Financial market turmoil translated into a 53 percent drop in first-quarter net income for Zurich-based reinsurer Swiss Re, but management said it believes the company's portfolio still has strong earnings possibilities.
For the quarter, Swiss Re reported net income dropped Swiss Franc (CHF) 705 million ($671.7 million at the current exchange rate) to CHF 624 ($594.4 million), translating into earnings per share of CHF 1.84 ($1.75). The results were affected by a 25 percent drop in net premiums earned of CHF 1.2 billion ($1.14 billion) to CHF 3.7 billion ($3.53 billion). The company's combined ratio rose 3.1 points to 96.9.
The company said the results were significantly affected by a CHF 819 million ($780.6 million) loss on the structured credit default swaps in runoff since November of last year.
The company's results also reported life & health premiums dropped 13 percent, or CHF 422 million ($402.1 million), to CHF 2.8 billion ($2.67 billion).
Jacques Aigrain, Swiss Re's chief executive officer, said during an analyst's conference call today that the company did not realize its full earnings possibility because of the market turmoil.
However, the results were good enough to increase the company's quarterly dividend by 18 percent to CHF 4 ($3.81) a share.
Aiding what he described as the long-term development of the company, Mr. Aigrain said Swiss Re quota share arrangements with other carriers such as Berkshire Hathaway aimed at providing more capacity for clients without the commitment of additional capital.
The arrangement with Berkshire, he noted, began on Jan. 1 and is to last for five years. Mr. Aigrain said it does not allow Berkshire access to client files and underwriting of risks.
"The alignment is as strong as it gets," he said of the arrangement strategy.
Standard & Poor's said today that Swiss Re's "double-A-minus" insurer financial strength ratings were unaffected by today's report.
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