Group results
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Strong improvement in operating results and investment performance led to net income of CHF 1.7 billion for 2003.
Premiums earned increased by 6% to CHF 30.7 billion compared to 2002. Excluding the effect of the stronger Swiss franc, the increase was 16%.
The Property & Casualty Business Group reported premiums earned of CHF 17.4 billion. Adjusting for currency exchange effects, premium growth was 25%.
Premiums in the Life & Health Business Group decreased by 9% to CHF 10.2 billion. Adjusting for the effect of currency exchange, premiums increased by 1%.
The Financial Services Business Group increased premiums earned to CHF 3.1 billion, up 14% compared to the previous year. Excluding currency exchange effects, underlying growth was 25%.
Net investment income was CHF 4.6 billion, compared to CHF 5.5 billion in 2002. The main reasons for the fall were the depreciation of the US dollar against the Swiss franc, combined with lower market interest rates; these were partially offset by an increase in total investment assets (up 5% in original currencies) and lower investment management expenses.
Net realised investment gains were CHF 376 million, including the impact of the equity portfolio hedge, compared to net realised losses of CHF 730 million in 2002. The net Impairment charge fell to CHF 725 million and was primarily incurred in the first half of 2003, compared to CHF 3.9 billion in impairments in 2002.
Other revenue decreased to CHF 236 million from CHF 365 million in 2002, due primarily to reduced brokerage fees and the sale in 2002 of non-core activities at the Group's Conning third party asset management subsidiary.
Trading revenues increased significantly to CHF 472 million from CHF 228 million in 2002, due to strong growth in insurance-linked and asset-backed securities, structured transactions and in credit business. This growth was partly offset by currency exchange effects.
Claims and claim adjustment expenses and life and health benefits decreased from CHF 24.6 billion to CHF 24.0 billion. Excluding currency exchange effects, these expenses increased by 7%, compared with premium growth over the same period of 16%. In 2002 the claims related to credit business and the reserve increase in the Guaranteed Minimum Death Benefits business, resulting from poor equity markets in that year, did not recur in 2003. Adverse development in 2003 in casualty claims, principally those originating in the United States, was more than offset by improvements in all other lines of business worldwide. Swiss Re's review of its US asbestos and environmental exposures in 2003 resulted in only a minor change in its reserves held.
Acquisition costs rose to CHF 6.9 billion in 2003 from CHF 6.2 billion in 2002, an increase of 10%. Adjusting for currency exchange effects, the increase was 20%, which is primarily due to the growth in the underlying business.
Amortisation of goodwill decreased from CHF 350 million to CHF 315 million, due to currency exchange effects.
Other operating costs and expenses declined from CHF 3.2 billion to CHF 2.9 billion. Adjusted for currency exchange effects, the Group's other operating costs fell by 3%, compared to the 16% growth in total revenues. The change reflects further improvements in operating efficiencies across all parts of the Group. In line with this, Corporate Centre costs for 2003 were CHF 403 million, down 8% compared to CHF 437 million in 2002. The overall Group management expense ratio fell to 8.2% from 9.2% in 2002, which represents an improvement for the fifth consecutive year.
The tax expense in 2003 was CHF 634 million compared to CHF 127 million in 2002 and represents an effective tax rate in 2003 of 27%.
The Group recorded net income of CHF 1.7 billion, compared to a net loss of CHF 91 million in 2002. Earnings per share were CHF 5.48, compared with CHF -0.29 in 2002.
Shareholders' equity increased from CHF 16.7 billion to CHF 18.5 billion. The increase was mainly due to improved earnings and the change in unrealised gains and losses on equities, partly offset by currency exchange effects. Return on equity increased to 10.2% from -0.5% in 2002.
Income reconciliation
The following table reconciles the income from Swiss Re's business groups and the operations of its Corporate Centre with the Group consolidated net income before tax.
| CHF millions |
2002
|
2003
|
Changes in %
|
|
|
|||
Business group operating income |
|||
| Property & Casualty |
309
|
1817
|
>250
|
| Life & Health |
1316
|
1218
|
-7
|
| Financial Services |
-633
|
558
|
|
|
|
|||
| Total business group operating income |
992
|
3593
|
>250
|
| Corporate Centre expenses |
-437
|
-403
|
-8
|
| Items excluded from the business groups: | |||
| Net realised investment gains/losses |
259
|
-89
|
|
| Amortisation of goodwill |
-350
|
-315
|
-10
|
| Other income/expenses |
-428
|
-450
|
5
|
|
|
|||
| Net income before tax |
36
|
2336
|
>250
|
|
|
|||
Net realised gains or losses on certain financial instruments, amortisation of goodwill, and other income and expenses - such as indirect taxes, capital taxes, and interest charges - have been excluded in the assessment of each business group's performance.
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