Swiss Re Ltd. (SREN), the world’s second- biggest reinsurer, posted a 21 percent increase in first-quarter profit as higher premiums and lower-than-expected catastrophe claims boosted property and casualty earnings.
Net income rose to $1.38 billion from $1.14 billion a year earlier, the Zurich-based company said today in a statement. That beat the $1.06 billion average estimate of seven analysts surveyed by Bloomberg.
Property and casualty income climbed 53 percent due to the absence of large natural disasters in the quarter and after the expiry of a quota share agreement with Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) at the end of December. Swiss Re, which said the renewal of reinsurance contracts in April showed “moderate growth,” reiterated its financial targets.
“It’s a great start to the year for Swiss Re,” said Stefan Schuermann, a Zurich-based analyst with Vontobel Holding AG. “Swiss Re has a very strong balance sheet with a good solvency ratio and non-life was very good.”
Swiss Re said profit in the quarter was boosted by a gain of about $100 million after settling a dispute over a so-called retrocession deal with Berkshire Hathaway in March. Property and casualty premiums climbed 15 percent to $3.54 billion compared with the company’s February estimate for an increase of about 25 percent over the next two years.
A “very strong” first quarter “demonstrates we have the right strategy and structure in place to reach our 2011-2015 financial targets,” Chief Executive Officer Michel Lies said in the statement. “The successful April renewals are another proof of Swiss Re’s ability to perform and grow despite economic headwinds and a continuous low interest rate environment.”
Swiss Re and larger rival Munich Re are seeking to bolster profit partly by investing in higher-yielding assets such as corporate credit and property after the euro region’s debt crisis undermined returns from government bonds.
Lies said on April 24 the company will boost holdings of corporate debt and stocks this year to counter depressed returns from government bonds. The reinsurer reported a return on investments of 3.4 percent for the quarter, down from 4 percent a year earlier.
Munich Re, the world’s biggest reinsurer, said profit in the first quarter was “close to 1 billion euros” ($1.3 billion) after an increase in prices and no major natural catastrophes.
The estimated first-quarter disaster bill in Europe was $1.8 billion as heavy snowfall, sub-freezing temperatures, high winds, ice and flooding spurred claims, according to a report by reinsurance broker Aon Benfield. Natural disasters caused $77 billion in global insured losses in 2012, down from $119 billion the previous year, according to Swiss Re.
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