Swiss Re roars back into profit

Chief financial officer Ann Godbehere delivers the goods Keystone

The world’s second-largest reinsurer, Swiss Re, has trounced forecasts by announcing a net profit of SFr1.7 billion ($1.33 billion) for 2003.

Thursday’s result ended a two-year losing streak. The Zurich-based firm posted a loss of SFr91 million in 2002.

The reinsurer adjusted its targets upwards, saying it expected profit to rise over the next three years on the back of better non-life results and higher investment returns.

Asked whether profit would exceed the SFr2 billion mark in 2004, chief financial officer Ann Godbehere said:

“Certainly that is where we are heading. Yes, we expect profits to continue to rise.”

The sector has benefited from rising premium rates and lower claims from major disasters.

Swiss Re’s net profit beat analysts’ forecasts of a net profit of SFr1.54 billion.

“The result is genuinely strong,” said Edward Booth, an equity analyst at Morley Fund Management in London.

But a rise in the dividend to SF1.10 per share from SFr1 a year ago fell short of the SFr1.50 the market had expected.

Last year the company cut its dividend for the first time in almost 100 years.

Good start to year

Swiss Re said it was off to a good start in 2004, adding that conditions remained strong in the reinsurance industry, driven by firm demand for risk cover from client insurers.

“They’re mega bullish about the market cycle [over the next three years],” commented JP Morgan analyst Michael Hutter.

In life and health reinsurance, operating earnings fell seven per cent to SFr1.22 billion on nine per cent lower premium income.

The financial services unit, which includes large corporate clients, swung to an operating profit of SFr558 million after a loss of SFr633 million in 2002.

Swiss Re is fighting a high-profile legal battle with World Trade Center leaseholder Larry Silverstein.

Silverstein wants the twin towers’ insurers, led by Swiss Re, to pay him $7 billion, double the policy limit. He argues that the destruction of the two towers should be regarded as two distinct events.

swissinfo with agencies

Key facts

Swiss Re employs 8,000 staff in 70 offices in more than 30 countries.
The Swiss Reinsurance Company was founded in 1863, two years after a major fire in Glarus.
Reinsurance is insurance for insurance companies.