Swiss Re Rebounds from 2008 Loss; Reports $469 Million FY Net Income

February 18, 2010

Swiss Re returned to profit in 2009. The world’s number two reinsurer reported net income of CHF506 million [$468.9 million], compared to a loss of CHF 864 million [$800.6 million] in 2008.

The earnings statement noted: “Net income was impacted by impairments of CHF 2 billion [$1.853 billion], mainly in the securitized products portfolio, and by mark-to-market losses of CHF 1.9 billion [$1.76 billion] on corporate bond hedges. The unrealized gains on these hedged corporate bonds of CHF 2.6 billion [$2.408 billion] are reflected in shareholders’ equity.

Earnings per share were CHF 1.49 [$1.38], compared to a negative figure of -CHF 2.61 [$2.42] in 2008.

For the fourth quarter Swiss Re reported net income of CHF 403 million [$373.6 million], compared to a loss of CHF 1.7 billion [$1.576 billion] in Q4 2008. Earnings per share were CHF 1.18 [$1.094] in the quarter, compared to a loss per share of CHF 5.34 [$4.95] in the fourth quarter of 2008. Annualized return on equity rose to 7 percent, compared to a negative figure of 3.4 percent in the prior year period.

The strong performance is good news for shareholders and creditors, including Warren Buffett’s Berkshire Hathaway. Shareholders’ equity increased to CHF 26.2 billion [$24.274 billion] at the end of 2009, compared to CHF 20.5 billion [$18.99 billion] at the end of 2008. Return on equity for the full year increased to 2.3 percent, compared to a minus figure of 3.4 percent in 2008.

Book value per common share was CHF 67.70, [$62.70] an increase of 11.1 percent compared to CHF 61.0 [$5.65] at the end of 2008. “Given the restored capital strength of the Group and the continued healthy operating performance of its core business, the Board of Directors proposes to increase the dividend to CHF 1.00 [$0.926] [from CHF 0.10 (app. 9 cents)],” said the bulletin. “This is the first step in returning to a normal dividend policy.”

Property & Casualty operating income increased to CHF 853 million [$790 million] in the fourth quarter of 2009, compared to CHF 409 million [$378.8 million] in Q4 2008.

Swiss Re noted that natural catastrophe losses had been at “low levels,” which contributed to an improvement in the combined ratio to “88.3 percent (or 86.5 percent excluding unwind of discount), compared to 104.6 percent (103.3 percent) in Q4 2008. For the full year the combined ratio was also 88.3 percent (or 86.5 percent excluding unwind of discount) for the full year, compared to 97.9 percent (96.1 percent) in 2008.

CEO Stefan Lippe commented: “Today, I am proud to say: we have come a long way. First, we have fully restored our capital position. Second, we have significantly de-risked and strengthened our balance sheet. And third, we have maintained the strong earnings power of our core business through underwriting profitability and cost discipline throughout the Group. These robust achievements for the year enable us to continue to support our clients and generate value for our shareholders.”

George Quinn, Swiss Re’s CFO, added: “In 2009 our capital position improved steadily quarter by quarter. At year end, our estimated excess capital at AA level was more than CHF 9 billion [$8.34 billion]. Our declared priority is to regain AA rating and to redeem the convertible perpetual capital instrument [from Berkshire Hathaway]. The substantial improvement in our financial flexibility increases our confidence that we will achieve these targets.”

The complete report and additional information, including a replay of today’s earnings conference call may be obtained on the Group’s web site at: www.swissre.com.

Source: Swiss Re

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