Swiss Re reports net income of USD 158 million for the first quarter 2010 Property & Casualty result impacted by high level of natural catastrophes
06 May 2010, Zurich
Swiss Re reported net income of USD 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 USD 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.”
Shareholders’ equity up by USD 0.8 billion to USD 26.2 billion
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.
Strong performance despite high natural catastrophe experience
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.
Excellent 2009 economic result
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: www.swissre.com/investors/.
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.
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 stabilising 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.”
Notes to editors
Change of reporting currency from CHF to USD
As announced on 18 February 2010, Swiss Re now reports its results in US dollars.
A substantial amount of the business Swiss Re writes is in US dollars, with a comparatively small amount in Swiss francs. The Group believes this change in reporting currency should contribute to reducing volatility in the company’s financial statements.
Media conference call
Swiss Re will hold a media conference call this morning at 10.30 am (CET). You are kindly requested to dial in 10 minutes prior to the start using the following numbers:
|From Switzerland:||+41 (0)44 800 9674|
||+49 (0)69 2222 3105|
||+33 (0)1 70 99 42 79|
|From UK:||+44 (0)20 7138 0829|
|From US:||+1 718 354 1152|
|From Hong Kong:
||+852 3009 5113|
The presentation slides for media are available in the press kit.
Investors and analysts’ conference call
Swiss Re will hold an analysts’ conference call this afternoon at 2 pm (CET). You are kindly requested to dial in 10 minutes prior to the start using the following numbers:
|From Switzerland:||+41 (0)44 800 9674|
||+49 (0)69 2222 3105|
||+33 (0)1 70 99 42 67|
+44 (0)20 7784 1036
|From US:||+1 718 354 1358|
|From Hong Kong:
||+61 (0)2 8223 9222|
The presentation slides for analysts are available on the Q1 overview page.
Swiss Reinsurance Company Ltd
Swiss Re is a leading and highly diversified global reinsurer. The company operates through offices in more than 20 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company’s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated “A+“ by Standard & Poor’s, “A1” by Moody’s and “A” by A.M. Best.
Cautionary note on forward-looking statements
Certain statements and illustrations contained herein are forward-looking. These statements and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact. Forward-looking statements typically are identified by words or phrases such as “anticipate“, “assume“, “believe“, “continue“, “estimate“, “expect“, “foresee“, “intend“, “may increase“ and “may fluctuate“ and similar expressions or by future or conditional verbs such as “will“, “should“, “would“ and “could“. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re’s actual results, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed or implied by such statements. Such factors include, among others:
- further instability affecting the global financial system and developments related thereto;
- changes in global economic conditions;
- Swiss Re’s ability to maintain sufficient liquidity and access to capital markets, including sufficient liquidity to cover potential recapture of reinsurance agreements, early calls of debt or debt-like arrangements and collateral calls under derivative contracts due to actual or perceived deterioration of Swiss Re’s financial strength;
- the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, credit spreads, currency values and other market indices, on Swiss Re’s investment assets;
- changes in Swiss Re’s investment result as a result of changes in its investment policy or the changed composition of its investment assets, and the impact of the timing of any such changes relative to changes in market conditions;
- uncertainties in valuing credit default swaps and other credit-related instruments;
- possible inability to realise amounts on sales of securities on Swiss Re’s balance sheet equivalent to its mark-to-market values recorded for accounting purposes;
- the outcome of tax audits, the ability to realise tax loss carryforwards and the ability to realise deferred tax assets (including by reason of the mix of earnings in a jurisdiction or deemed change of control), which could negatively impact future earnings;
- the possibility that hedging arrangements may not be effective;
- the lowering or loss of one of the financial strength or other ratings of one or more companies in the Group;
- the cyclicality of the reinsurance industry;
- uncertainties in estimating reserves;
- the frequency, severity and development of insured claim events;
- acts of terrorism and acts of war;
- mortality and morbidity experience;
- policy renewal and lapse rates;
- extraordinary events affecting Swiss Re’s clients and other counterparties, such as bankruptcies, liquidations and other credit-related events;
- current, pending and future legislation and regulation affecting Swiss Re or its ceding companies, and regulatory or legal actions;
- changes in accounting standards;
- significant investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transactions, including, in the case of acquisitions, issues arising in connection with integrating acquired operations;
- changing levels of competition; and
- operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks.
These factors are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.