Swiss Re Q3 Net Off 5% to $1.28 Billion in ‘Turbulent Quarter’

Swiss Re’s third quarter earnings report revealed a five percent drop in net income to CHF 1.469 billion ($1.28 billion) compared to CHF 1.55 billion ($1.35 billion) in the third quarter of 2006. The results actually exceeded most financial analyst’s expectations, despite what Swiss Re termed “a turbulent quarter in the financial markets.”

The world’s largest reinsurer’s net income for the first nine months of 2007 is up 23 percent at CHF 3.992 billion ($3.478 billion). Annualized return on equity for the third quarter was 18.8 percent and 17.2 percent for the first nine months of 2007. Earnings per share for the quarter declined marginally by three percent to CHF 4.20 ($3.66), but have increased strongly by 17 percent for the first nine months of 2007.

“Swiss Re continues to perform strongly. The results of our Property & Casualty and of our Life & Health businesses are excellent,” commented CEO Jacques Aigrain. “The performance is driven by disciplined underwriting, although we also benefited from low natural catastrophe claims during the quarter. Swiss Re will remain resolute in its focus on quality underwriting and active cycle management, and on deploying capital to maximize returns and generate strong earnings growth.”

Swiss Re reported third quarter total investment results of CHF 1.7 billion ($1.48 billion) – excluding linked business- indicating “an annualized return on investments of 4.6 percent for the third quarter and 5.3 percent for the first nine months.” The Group also noted that its “cautious stance on its investment portfolio prevented it from sustaining any material negative impact from the financial market turbulence. Instead, Swiss Re’s net unrealized gains increased strongly from CHF 2.0 billion [$1.74 billion] to CHF 4.2 billion [$3.66 billion], “as the equity portfolio performed well and lower interest rates more than compensated for the wider spreads on fixed-income portfolios.”

The P/C combined ratio was 83.4 percent for the third quarter, “one of the lowest ever reported by Swiss Re,” the bulletin noted. For the first nine months the P/C combined ration is still a very respectable 89.7 percent.

Swiss Re may have emerged better than most financial services companies in the third quarter, but it did not go unscathed, reporting an operating loss of CHF 113 million ($98.5 million). The report noted that “as a result, operating performance for the year to date is 13 percent lower than for the same period in 2006. All Financial Services trading activities are marked to market through the profit and loss account and thus any deterioration in its activities are reported immediately in operating performance. ”

Aigrain indicated that Swiss Re is maintaining its outlook for the rest of the year, citing the excellent nine-month performance figures. This “points towards a successful full year, assuming an average level of natural catastrophes,” he concluded.

Swiss Re received an added vote of confidence from A.M. Best Co., who affirmed its ‘A+’ (Superior) ratings after the earnings figures were released (See related article).

The full report and additional information may be obtained on the Group’s web site at: www.swissre.com.