May 2 (Bloomberg) -- Swiss Re Ltd., the world’s second-biggest reinsurer, said first-quarter profit climbed 21 percent after lower-than-expected catastrophe claims and the end of a deal with Warren Buffett’s Berkshire Hathaway Inc.
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 and after the expiration in December of an agreement that gave Berkshire Hathaway a fifth of the reinsurer’s new or renewed property and casualty business. Swiss Re, which said contract renewals 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 climbed as much as 1.1 percent and was up 0.3 percent to 74.20 Swiss francs at 9:37 a.m. in Zurich trading, valuing the company at 27.5 billion francs ($29.6 billion).
Swiss Re said profit in the quarter was boosted by a gain of more than $100 million after settling a dispute over a separate so-called retrocession contract with Berkshire Hathaway in March.
Property and casualty premiums rose by 15 percent to $3.54 billion in the quarter, said Swiss Re, which in February forecast growth 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.”
The company reported volume growth of 5 percent during reinsurance contract renewals in April, which mainly focus on business in Asia. Prices were 3 percent lower on a risk-adjusted basis, Swiss Re said.
Swiss Re expects price pressures in some areas, including peak natural catastrophe risks in the U.S., to be “partially offset” by improvements in casualty rates, Chief Financial Officer George Quinn said today on a conference call.
“If we see a continuation of what we’ve had in April, that’s a strong sign of continuing positive returns for the future,” he said.
Swiss Re and larger competitor 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.
Swiss Re shifted about $1.7 billion of its investments during the quarter, mainly into corporate debt from government bonds.
The reinsurer reported a return on investments of 3.4 percent for the quarter, down from 4 percent a year earlier. That return will decline further because of low interest rates, Quinn said.
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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