Swiss Re reported strong results for 2010, reflecting the sustained earnings power of its business and the strength of its client franchise.
The company achieved full-year net income of $863 million and earnings per share of $2.52. Swiss Re plans to establish a new corporate structure under a newly formed holding company, increasing its client focus, improving the transparency and accountability of its businesses, and creating greater flexibility.
“Over the past two years we have come a long way,” says Stefan Lippe, Chief Executive Officer. “Swiss Re has strengthened its balance sheet, set new strategic priorities and aligned its management structure. The company is now taking the next step in shaping the company's future by adjusting its legal structure to reinforce its strategic priorities and allow it to fully unlock the potential of its business.”
Strong earnings power in 2010
Swiss Re delivered strong results for the year. Excluding the impact of the CPCI termination, net income for 2010 was USD 2.3 billion. The return on equity excluding the CPCI was 9.2%. The CPCI was terminated in November 2010 and repaid in January 2011. Including the impact of the CPCI termination, Swiss Re achieved in 2010:
• Full-year net income of USD 863 million (USD 496 million in 2009), an increase of 74%
• Return on equity of 3.6% (2.3% in 2009)
• Earnings per share (EPS) of USD 2.52 or CHF 2.64 (USD 1.46 or CHF 1.49 in 2009)
• Shareholders' equity of USD 25.3 billion (USD 25.3 billion at end 2009)
Strong results from business segments
Property & Casualty (P&C) delivered very strong results due to disciplined underwriting and despite a high level of natural catastrophe losses. Operating income was USD 2.5 billion, down 30% due to the higher large loss experience and lower net investment income. The combined ratio was 93.9%, compared to 88.3% in 2009. The impact of natural catastrophes was 3.0 percentage points above the expected level and was partially compensated by 0.8 percentage points from positive run-off. Swiss Re estimates claims, net of the benefits of retrocession and before tax, relating to the Queensland, Australia flooding for the fourth quarter of 2010 of USD 100 million. The company’s preliminary estimate of claims from the floods in the first quarter of 2011 is USD 225 million. Swiss Re also estimates that claims from the Australian cyclone Yasi will be approximately USD 100 million. Both of these estimates are net of the benefits of retrocession and before tax. Significant uncertainties are involved in estimating losses from such an event and this preliminary estimate may need to be adjusted as new information becomes available.
Life & Health reported good results with a significant improvement in operating performance. Operating income was USD 810 million, an increase of 18%. The benefit ratio increased 4.9 percentage points to 88.7%. Excluding the 2009 benefit derived from the rescission of a disability contract, together with the impact of certain commutations, the benefit ratio increased 3.0 percentage points. Mortality experience was better than expected, although less favourable than the results recorded in the prior year. Morbidity was within expectations for both periods.
Asset Management achieved good results with an operating income of USD 4.5 billion due to lower impairments and lower hedging costs compared to 2009, which offset the impact of lower net investment income from lower yields. Return on investments was 3.5%. Total return, including unrealised gains and losses, rose to 6.5%.