Swiss Re Reports $1.3 Billion Q3 Net Income; Minimal Sovereign Debt Exposure

November 3, 2011

Swiss Re reported more good news, following the ratings upgrade from Standard & Poor’s. The world’s second largest reinsurer posted $1.3 billion net income in the third quarter of 2011, compared to $600 million in Q3 2010, an 18 percent rise.

The Group’s earnings report, issued today, stated: “All segments contributed to these results, which were supported by a moderate natural catastrophe experience and positive one-offs. Return on equity was 20.5 percent (vs. 9.5 percent in the prior year period), ensuring Swiss Re remains well on track to achieving its 2011– 2015 financial targets.”

CEO Stefan Lippe commented: “I am pleased to announce another successful quarter for Swiss Re. Third-quarter Group results were excellent with a positive contribution from all segments. Our underlying earnings power is very strong and our conservative asset management approach is proving to be appropriate in these times of heightened financial market volatility.”

Swiss Re said “shareholders’ equity rose by $3.0 billion, compared to the second quarter to $27.8 billion, due to the excellent Group result and a $2.5 billion increase in unrealized gains, mostly driven by declining interest rates on government bonds.”

The bulletin also noted that the reinsurer had experienced “very strong underlying earnings” in the P/C sector, reporting an operating income of $1.0 billion, compared to $1.1 billion in Q3 2010. Swiss Re said the “result was based on a very strong underlying performance, further reserve releases and a better-than-expected natural catastrophe experience in the quarter.”

“The combined ratio increased to 80.8 percent. Premiums earned increased by 18.0 percent or 13.1 percent at constant foreign exchange rates, reflecting successful renewals and new business written during 2011, particularly in Asia.”

Swiss Re also indicated that “given the heightened volatility in financial markets as a result of economic uncertainties,” the Group has, and “will continue to maintain a conservative asset management strategy.” Swiss Re said its “exposure to sovereign debt issued by peripheral euro zone countries remains very low at $74 million. The exposure to Greek sovereign debt is nil.”

However, reinsurance will be impacted by the ongoing floods in Thailand, which, Swiss Re noted, “are expected to have a severe impact on industrial businesses that have established manufacturing facilities locally. As the flooding is still ongoing, it is currently not possible to evaluate damage, repair times and supply chain interruptions. As a result, a reliable claims estimate cannot be determined at this time.”

The Group also noted a change in its executive committee, as Brian Gray, Chief Underwriting Officer and a member of the Executive Committee, “has chosen to retire early to return to Canada,” effective April 30, 2012 after “more than 26 years of service. His successor will be announced in the first quarter of 2012.”

In conclusion Swiss Re stressed that “financial targets are its “most important priority,” and that it “remains committed to achieving its 2011– 2015 financial targets, after delivering a return on equity of 20.5 percent (vs. 9.5 percent) in the third quarter, up from 15.6 percent in the second quarter and -10.7 percent in the first quarter.” Stefan Lippe added: “Our five-year financial targets announced in February 2011 are our most important priority and we are fully focused on achieving them.”

The bulletin described the strategy as being focused “on capturing growth without compromising profitability.” Swiss Re also explained that “with the persistently low interest rate environment,” it “believes a modest but broad market turn in the property and casualty market is underway.”

Commenting on the recent rating upgrade from Standard & Poor’s to ‘AA–’ from ‘A+,’ Lippe noted: “The ratings upgrade applies across all three of our business units – Reinsurance, Corporate Solutions and Admin Re® – and supports our excellent client franchise. Swiss Re remains focused on capturing profitable growth opportunities – putting to work our capital strength and our ability to deliver innovative solutions.”

Source: Swiss Re

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