Swiss Re reports net income of CHF 624 million in 1st quarter 2008 - Earnings per share of CHF 1.84 - Annualised return on equity of 8.5% - Satisfactory underlying performance across the business segments
06 May 2008, Zurich
Swiss Re reported net income of CHF 624 million in the first quarter of 2008, a reduction of 53% over the prior year's first quarter. The reduction was attributable to the continuing turmoil in the financial markets and the resulting additional mark-to-market loss of CHF 819 million on the structured credit default swaps in run-off since November 2007. This was partially offset by a strong performance from Asset Management. Property & Casualty and Life & Health delivered satisfactory results. Earnings per share were CHF 1.84. The annualised return on equity was 8.5%.
Swiss Re reported net income of CHF 624 million for the first quarter of 2008. Earnings per share fell 52% to CHF 1.84 over the same period of last year. Return on equity was equivalent to an annualised rate of 8.5% compared to 17.1% in the first quarter 2007.
Shareholders' equity decreased 13% to CHF 27.8 billion compared to 31 December 2007 due to the depreciation of the US dollar against the Swiss franc, mark-to-market effects on the investment portfolio and the continued buy-back of shares. As of the end of the first quarter, Swiss Re's share buy-back reached CHF 3.26 billion, with 42% of its announced CHF 7.75 billion target completed. Book value per share was down 9% to CHF 83.26.
Property, Casualty continued its solid performance. Operating income was CHF 1.3 billion, a decrease of 6% compared to the first quarter of 2007, reflecting strict underwriting across all lines of business. The combined ratio was up 3.1 percentage points to 96.9% compared to the first quarter of 2007, mainly due to property business which was impacted by higher man-made losses and lower premium volumes.
Life, Health generated an operating income of CHF 449 million, representing a decrease of 45% compared to a very strong first quarter in 2007. While the result benefited from Admin Re® as well as variable annuity and longevity business acquired in 2007, it was impacted by lower proprietary net realised investment gains.
Financial Markets generated an operating income of CHF 1.4 billion. In a generally difficult market environment, the structured credit default swaps in run-off generated an additional mark-to-market loss of CHF 819 million in the first quarter. While this business is in run-off, Swiss Re continues to be exposed to market value fluctuations on the underlying securities and we estimate a further loss of CHF 200 million for the month of April. The annualised return on investments, which excludes the mark-to-market loss on the structured credit default swaps, was 5.8%, up 0.4 percentage points compared to the first quarter of 2007.
Jacques Aigrain, Swiss Re's Chief Executive Officer, said: "Despite the continuing turmoil in the financial markets, we remain confident in our earnings power and our ability to maximise shareholder returns. Our capital position is strong and our insurance related portfolio is sound. While we face challenging conditions, we are well prepared and will not deviate from our sharp focus on underwriting quality, careful risk selection and economic profit growth."
Swiss Re maintains its targets of earnings per share growth of 10% and return on equity of 14% over the cycle.
Together with the release of its first quarter 2008 results, Swiss Re also disclosed its 2007 results based on its Economic Value Management (EVM) model. EVM is Swiss Re's integrated economic measurement and steering framework used for planning, pricing, reserving and managing its business. The 2007 EVM results can be found at: www.swissre.com/investorrelations.
Media conference call
Swiss Re will hold a media conference call this morning at 10.30 (CET). The slides for the first quarter results are available on www.swissre.com. You are kindly requested to dial in 10 minutes prior to the start using the following numbers:
From Switzerland: +41 (0) 22 417 7114
From Germany: +49 (0)69 2222 2218
From France: +33 (0)1 70 99 42 83
From UK: +44 (0)20 7138 0832
Analysts' conference call
Swiss Re will hold an analysts' conference call this afternoon at 14.00 (CET). You are kindly requested to dial in 10 minutes prior to the start using the following numbers:
From Switzerland: +41 (0)44 800 9659
From UK: +44 (0)20 7138 0814
From US: +1 (0)718 354 1359
Notes to editors
Swiss Reinsurance Company Ltd
Swiss Re is a leading and highly diversified global reinsurer. The company operates through offices in more than 25 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 "AA-" by Standard, Poor's, "Aa2" 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 are typically 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:
- changes in global economic conditions and the risk of a global economic downturn;
- direct and indirect impact of continuing deterioration in the credit markets, and further adverse rating actions by credit rating agencies in respect of structured credit products or other credit-related exposures and of monoline insurance companies;
- the occurrence of other unanticipated market developments or trends;
- the ability to maintain sufficient liquidity and access to capital markets;
- the cyclicality of the reinsurance industry;
- uncertainties in estimating reserves;
- the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, currency values and other market indices;
- changes in Swiss Re's investment results;
- uncertainties in valuing credit default swaps and other credit-related instruments;
- 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;
- changes in rating agency policies or practices;
- the lowering or loss of one of the financial or claims-paying ratings of one or more of Swiss Re's subsidiaries;
- political risks in the countries in which Swiss Re operates or in which it insures risks;
- extraordinary events affecting Swiss Re's clients and other counterparties, such as bankruptcies, liquidations and other credit-related events;
- risks associated with implementing Swiss Re's business strategies;
- the impact of current, pending and future legislation, regulation and regulatory and legal actions;
- the impact of 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.
In our ongoing efforts to improve the quality and relevance of our publications, we would like to know more about you.
Subscribe To RSS
Subscribe to Newsletters
(Swiss Re Institute) Risk Dialogue Magazine
The Risk Dialogue Magazine is a newsletter exploring future risk topics, featuring multimedia articles from the Swiss Re Institute's events and insights from our global network of experts.
Our sigma publication series provides comprehensive information on the international insurance markets and analyses of economic trends and strategic issues in re/insurance and financial services.
Swiss Re Publications
Our publications share our expertise on issues of concern to our clients, the re/insurance industry and society - from food, health, longevity and financial security to managing climate and natural disaster risk.