Swiss Re Profits up 45% to $2.167 Billion

Swiss Re joined Munich Re in reporting strong 2004 results. The group reported net profits of CHF 2.5 billion ($2.167 billion) compared to CHF 1.7 billion ($1.474 billion) in 2003, a 45 percent gain, despite 2004’s natural catastrophe losses.

Swiss Re’s return on equity improved to 13.6 percent, from 10.2 percent in 2003, and the company announced a 45 percent dividend increase to CHF 1.60 ($1.39) per share. The earnings announcement noted that all three of the company’s business groups “contributed to the strong performance and an excellent 5.8 percent return on investments further enhanced Swiss Re’s 2004 earnings.”

CEO John Coomber commented: “Our CHF 2.5 billion profit for 2004 demonstrates Swiss Re’s ability to successfully grow earnings. Looking ahead, we are resolved to maintain pricing adequacy and we see our strategies for Asia and for risk securitisation as key to delivering growth in earnings per share.”

The bulletin noted that Swiss Re’s “focus on underwriting profitability led to earned premiums being broadly flat at constant exchange rates, while the impact of foreign currencies and in particular the weaker US dollar led to an overall decline in premiums of 4 percent to CHF 29.4 billion [$25.5 billion], from CHF 30.7 billion [$26.6 billion] in 2003.

“An excellent investment result, with a return on investments of 5.8 percent, up from 5.1 percent in 2003, contributed to the higher earnings. The total investment result reached CHF 6 billion [$5.2 billion], an increase of 20 percent over 2003. Despite the low interest rate environment, net investment income increased 10 percent at constant exchange rates to CHF 4.9 billion [$4.25 billion]. Very strong operating cash flows of CHF 6.6 billion [$5.72 billion] and significant growth in Admin ReSM business in 2004 provided the platform for this increase.

“Net realised gains grew substantially to CHF 1.1 billion [$953.5 million] from CHF 376 million [$326 million] in 2003, reflecting lower impairment charges and higher realised gains on equities.”

Swiss Re recorded a 29 percent increase in its P/C Business Group as earnings rose to CHF 2.3 billion [$2 billion] in 2004, from CHF 1.8 billion [$1.56 billion] in 2003. “Although 2004 was a peak year for natural catastrophes, the combined ratio remained stable at 98.4 percent,” said the announcement. “Increased claims from natural catastrophes of CHF 760 million [$658 million] compared with 2003 were offset by improved underwriting performance and a release from equalisation reserves of CHF 241 million [$209 million].

“Earned premiums declined 8 percent (5 percent at constant exchange rates) to CHF 16 billion [$13.87 billion], primarily reflecting higher retentions by clients.

“The Life & Health Business Group delivered a 7 percent increase in operating income to CHF 1.3 billion [$1.127 billion], with the return on operating revenues increasing to 9.1 percent from 8.7 percent in 2003.

“Premium income was flat at CHF 10.2 billion [$8.84 billion], however, adjusted for currency movements, premiums grew by 4 percent due to growth in the Admin ReSM business.

“The Financial Services Business Group’s operating income grew 25 percent in 2004 to CHF 695 million [602.5 million]. The premium business, which represents 87 percent of the business group’s earnings, experienced favourable underwriting conditions, particularly in credit business, leading to a 5 percent (9 percent at constant exchange rates) increase in premiums earned to CHF 3.2 billion [$2.77 billion]. The combined ratio further improved to 92.9 percent from 94.7 percent in 2003.

“The fee business earnings at CHF 87 million [$75.4 million] were in line with 2003 reflecting a weaker US dollar and a less attractive trading environment in corporate finance markets in 2004, offset by growth in fees from insurance-linked securities and third party asset management.”

Swiss Re said it’s optimistic about future business opportunities, noting its leading market position,” which it said it had “utilised effectively in the recent renewals.” It expects to see “further growth in earnings in 2005.” The company stressed that its “clear priority is growth in earnings throughout the insurance cycle. Swiss Re has therefore introduced a growth target of 10 percent for its earnings per share, which, together with the return on equity target of 13 percent, reflects the Group’s commitment to continue to grow returns for its shareholders.”

The announcement also noted: “At the Annual General Meeting on 9 May 2005, Swiss Re will propose Dr. Jakob Baer for election as a new member of the Board of Directors. Dr Baer, an attorney-at-law and a Swiss citizen, was previously the CEO of KPMG Switzerland and a member of KPMG’s European and international management boards. Jorge Paulo Lemann, a board member since 1999, will step down at the forthcoming Annual General Meeting.

The complete earnings report and additional information are available on the company’s Website at: www.swissre.com.