Swiss Re profit rises by almost half

Swiss Re saw profits rise significantly despite a lower premium volume Keystone

Swiss Re, the world’s second-largest reinsurer, has announced a 45 per cent increase in net profit, helped by stronger returns on its investments.

The company beat market expectations, with net profit reaching SFr2.5 billion ($2.17 billion) last year, despite a drop in income from premiums.

“Swiss Re expects to deliver further growth in earnings in 2005,” the company said in a statement, adding that it was “optimistic about future business opportunities.”

Analysts polled by the Reuters news agency had predicted that Swiss Re would improve on its 2003 results, when it returned to profitability after two straight loss-making years.

But they had been expecting net profit to be closer to SFr2.27 billion.

The group’s results were helped by stronger investment performance, with total investment reaching SFr6 billion – a 20 per cent increase on 2003.

Return on investments climbed to 5.8 per cent in 2004, a slight improvement on the previous year.

The group said its property and casualty combined ratio – a key industry profitability indicator – was stable at 98.4 per cent despite taking a hit after hurricanes and typhoons struck the United States and Japan in the second half of last year.

Costly disasters

Swiss Re said in October that the disasters would cost around $750 million. They also contributed to the insurance industry’s costliest year on record, when insured damage climbed to $49 billion.

Stable profitability in Swiss Re’s property and casualty business was reached only by dipping into the company’s reserves to help cover claims from the disasters.

Premium income dropped four per cent last year, from SFr30.7 billion in 2003 down to SFr29.4 billion, which was lower than expected.

The insurance industry has warned that it would rather forgo business than cut prices to increase the volume of premiums. Swiss Re itself has cancelled some contracts to keep prices from falling.

But last year’s hurricanes and typhoons, as well as the Indian Ocean tsunami in December, have helped fuel demand for coverage from reinsurers.

Swiss Re announced last month that rates for renewed property and casualty policies had not budged in January, when a large chunk of its non-life business had been up for renewal.

Swiss Re said it would propose a dividend of SFr1.60 per share, up from SFr1.10 in 2003.

“They’re not bad results… the dividend is showing a nice increase, but markets may have been looking for more and they’re not saying anything about a share buy-back. That could disappoint markets a bit,” said René Locher at Kepler Equities.

swissinfo with agencies

Key facts

Swiss Re is the world’s second biggest reinsurer, and the largest in the life and health sectors.
The company operates through more than 70 offices in over 30 countries, employing around 8,000 people.
Swiss Re has been in the reinsurance business since its foundation in Zurich in 1863.
It has three business groups: Property & Casualty, Life & Health and Financial Services.