Swiss Re reported net income of $158 million for the first quarter of 2010, a successful result given the “high natural catastrophe losses in the first quarter.” Swiss Re also noted that the “estimated excess capital position at the AA level increased to more than $12 billion.”
The earnings report is the first financial document the reinsurer has issued in US dollars rather than Swiss francs (CHF).
Swiss Re’s first quarter earnings rose 22 percent compared to the $130 million in the same period of the previous year. Earnings per share were CHF 0.49 ($0.46), compared to CHF 0.45 ($ 0.39) for the first quarter of 2009.
Shareholders’ equity increased by $800 million to $26.2 billion in the first quarter of 2010, “driven mainly by mark-to-market gains on fixed income securities amounting to $1.1 billion,” said the bulletin. “Return on equity for the first quarter of 2010 was 2.7 percent, compared to 2.9 percent 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 ($68.6), compared to CHF 67.7 ($66.2) at the end of 2009.
CEO Stefan Lippe commented: “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.”
Swiss Re’s P/C operations reported operating income of $259 million, a decrease of 69 percent compared to $846 million in the first quarter of 2009.” The reinsurer estimated claims of $500 million from the Chile earthquake and $100 million from European winter storm Xynthia. “As a result,” Swiss Re said its “combined ratio rose to 109.4 percent (or 107.8 percent excluding unwind of discount) for the first quarter of 2010, compared to 90.2 percent (88.6 percent) in the prior-year period.”
As far as more recent disasters are concerned, Swiss Re said that, based on current information, it provisionally “estimates its loss from the explosion of the Deepwater Horizon oil rig to be $ 200 million before tax. The company expects the total insured market loss from this event to be in the range of $1.5 billion to $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.”
Life & Health achieved operating income of $245 million in the first quarter of 2010, compared to operating income of $244 million in the prior-year period. The benefit ratio was stable at 87.4 percent, compared to 86.9 percent in the same quarter of 2009. In the first quarter of 2010, Swiss Re grew its traditional business by 3.5 percent.
Asset Management delivered operating income of $937 million in the reporting period, compared to $ 978 million in the first quarter of 2009. The annualized return on investments was 2.8 percent in the first quarter of 2010, compared to 1.9 percent in the first quarter of 2009. Total return on investments for the quarter was 8.1 percent, compared to –7.1 percent in the same period of the previous year.
Swiss Re also said it cost reduction initiatives were “on track” to reduce “running costs” by CHF 400 million [app $380 million] by the end of 2010.
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 percent over the cycle.”
The full report, additional information, as well as details on accessing this morning’s earnings conference call may be obtained on the Group’s web site at: www.swissre.com.
Source: Swiss Re