief transactions. The combined ratio was a very strong 85.0% (vs. 171.0%).

L&H Reinsurance delivered solid results: net income was USD 209 million (vs. USD 14 million). The business benefited from an increase in premiums and fee income, as well as a favourable mortality and morbidity experience compared to expectations.

Given the current challenging market environment, Swiss Re sees opportunities in both P&C and L&H Reinsurance to offer capacity for capital relief, adverse development, structured life and large natural catastrophe covers.

Very good performance from Corporate Solutions with strong premium growth
Net income in Corporate Solutions was USD 84 million (vs. USD -42 million). Net premiums earned increased 28.3% to USD 531 million in the first quarter of 2012 (vs. USD 414 million). This increase was driven by a successful writing of new business. The combined ratio was a very strong 84.7% (vs. 123.9%). The result benefited from an absence of claims from large natural catastrophes. Corporate Solutions continues to grow in line with its strategy to focus on large commercial business as a lean global player, based on the same costing, underwriting quality and portfolio steering for which the Group is well known.

Positive Admin Re® results
Admin Re® reported an exceptional net income of USD 174 million (vs. USD 47 million). The result was supported by a number of one-off items in the quarter, including realised gains of USD 61 million and a one-time tax benefit. Swiss Re will continue to steer the Admin Re® portfolio to optimise capital and returns. In addition, gross cash generation remains an area of focus.

Annualised return on equity significantly above financial targets
Swiss Re has achieved an annualised return on equity of 15.3% in the first quarter, which is significantly above its five-year financial targets 2011-2015. George Quinn, Group CFO, says: “With the new Business Unit structure in place, we will move the Group's capital towards areas where we see the opportunities are the most attractive. This will better position us to both capture strong growth and deliver the sustained improvements in returns necessary to achieve our five-year targets.”

Successful April renewals
Swiss Re experienced very successful April renewals, which are mainly focused on Asian business. Renewals in Japan were excellent, with Swiss Re benefiting from very strong rate increases in natural catastrophe-related business. The Group was able to build on its strong client franchise and benefit from the clear commitment it had given to the Japanese market last year immediately after the Tohoku earthquake and tsunami. Also other markets in Asia, such as Korea, saw strong and profitable growth. Overall, volumes went up by 14% for the April renewals and the fully economic price quality of the renewed portfolio improved by 17 percentage points.

Swiss Re is well positioned

Michel M. Liès, Group CEO, says: “The excellent performance of our businesses in the first three months demonstrates that we continue to make the progress necessary to achieve our financial targets. We will manage risks prudently while supporting existing and new clients with our capacity and our expertise. We aim to capture the opportunities we see arising from the hardening of the P&C reinsurance market, strong economic growth in the emerging markets and the challenge of regulatory changes such as Solvency II.”