Swiss Re back in profit

Swiss Re reported net income of SFr506m for the full year 2009 returning to profit after devastating losses of SFr 864m last year.

It estimated its excess capital at AA level increased to more than SFr9bn.

Financial Highlights in Swiss France(SFr) (2008 in brackets)

• Premiums earned 24 606m (25 501m)
• Fee income from policyholders 916m (808m)
• Proprietary net investment income 6 168m (6 865m)
• Net investment income from unit-linked
• and with-profit business 767m (1 016m)
• Proprietary net realised investment gains/losses –3 021m (–4 689m)
• Net realised investment gains/losses from unit-linked and with-profit business 3 754m (–4 793m)
• Other revenues 193m (270m)
• Total revenues 33 383m (24 978m)
• Total expenses –32 429m (–26 328m)
• Income/loss before income tax expense 954m (–1 350m)
• Net income/loss 723m (–864m)
• Net income/loss attributable to common shareholders 506m (–864m)

Stefan Lippe, Swiss Re’s chief executive officer, said: “Today, I am proud to say: we have come a long way.

“First, we have fully restored our capital position. Second, we have significantly de-risked and strengthened our balance sheet. And third, we have maintained the strong earnings power of our core business through underwriting profitability and cost discipline throughout the Group.

“These robust achievements for the year enable us to continue to support our clients and generate value for our shareholders.”

Capital position

George Quinn, Swiss Re’s chief financial officer, said: “In 2009, our capital position improved steadily quarter by quarter. At year end, our estimated excess capital at AA level was more than SFR9bn.

“Our declared priority is to regain AA rating and to redeem the convertible perpetual capital instrument. The substantial improvement in our financial flexibility increases our confidence that we will achieve these targets.”

P&C results

Q4 P&C operating income increased to SFr853m compared to SFr409m in the prior year period. With natural catastrophe losses at low levels, the combined ratio improved to 88.3% (or 86.5% excluding unwind of discount), compared to 104.6% (103.3%) in 2008.

Fully year P&C operating income increased 39% to SFr3.8bn in 2009 from SFr2.7bn in 2008. The combined ratio improved to 88.3% (or 86.5% excluding unwind of discount) for the full year, compared to 97.9% (96.1%) in 2008.

Confidence

Lippe said: “The strong fundamentals of our business underpin my confidence in the future. Few reinsurers can match the size and diversification of our portfolio.

“And fewer still can match our capital strength, our underwriting performance and our ability to innovate. Based on these strengths, we are well placed to reinforce our competitive edge.”

Having made considerable progress in the past year, the Group believes now is an appropriate time to re-establish targets. Swiss Re aims to achieve a return on equity of 12% over the cycle.

“This target reflects the lower yield environment and the shift in the company’s asset portfolio towards lower-risk and shorter duration assets.

“There is still work to be done in 2010, including the continuing optimisation of the investment portfolio and the further unwinding of the remaining Legacy positions. Swiss Re expects this process to be largely completed in the course of the year.