(Bloomberg) — Swiss Re AG booked $250 million in losses from the August chemical warehouse explosions in the Chinese city of Tianjin, its biggest payout in a quarter that saw profit rise 13 percent.
Net income climbed to $1.4 billion in the three months through September from $1.2 billion a year earlier, the Zurich- based company said in a statement Thursday. That beat the $840 million average estimate of seven analysts compiled by Bloomberg.
Swiss Re said it benefited from strong underwriting and investment results and from a quiet period for natural catastrophes. It plans to use surplus cash to buy back about 1 billion Swiss francs ($1 billion) in shares starting in mid- November.
"Despite an overall insurance market environment that remains challenging, we've again made progress towards our 2011—2015 financial targets," Chief Executive Officer Michel M. Lies said. The shares rose as much as 2 percent and were trading at 92.55 francs as of 10:59 a.m. in Zurich.
Tianjin losses
Reinsurers are under pressure from falling prices for coverage, in part because catastrophe losses have declined in recent years. They also face growing competition from hedge funds and pension funds, while record-low interest rates are squeezing returns on investments. Swiss Re's ROI fell to 3.2 percent from 3.5 percent a year earlier.
Swiss Re is the first major reinsurance company to declare losses over the Tianjin disaster, providing an indication of the final bill for the industry. Munich Re, the world's largest reinsurer, reports earnings next week, as do Scor SE and Hannover Re. Swiss Re said its numbers may change because they involve "considerable uncertainties."
Reinsurance brokerage Guy Carpenter estimates Tianjin will cost insurance and reinsurance companies between $1.6 billion and $3.3 billion. Zurich Insurance Group AG abandoned its proposed bid for British insurer RSA Insurance Group PLC last month after forecasting $275 million in losses from Tianjin.
Validus Holdings Ltd. expects the explosions set it back $44 million. PartnerRe Ltd., which like Validus is based in Bermuda, recorded $60 million in losses from Tianjin during the third quarter.
A series of explosions at a chemical storage depot on Aug. 12 leveled warehouses, factories, dormitories, shipping containers and thousands of new cars. Tianjin officials said 173 people were killed. One of China's worst industrial disasters, it illustrated the dangers insurers face from increased risks in expanding industrial areas. Tianjin is the third-largest port in the world and serves as Beijing's seaport.
Swiss Re's net income from its property and casualty division rose to $1 billion from $842 million. Net income from life and health reinsurance rose to $268 million from $160 million, helped by lower interest charges. Earnings from premiums and fees were stable. Two divisions — Corporate Solutions and Admin Re — saw profit decline.
Swiss Re's third-quarter results were driven by "virtually no natural catastrophe losses," Vontobel analyst Stefan Schuermann, who has a hold on the stock, wrote in a note to clients. "Based on the solid cash intake, the group will be able to not only increase the recurring dividend but finally launch the pre-announced buyback."
Thierry Léger was named CEO of Swiss Re Life Capital Ltd, a role he will start in January. He has been with the company 18 years and was most recently head of life and health products. Sir Paul Tucker, the former U.K. central banker, was nominated to the board of directors. He served as deputy governor of the Bank of England from 2009 to 2013.
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