May 4 (Bloomberg) -- Swiss Re Ltd., the world’s second-biggest reinsurer, posted better-than-expected first-quarter profit as catastrophe claims fell from a record level and investment returns improved.
Swiss Re rose the most in almost two months in Zurich trading after reporting net income of $1.14 billion following a loss of $665 million a year earlier. That beat the $688 million mean estimate of 12 analysts surveyed by Bloomberg.
Natural disasters caused less than $3 billion of insured losses in the industry in the first quarter, compared with almost $53 billion a year earlier when earthquakes hit Japan and New Zealand, according to estimates from Aon Benfield, the world’s biggest reinsurance broker. Swiss Re Chief Financial Officer George Quinn expects the “trend of increasing prices” to continue this year after “very strong” rate gains in natural catastrophe-related business in Japan last month.
“It is an excellent set of results, mainly driven by property and casualty reinsurance because of a benign first-quarter in terms of large losses,” said Daniel Bischof, a Zurich-based analyst with Helvea, who has a “neutral” rating on Swiss Re shares. “We will see a positive market reaction.”
Swiss Re rose as much as 3.4 percent and was up 3.2 percent to 59.70 francs ($65.25) as of 9:19 a.m. in Zurich trading. That brought this year’s gain to 32 percent and made the stock the second-best performer on the 28-company Bloomberg Europe 500 Insurance Index, which has climbed 8 percent.
Earnings also rebounded as Zurich-based Swiss Re boosted its return on investments to 4 percent from 3.9 percent in the year-earlier quarter, according to Quinn.
“We’ve had a very quiet quarter in terms of catastrophes,” Quinn said on a conference call. “The return on investments that we reported today is very high in the current market conditions and I would not expect to repeat that.”
Claims from natural and man-made disasters, including an offshore fire and the grounding of the Costa Concordia cruise ship in January, totaled about $73 million in the first quarter, Swiss Re said, compared with $2.41 billion the firm reported in the year-earlier period.
The company reported “successful” April renewals, which were mainly focused on Japan and other Asian countries. Swiss Re had about $3.48 billion of large natural catastrophe claims in 2011, which is giving the reinsurer leverage to boost prices.
“Overall we have seen a very substantial price increase,” said Quinn. “It is the largest we have reported in a renewal for as long as I can remember.”
Volumes rose by 14 percent for the April renewals and the “fully economic price quality” of the renewed portfolio improved by 17 percentage points, Swiss Re said.
Swiss Re said last month it expects margins to improve because of new business at its life and health unit and a “firming of the reinsurance cycle” at the property and casualty division.
Swiss Re is targeting an average annual increase in earnings per share of 10 percent until 2015 and a return on equity averaging 700 basis points above the risk-free yield of a five-year U.S. Treasury bond. A basis point is one-hundredth of a percentage point.
Swiss Re gave comparative figures for 2011 after reporting under a new structure, which provides a breakdown for its reinsurance, corporate solutions and Admin Re units.
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