Swiss Re’s 2015 Net Income Rises 31% to $4.6B; Q4 Profit Up to $938M

By Jan-Henrik Foerster and Jeffrey Voegeli | February 23, 2016

Swiss Re AG reported fourth-quarter profit that beat estimates after a quiet year for natural catastrophes and announced that Christian Mumenthaler, head of the company’s main reinsurance unit, will take over as chief executive officer on July 1.

Net income rose to $938 million from $245 million a year earlier when earnings were hit by one-time charges. That exceeded the $915.6 million average estimate of eight analysts surveyed by Bloomberg.

Reinsurers including Munich Re, Swiss Re and Hannover Re sell backup coverage to insurance companies, protecting them against big risks such as natural disasters. While losses from catastrophes last year fell to the lowest since 2009, earnings in the industry continue to be squeezed by record-low interest rates and declining prices for coverage.

Swiss Re fell as much as 2.8 percent in Zurich trading and was down 0.6 percent at 92.85 francs ($93.19) as of 9:45 a.m. The stock is up 7 percent over the last 12 months.

Despite the positive earnings, Swiss Re’s stock will face continuing pressure due to overcapacity in the industry and a negative outlook for prices, Baader Helvea analyst Daniel Bischof wrote in a note to investors. Swiss Re Chief Financial Officer David Cole also said he expects continued price pressure, though it will probably diminish.

Dividend Increase

Swiss Re increased its dividend to 4.6 francs, compared with a Bloomberg estimate of 4.5 francs. Last year, the company paid out a regular dividend of 4.25 francs and a special dividend of 3 francs. The reinsurer on Tuesday also announced plans for a share buyback of up to 1 billion francs to deploy its excess capital.

New CEO

Christian Mumenthaler, previously CEO of the reinsurance unit, will succeed the retiring Michel Liès. Mumenthaler, 46, has been with Swiss Re since 1999, holding several posts on the company’s executive committee, including that of chief risk officer.

“The board is delighted to have found an internal successor who can transition smoothly and who has an intimate understanding of and experience in implementing the group’s strategy,” Swiss Re said in the statement, adding that Mumenthaler was responsible for approximately 85 percent of the group’s revenue in his previous job.

P&C Reinsurance Unit

Net income at the property & casualty reinsurance unit fell to $703 million from $1.2 billion a year earlier. Profit in the fourth quarter was hit by flood loses losses in the U.K. and India, Swiss Re said. The unit’s combined ratio rose to 89.6 percent from 86.7 percent in the fourth quarter. A ratio greater than 100 means that an insurer is paying more in claims and costs than it is collecting in premiums.

Munich Re, Swiss Re’s biggest competitor, said earlier this month that prices in its non-life reinsurance business declined by about 1 percent in January, when slightly more than half of that business was up for renewal.

Swiss Re’s full-year net income jumped 31 percent to $4.6 billion, or $13.44 a share [compared to $3.5 billion in 2014].

“The result is still solid, there were no large claims,” said Stefan Schuermann, an analyst at Vontobel with a hold rating on the stock. “They have a strong balance sheet that leaves room for further capital action.”

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