Strong group net income of US$1.44 billion keeps Swiss Re on track to meet targets

Sound underwriting and a benign natural catastrophe experience in 2015 Q1 resulted in Swiss Re’s property and casualty reinsurance arm posting net income of US$808 million compared with US$909 million in 2014 Q1, contributing to the company’s overall 17% increase in net income for the first quarter of this year.

The underwriting and benign cat factors “were offset by price softening and less positive reserve developments than in the prior-year period,” notes a statement issued Thursday by Swiss Re, a wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer.

With regard to P&C Re premiums earned, these decreased slightly to US$3.77 billion in 2015 Q1 compared with US$3.81 billion in 2014 Q1.

The decrease was mainly the result of foreign exchange translations, Swiss Re reports, but adds that if measured at constant foreign exchange rates, premiums would have increased by 6%. “This underlying increase was driven by further growth in the casualty business,” particularly in the United States and the Europe, Middle East and Africa (EMEA) regions.

P&C Re’s combined ratio was 84.4% for the first quarter of 2015 – compared with 79.2% – for the first quarter of 2014, benefiting from a lower than expected level of natural catastrophe losses and reserve releases, the statement notes.

P&C Re’s return on investment (ROI) increased to 4.2% in 2015 Q1 compared with 3.6% in 2014 Q1, while return on equity (ROE) decreased to 22.7% compared with 29.5%.

P&C Re’s performance contributed to the group being ability to deliver a 17% increase in net income of US$1.44 billion during the first quarter of the year compared with US$1.23 billion in the same quarter of 2014.

Swiss Re attributes that performance to strong underwriting and investment results. In fact, the strong group net income and ROE of 16.1% (compared with 14.9% in the first quarter of 2014) was “driven by profitability across all business units and strong investment results,” the statement adds. ROI increased to 3.9% in the first three months of 2015 compared with 3.7% in the same period of 2014.

Overall, premiums earned and fee income amounted to approximately US$7.56 billion in 2015 Q1 compared with US$7.55 billion in 2014 Q1, Swiss Re reports.

“Despite the ongoing challenges from further declining interest rates and market uncertainty, Swiss Re delivered a strong return on investments of 3.9%. Swiss Re is on track to reach its 2011-2015 financial targets by the end of this year,” the company notes.

Profits up 17% at world’s second-largest reinsurer http://t.co/HsaHgjRiCb

— Jonathan N. Seabolt (@WolfOfResearch) April 30, 2015

“The current market and interest rate environment continues to be very challenging. For that reason, I am all the more pleased to say that we have been able to further grow our business profitably and achieve strong results thanks to our client-centred, differentiated approach and diversified business model,” Michel M. Liès, group chief executive officer for Swiss Re, says in the statement.

“In addition, the result shows our ability to manage our risk portfolios to better mitigate challenges and seize market opportunities,” Liès adds.

Other group results include the following:

• Life & Health Reinsurance’s net income was US$277 million in 2015 Q1 compared with US$64 million in 2014 Q1, while ROE was 17.2% compared to 4.4%;

• Corporate Solutions’ net income was US$167 million compared with US$80 million, while ROE was 29.0% compared with 12.0%; and

• Admin Re’s net income was US$206 million compared with US$48 million, while ROE was 12.7% compared with 3.2%.

“The first quarter has seen all business units deliver a very good start to the year,” says David Cole, Swiss Re’s group chief financial officer. “We’re especially pleased that our Life & Health business is on track to meet our profitability target.”

Swiss Re reports that the April treaty renewals saw the company increase the volume of renewed business by 7%, with the majority of the growth stemming from high growth markets. “The price quality overall remains attractive despite further softening in property catastrophe rates,” the company notes.

“Despite a challenging overall environment, the insurance market offers ample opportunities and we remain well-placed to address the significant levels of underinsurance in the world today,” Liès comments.

“Our data shows that there were more natural catastrophes in 2014 than in any other year on our records – yet, over two-thirds of the world’s assets do not yet have any financial protection from these events,” he points out. “We remain firm in our commitment to help our insurance clients to meet this challenge in a profitable and sustainable manner.”