Property & Casualty Business Group
Operating income rose by CHF 718 million to CHF 822 million and premiums earned in original currencies grew by 33%. The combined ratio improved to 99.8% in first-half 2003. |
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Primary and reinsurance markets
The hard insurance and reinsurance markets have continued through the first half of 2003. "Underwriting discipline" and "return to basics" are common themes heard throughout the industry. Capital constraints are still an issue for a number of insurers and reinsurers. Terrorism risks also remain a major concern: given the temporary nature of the Terrorism Risk Insurance Act in the US, the industry has a great interest in future public policy and its implications for products and coverage in this field.
Rates in the primary market continue to increase. For short-tail lines, however, especially natural catastrophe business, the pace of price increases has slowed or even stabilised. Capacity for certain segments of liability business is still very restricted.
Reinsurance markets continue to emphasise risk assessment, exposure control and pricing. Rates are still increasing, with a few exceptions. Swiss Re is pursuing strategies and designing products that limit the maximum liabilitiy from any single contract.
| CHF millions |
First half
2002 |
First half |
Change
in % |
|||
|
|
||||||
Revenues |
|
|
|
|
|
|
| Premiums earned |
6654
|
7864
|
18
|
|||
| Net investment income |
792
|
672
|
-15
|
|||
| Net realised investment gains/losses |
-318
|
133
|
||||
|
|
||||||
| Total revenues |
7128
|
8669
|
22
|
|||
Expenses |
|
|
|
|
|
|
|
|
||||||
| Claims and claim adjustment expenses |
-5186
|
-5837
|
13
|
|||
| Acquisition costs |
-1491
|
-1635
|
10
|
|||
| Other operating costs and expenses |
-347
|
-375
|
8
|
|||
|
|
||||||
| Total expenses |
-7024
|
-7847
|
12
|
|||
|
|
||||||
| Operating income |
104
|
822
|
690
|
|||
|
|
||||||
|
|
||||||
| Operating result, excluding net realised investment gains/losses |
422
|
689
|
63
|
|||
|
|
||||||
| Claims ratio in % |
77.9
|
74.2
|
||||
| Acquisition cost ratio in % |
22.5
|
20.8
|
||||
| Administration expense ratio in % |
5.2
|
4.8
|
||||
| Combined ratio in % |
105.6
|
99.8
|
||||
| Combined ratio in % excluding changes in equalisation reserves |
103.9
|
99.8
|
||||
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Business development
Premiums earned increased by 18%, compared to a target of 8%. Excluding foreign exchange effects, growth was 33%, of which 11% arose from a few large contracts. This strong performance reflects substantial growth in written premiums in the second half of 2002, as well as the success of the 2003 renewals.
The Property & Casualty Business Group achieved a combined ratio of 99.8%, an improvement from 105.6% (103.9% excluding equalisation reserves) in the previous year.
This improvement in the combined ratio was recorded in all lines, especially in property, where an 10.2 percentage point reduction to 90.3% from 100.5% was achieved.
The acquisition cost ratio improved to 20.8% from 22.5% in first half 2002, due to the successful renewal negotiations. The administration expense ratio declined to 4.8% from 5.2%, reflecting a continued focus on efficiency.
The operating income increased by CHF 718 million to CHF 822 million. Improved underwriting performance contributed CHF 387 million. A decline in net investment income of CHF 120 million, of which CHF 77 million was due to foreign exchange effects and the balance to a lower interest rate environment, was more than offset by an increase in realised gains of CHF 451 million, due to gains on fixed income securities and reduced impairment charges.
Outlook
We expect the hard market to persist. However, because of the substantial growth in the second half of 2002, the premium growth rate achieved in the first half of 2003 is not to be expected for the full year.
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