Posted on 09 Nov 2012 by Neilson
Swiss Re reports a net income of USD 2.2 billion in the third quarter of 2012 (vs. USD 1.3 billion in the prior-year period) and a return on equity of 28%, driven by continued strong performance from P&C Reinsurance and a one-off gain from the sale of the Admin Re® US business. Growth in premiums and net income at the Corporate Solutions Business Unit are in-line with targets. Swiss Re remains well-placed to achieve its five-year financial targets and to support clients in a volatile environment.
Michel M. Liès, Swiss Re's Group Chief Executive Officer, says: "We have achieved very good financial results in a volatile environment. A low large loss burden and the one-off gain from the sale of the Admin Re® US business in the quarter undoubtedly helped, but the excellent performance in P&C Reinsurance shows that our underlying business continues to perform strongly."
Very good Group return on investment of 4.5%; increase in shareholders' equity
Group premiums earned and fee income increased by 11% to USD 6.6 billion (vs. USD 5.9 billion in the prior-year period). Swiss Re's Group combined ratio was an excellent 72.0% (vs. 85.3%). A very good investment result again underpinned the Group's performance: Investment income was USD 1.0 billion with a Group return on investment of 4.5%.
Shareholders’ equity increased to USD 33.5 billion (vs. USD 31.0 billion) and book value per common share rose to USD 94.47 or CHF 88.79, compared to USD 87.03 or CHF 82.38 at the end of the second quarter 2012. Earnings per share for the third quarter 2012 were USD 6.33 (vs. USD 3.94 a year earlier).
Very strong net income in P&C Reinsurance demonstrates excellent underwriting performance
Net income in P&C Reinsurance was a very strong USD 1.0 billion (vs. USD 731 million), demonstrating the earnings power of Swiss Re's underlying business. Premiums earned increased by 15% to USD 3.3 billion (vs. USD 2.9 billion). The result was helped by reserve releases and a very benign claims environment in the quarter with comparatively low losses from natural catastrophes. The combined ratio was an exceptionally low 69.3% (vs. 81.5%). Successful renewals in the first half of the year also contributed to strong top-line growth, which led to a drop in expense ratios.
L&H Reinsurance reports net profit, significant realised gains
Net income in Life & Health Reinsurance was USD 187 million in the third quarter of 2012, lifted by significant realised gains. This compared with a profit of USD 492 million a year earlier. Premiums earned and fee income increased 6.0% to USD 2.3 billion in the third quarter of 2012 (vs. USD 2.1 billion). The increase was primarily a result of increased health premiums due to business growth in all regions, including in high-growth markets. The benefit ratio increased to 79.0% compared to 76.7% in third quarter 2011. The increase was mainly due to favourable model adjustments made in the prior-year period that were not repeated in the current year.
Corporate Solutions on track to meet targets
Corporate Solutions posted a quarterly profit of USD 110 million (vs. USD 67 million). Premiums earned rose by 12% to USD 588 million (vs. USD 523 million) while the combined ratio improved strongly to 87.4% from 106.7%. As with P&C Reinsurance, Corporate Solutions also benefited from the low large loss burden. Good growth was seen across all regions and lines of business. Corporate Solutions' growth is well in-line with its targets and the Business Unit's ambitions to be a lean, global player in the commercial insurance market.
Admin Re® profit boosted after completion of sale of US business; pays dividend of USD 0.9 billion to Group
Admin Re® reported an exceptional net income of USD 823 million (vs. USD 195 million) in the third quarter. A large part of this was a gain of USD 626 million relating to the sale of the Admin Re® US business (REALIC), predominantly due to realisation of previously unrealised gains on the investments backing the insurance liabilities transferred to the buyer. The gain partly offset a corresponding loss of USD 1.0 billion recorded in the second quarter, which led to a cumulative loss of USD 0.4 billion for the transaction. The sale also resulted in a dividend payment of USD 0.9 billion from Admin Re® to the Group. Admin Re® will continue to explore new opportunities in the United Kingdom and Continental Europe that meet Swiss Re Group's investment criteria and return expectations.
Successful delivery against return on equity and earnings per share targets
Swiss Re remains on track to deliver on its financial targets for the period 2011-2015. In the first nine months of 2012, Swiss Re was ahead of its targets for return on equity to be 700 basis points above the average risk-free rate and for earnings per share to grow at an average of 10 percent a year. Measured to the end of the first half of the year, economic net worth per share plus dividends increased to USD 93.8 compared to USD 87.8 for full-year 2011, slightly behind schedule on our target for 10 percent average annual growth over the five-year period.
George Quinn, Group Chief Financial Officer, says: "The economic and business environment remains volatile and this is unlikely to change in the near future. Our first priority is to deliver on our financial targets and provide our shareholders with a sustainable dividend that we plan to increase in-line with long-term earnings. Beyond that, we will look to deploy any remaining excess capital above our stated target level to those areas of our business where we see profitable opportunities. If we are unable to find opportunities that meet our return expectations, we would look at further measures to return excess capital, such as a special dividend."
Most sustainable insurance company
In addition to these financial results, Swiss Re has been named for the fifth year in a row the most sustainable company in the insurance sector by Sustainable Asset Management (SAM). Swiss Re therefore leads one of the most respected corporate sustainability rankings in the world, which is also the basis for inclusion in the Dow Jones Sustainability Index (DJSI). In the 2012 DJSI review, Swiss Re was ahead of over 120 sector competitors.
Michel M. Liès, Group CEO, says: "We are particularly proud to be recognised again as the world's most sustainable insurance company. This is an important confirmation of our commitment to sustainability, the foundations of which we laid almost 20 years ago, and an indication of the attention that is increasingly paid to non-financial metrics. What is more, our partnership with the ambitious Solar Impulse aviation project shows that we can convert intangible qualities like sustainability and innovation into concrete business opportunities."
Hurricane Sandy, which made landfall in New Jersey on 29 October 2012, caused high winds and storm surge, resulting in extensive flooding. Estimating claims is particularly complex due to the combined impact of prolonged power outages, disruptions to public transport and damage to other infrastructure. As a consequence, it is not possible to provide a reliable claims estimate at this time.