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Swiss Re Reports Net Income of $158 million for Q1, P/C Results Impacted by Nat Cats

Posted on 06 May 2010

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Swiss Re reported net income of $158 million for the first quarter of 2010. The company continued to deliver strong underlying performance, even though the Property & Casualty result was affected by high natural catastrophe losses in the first quarter. The estimated excess capital position at the AA level increased to more than $12 billion.

Stefan Lippe, Swiss Re’s Chief Executive Officer, said: "In the first quarter of 2010, we continued to deliver strong underlying performance, even though the result was impacted by high natural catastrophe losses, mainly from the earthquake in Chile and European winter storm Xynthia. While natural catastrophes like these can contribute to earnings volatility, protecting our clients against such extreme events is the essence of our business model.”

Swiss Re reported net income of USD 158 million for the first quarter of 2010, compared to an income of USD 130 million in the same period of the previous year. Earnings per share were CHF 0.49 (USD 0.46), compared to CHF 0.45 (USD 0.39) for the first quarter of 2009.

Shareholders’ equity increased by USD 0.8 billion to USD 26.2 billion in the first quarter of 2010, driven mainly by mark-to-market gains on fixed income securities amounting to USD 1.1 billion. Return on equity for the first quarter of 2010 was 2.7%, compared to 2.9% in the first quarter of 2009. Book value per common share, which excludes the convertible perpetual capital instrument issued to Berkshire Hathaway, was CHF 72.2 (USD 68.6), compared to CHF 67.7 (USD 66.2) at the end of 2009.

Since the end of 2009, Swiss Re has further strengthened its capital position. The company estimates that, at the end of March 2010, its excess capital at the AA level increased to more than USD 12 billion.

Property & Casualty reported operating income of USD 259 million, a decrease of 69% compared to USD 846 million in the first quarter of 2009. The result was impacted by the high level of natural catastrophes in the quarter, including estimated claims of USD 500 million from the Chile earthquake and USD 100 million from European winter storm Xynthia, already disclosed on 10 March 2010. As a result, the combined ratio rose to 109.4% (or 107.8% excluding unwind of discount) for the first quarter of 2010, compared to 90.2% (88.6%) in the prior-year period.

Life & Health achieved operating income of USD 245 million in the first quarter of 2010, compared to operating income of USD 244 million in the prior-year period. The benefit ratio was stable at 87.4%, compared to 86.9% in the same quarter of 2009. In the first quarter of 2010, Swiss Re grew its traditional business by 3.5%.

Asset Management delivered operating income of USD 937 million in the reporting period, compared to USD 978 million in the first quarter of 2009. The annualised return on investments was 2.8% in the first quarter of 2010, compared to 1.9% in the first quarter of 2009. Total return on investments for the quarter was 8.1%, compared to –7.1% in the same period of the previous year.

The Group’s measures to achieve a reduction in running costs of CHF 400 million by the end of 2010 are on track.

With the release of its first quarter 2010 results, Swiss Re also disclosed its 2009 Economic Value Management (EVM) profit of CHF 7.1 billion. The EVM model is Swiss Re’s integrated economic measurement and steering framework used for planning, pricing and managing its business. The 2009 EVM result reflects the excellent performance in Property & Casualty, Life & Health and Asset Management. The full report can be found at:

Deepwater Horizon oil rig estimate

Based on current information, Swiss Re provisionally estimates its loss from the explosion of the Deepwater Horizon oil rig to be USD 200 million before tax. The company expects the total insured market loss from this event to be in the range of USD 1.5 billion to USD 3.5 billion. However, as the situation is still unfolding and involves significant uncertainties, the ultimate loss is hard to predict and therefore estimates may be subject to change. Outlook

In the April 2010 renewals, which covered mainly Asian property business, Swiss Re succeeded in sustaining business volume and maintaining long-term price adequacy. The company expects recent large losses to increase risk awareness and create a stabilizing influence on pricing. Swiss Re remains committed to active cycle management and portfolio steering.

Swiss Re continues to drive innovation in the industry. Offering added-value expertise and services to its clients remains a priority. As market leader in life and health reinsurance, Swiss Re was one of the founders of the Life & Longevity Markets Association (LLMA), which aims to promote the development of a liquid traded market in longevity and mortality-related risk of the type that exists for property and casualty insurance-linked securities (ILS). The Group further reinforced its leading position in the ILS market during the first quarter of 2010 by structuring the first catastrophe bond to rely on PERILS industry loss estimates for European windstorm.

Stefan Lippe concluded: “Primary insurance volumes and prices remain under pressure, delaying the hardening of the reinsurance market. In this market environment, we will continue to drive innovation, focus on disciplined underwriting and deploy capital to those lines of business where we expect to achieve returns that meet our ROE target of 12% over the cycle.”


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