Stefan Lippe, Swiss Re's Chief Executive Officer, says: "The Group performance in the second quarter was strong. All segments – Property & Casualty,
Life & Health and Asset Management – contributed to the result. Furthermore, Swiss Re's future growth prospects have been underscored by our strong July 2011 renewals, during which we benefited from the gradual firming of pricing in Property & Casualty."
Shareholders' equity increased to USD 24.8 billion?Swiss Re reported an 18% increase in Group net income to USD 960 million in the second quarter. Earnings per share were USD 2.80 (CHF 2.55), compared with USD 2.37 (CHF 2.56) for the second quarter of 2010.
Shareholders' equity rose USD 0.4 billion to USD 24.8 billion, more than offsetting the dividend payout to shareholders during the second quarter of approximately USD 1.0 billion. Return on equity (RoE) increased to 15.6%, compared to 13.4% in the year-ago period. Book value per common share was USD 72.37 (CHF 60. 94) at the end of June 2011, compared to USD 71.26 (CHF 65.19) at the end of March 2011.
All segments contributed to financial results, excellent combined ratio?Property & Casualty delivered excellent operating income of USD 993 million, compared to USD 455 million in the prior-year period, and an excellent combined ratio of 78.4%, compared to 102.0%. The increase in operating income was driven by disciplined underwriting, a favourable net development of prior accident years and lower large loss experience in the second quarter. Premiums earned increased 12.6% (or 7.1% at constant foreign exchange rates), reflecting strong renewals and also new business written in the first half of 2011.
Operating income in Life & Health rose by 13.4% to USD 161 million in the second quarter, driven by favourable morbidity trends. This was partly offset by additional Admin Re® expenses of USD 57 million, including costs from the restructuring. The benefit ratio was 87.0% in the second quarter of 2011.
Asset Management performed very well in a volatile market. The operating income of USD 1.3 billion compares with USD 1.2 billion in the year-ago period and was driven by higher investment income from government and corporate bonds and mark-to-market gains in equity and alternative investments. The annualised return-on-investment (RoI) was 4.3% (down from 5.8% in the prior-year period) and annualised total return on investments was 8.1% (compared to 13.2%).
The volatility of financial markets in the wake of recent sovereign debt issues in Europe remains a concern. After starting to take resolute steps from late 2009 to reduce sovereign debt exposure to non-AAA rated European government bonds, Swiss Re now holds only USD 78 million in sovereign debt issued by peripheral eurozone countries. The company's exposure to Greek sovereign debt is nil.
Strong July 2011 renewals, leading to earnings growth?While enjoying improved market conditions and a firming price environment, Swiss Re continues to focus on disciplined underwriting. In July renewals, which covered approximately 18% of Swiss Re’s Property & Casualty treaty book, top-line growth was 8%. Risk-adjusted price adequacy for business renewed in July improved by 5 percentage points. Swiss Re was able to increase volume and prices mainly as a result of higher demand for natural catastrophe cover in Australia, New Zealand and the United States. Swiss Re was also able to complete Property & Casualty run-off transactions at attractive rates, but remained defensive on Casualty business whenever prices did not meet the company's requirements.
In the course of 2011 renewals to date, Swiss Re has maintained the high quality of its portfolio. Year-to-date, Swiss Re's total treaty portfolio rose by USD 2.0 billion or 20% to USD 12.2 billion. Strongest growth originated in Asia.
The reinsurance market has started to turn, and Swiss Re expects further improvements over the next 6 -18 months.
Progress made on financial targets, continued focus on tailor-made and innovative solutions?In February 2011, Swiss Re announced new five-year financial targets. The company made good progress in the second quarter towards achieving these goals. Swiss Re's return on equity (RoE) for the period was 15.6%.
Stefan Lippe says: "These financial targets are the company's most important priority and Swiss Re is fully focused on achieving them."
In a rapidly changing world, customer needs evolve. Swiss Re strives to develop innovative solutions for clients in order to support them in refocusing their activities. In the second quarter, the company was able to conclude successful Admin Re® and P&C run-off transactions.
Seizing opportunities despite volatile environment?Amid ongoing volatility and the moderate nature of the global economic recovery, Swiss Re is seizing opportunities for growth in its chosen areas of focus. The company expects significant potential in emerging markets such as China, Brazil and Vietnam. China is already Swiss Re's third-largest market (measured in gross premiums written during the first half of the year). Within 10 years, Swiss Re economists predict that China will be the world's second-largest insurance market.
Broader demographic developments relating to the ageing population of many countries also present an opportunity for reinsurance companies like Swiss Re. As a market leader in longevity, Swiss Re helps pension fund providers and insurance companies with the associated risks.
Stefan Lippe says: "By seizing opportunities in emerging markets and longevity in addition to pursuing traditional opportunities, Swiss Re is well-positioned and we can fully focus on achieving our 2011- 2015 financial targets."