Swiss Re Ltd. (SREN), the world’s second- biggest reinsurer, will boost holdings of corporate debt and stocks this year to counter depressed returns from government bonds, Chief Executive Officer Michel Lies said.
Corporate debt and equities will rise as a proportion of the portfolio while remaining below the industry average, Lies said in an interview yesterday in Lima, where he was attending the World Economic Forum on Latin America.
Reinsurers are adjusting investments after central banks in the U.S., Europe, Japan and the U.K. attacked the longest and deepest recession since the 1930s with low interest rates and asset purchases. Underwriting income is helping to cushion lower bond yields, Lies said.
“There are positive effects compensating the low-yield environment for us,” Lies said. “It forces the industry to be more disciplined in underwriting. If the market goes sometimes a little bit crazy about accepting any kind of risk, we are not ashamed of reducing our premium income.”
Swiss Re expects investment income to decline in 2013, Chief Financial Officer George Quinn said on Feb. 21. The yield on 10-year U.S. Treasuries fell to 1.85 percent at the end of the first quarter from 2.21 percent a year earlier.
Emerging markets will contribute 25 percent of Zurich-based Swiss Re’s premium income by 2015 compared with 15 percent now, Lies said. Latin America accounts for 5 percent. Munich Re is the world’s largest reinsurer.
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