Swiss Re 3Q Net Doubles to $1.3B

NU Online News Service, Nov. 3, 2:01 p.m. EDT

Global reinsurer Swiss Re says 2011 third quarter net income was $1.3 billion, up 118 percent from $618 million in the 2010 third quarter as the company saw positive contribution from all segments. 

Stefan Lippe, Swiss Re's chief executive officer, says in a statement, “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’s total revenue in the quarter was down 32 percent to $5.6 billion, compared to $8.3 billion a year ago. But the company saw total expenses of $4 billion in the 2011 third quarter, compared to $7.4 billion in the 2010 third quarter.

On the expense side, "return credited to policyholders" swung from negative-$1.98 billion to positive-$2.19 billion. A Swiss Re spokesperson explains that this figure refers to investments that the company adminsters on behalf of policyholders. Returns on those assets are credited to the policyholder. The assets can be equities, the spokesperson adds, and in a quarter like the 2011 third quarter where equities lose value, the return to the policyholder can be negative if the account swings to a loss.

For property and casualty, operating income decreased 7.3 percent to $1 billion, compared to $1.1 billion in the 2010 third quarter. The 2011 third quarter was impacted by reserve increases for the Feb. 2011 New Zealand earthquake as well as Hurricane Irene, Typhoon Nesat and an explosion at a naval base in Cyprus.

Net premiums earned grew 18 percent from $2.9 billion in the 2010 third quarter to $3.4 billion in this year’s third quarter.

The combined ratio rose 4.4 points to 80.8, driven by “the comparatively higher large-loss burden, only partially offset by the improved net development in prior accident years,” Swiss re explains. The company adds that 11.4 points of the combined ratio relates to the net impact form natural catastrophes, which is 3.1 points below the expected level. 

George Quinn, chief financial officer, says in a video posted on Swiss Re’s website says property and casualty was the main driver of the company’s results. “We’ve benefited in this quarter from strong underwriting performance, from moderate [natural catastrophe] experience, and a positive impact from prior year claim development,” he notes.

Life and health, he says, was “neither good nor bad, but OK.”

Speaking to market conditions, Quinn says there is bad news that should push rates up, including the impact of low interest rates, fall in equity markets, the Euro-zone crisis, and the number of natural catastrophes, including the current flooding event in Thailand. He says these factors should contribute to the continuation of the “broad market turn” that started earlier this year. 

In its statement, Swiss Re says Asset Management “delivered a very strong operating income of $1.2 billion…with a significant contribution from net-realized investment gains of $354 million, mainly from government bonds.”

The company notes that its exposure to sovereign debt issued by peripheral Eurozone countries “remains very low at $74 million” and its exposure to Greek sovereign debt “is nil.”

Swiss Re also addresses the impact of the floods in Thailand, stating it expects the event to have a “severe impact on industrial businesses that have established manufacturing facilities locally.” Reliable claims estimates cannot be made at this time, Swiss Re says, as the flooding is still ongoing.