Swiss Re reported a net profit of CHF 150 million ($131.6 million) in the first quarter of 2009, compared to CHF 0.6 billion ($527 million) for the same period last year. Earnings per share declined to CHF 0.45 (39.5 cents). Annualized return on equity for the first quarter of 2009 was 2.9 percent, compared to 8.5 percent for the same period of 2008.
However, the Group’s announcement noted that “shareholders’ equity increased by 15 percent to CHF 23.6 billion [$20.72 billion], compared to year end 2008. This increase is largely due to the convertible perpetual capital instrument issued to Berkshire Hathaway in March 2009, which contributed CHF 3.0 billion [$2.634 billion] to the Group’s equity.
“Net unrealized investment losses of CHF 2.1 billion [$1.844 billion], mainly caused by interest rate movements, were partially offset by positive foreign exchange movements of CHF 1.4 billion [$1.23 billion].”
CEO Stefan Lippe commented: “We are pleased to report that Swiss Re was able to return to profit in the first quarter of 2009. More importantly, we strengthened our capital base and made progress on our plans to reduce risk. The results show that even in this challenging economic environment Swiss Re’s earnings power in its core business remains strong.”
Swiss Re said its P/C division “posted an operating income of CHF 1.0 billion [$878 million} and an outstanding combined ratio of 90.2 percent, (or 88.6 percent excluding unwind of discount). These positive results were driven by premium growth, excellent underwriting performance and favorable claims experience. Robust January 2009 renewals also supported the result, and confirmed the trend towards stronger prices in several major business lines. This further reflects the trust that our clients place in our ability to provide innovative and sustainable (re)insurance solutions, and to meet the continued demand for significant solvency support.”
Swiss Re also seems to have recovered from the crisis caused by investment losses in 2008, which led to the resignation of CEO Jacques Aigrain and the helping hand from Warren Buffett’s Berkshire Hathaway.
The Group reported that its Asset Management division “delivered a return on investment of 1.9 percent.” Swiss Re said that in line with its “previously announced intention to de-risk our portfolio, we have sold selected positions, continued to implement hedging strategies, increased the proportion of short-term maturity securities and invested new cash inflows in lower risk asset classes. While this shift into cash, short-term and government-backed securities reduces the level of investment returns, it allows us to deploy our capital more effectively to core (re)insurance risks.”
Lippe added: “Rebuilding trust with our stakeholders is essential. We have restored our capital position, and continue to de-risk our balance sheet and allocate our capital to those markets and clients that provide sustainable returns. We remain committed to reducing the risks in our legacy portfolio, while holding on to higher rated assets in order to capitalize on improving market conditions. Simplifying the organization to reduce costs and improve efficiencies, while strengthening our client focus, are other important measures we are taking to become more competitive.”
Swiss Re also indicated that its “mid-term financial targets have been revised as a result of the volatile market conditions. Over the next three years, we will focus on generating the necessary capital to avoid potential dilution of our existing shareholders’ capital. Furthermore, we seek to generate a 14 percent return on capital in (re)insurance pricing. We are targeting an AA level of capital adequacy, and as previously announced we aim for a reduction in expenses run-rate of CHF 400 million [$351.2 million} by the end of 2010.”
Lippe’s outlook for the future is upbeat “It will take some time to reduce the asset risk in our portfolios, and we may suffer volatility in the process,” he stated. “However, we see increased demand and reduced capacity in the (re)insurance market driving prices higher. Swiss Re is in a strong position to seize such market opportunities. The successful 2009 renewals clearly underscore our ability to deliver unique value to our clients, and confirm the trust they place in our (re)insurance expertise.”
Source: Swiss Re – www.swissre.com
Topics Profit Loss Reinsurance Swiss Re
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