Swiss Re 1st Half Results: Premiums Up, Net Income Down

Swiss Re reported its first half operating results with classic good and bad news, while the world’s second largest reinsurer’s premium income grew 16 percent during the period to CHF13.836 billion ($9.23 billion), the company’s net income was an anemic CHF118 million ($78.66 million), compared to CHF1.345 billion ($896.6 million) for the first half of 2001.

The company attributed the decreases mainly to the “equity market decline during the first-half,” which required CHF917 million ($611.3 million) in write-offs. “Investment results” declined by 1.327 billion ($885 million), while dividend income dropped by CHF243 million ($162 million).

Swiss Re’s p/c activities, however, were a bright spot.”Premiums earned were up 3% at CHF6 654 million [$4.436 billion], compared to CHF6 458 million [$4.305 billion] in first-half 2001,” said the announcement. “Underlying premium growth was 13%, excluding currency effects and certain business transfers to financial services.”

The combined ratio also had a distinct improvement falling from 113 percent in first-half of 2001 to 104 percent in the first-half of 2002. Swiss Re noted that its “decision to improve the portfolio’s quality led to a marked shift in business from proportional to non-proportional treaties, which reduced the growth in premiums but improved transparency and control over pricing and exposures.” It also confirmed that the “demand for reinsurance continues to grow as client’s capital positions are squeezed by negative capital market performance.”

Commenting on the recent floods in Eastern Europe the bulletin indicated that while no precise estimate of the total economic loss could yet be be made, “preliminary estimates suggest they are expected to exceed EUR 15 billion [$14.7 billion].” Insured losses, however, will be well below that figure. Swiss Re’s estimate of its exposure is CHF250 million ($167 million).

The report was positive as far as the p/c sector was concerned, stating that it expects the sustained improvement in market conditions to continue across the reinsurance business in the second half of the year, and as a result,” prices and conditions in the non-life business are expected to continue to firm in the upcoming renewals.”

The real question concerns the stability of the world’s equity markets. The company warned that a continued downturn could negatively affect 2nd half results. It concluded, however, that, “Assuming a modest equity market recovery and no extraordinary large loss events, during the remainder of 2002, Swiss Re expects a satisfactory full-year result, given the challenging capital market environment.”