Swiss Re Falls Most Since April as Profit Misses on Life Drop

Aug 06, 2014 4:27 am ET

Aug. 6 (Bloomberg) -- Swiss Re Ltd., the world’s second- biggest reinsurer, slumped in Zurich trading after reporting second-quarter profit that missed analysts estimates, amid a decline in earnings from life and health insurance.

Swiss Re slid as much as 3.4 percent, the biggest loss since April 15. It decreased 2.3 percent to 75.30 Swiss francs at 10:08 a.m., extending this year’s fall to 8.3 percent.

Net income increased to $802 million from $786 million a year earlier, the Zurich-based reinsurer said in an e-mailed statement today. Swiss Re was expected to earn $898 million, according to the average estimate of 12 analysts surveyed by Bloomberg.

“The non-life result was a bit modest and life was disappointing after some one-offs,” Stefan Schuermann, a Zurich-based analyst with Vontobel Holding AG who has a buy rating on the stock, said by telephone.

Net income at the life and health unit fell to $48 million from $154 million a year earlier. Profit for the non-life business rose 22 percent to $553 million as premiums climbed 12 percent.

‘Not Satisfied’

Swiss Re is revamping life and health, the least profitable of its businesses last year, and is still working to improve underlying earnings, Chief Financial Officer David Cole told reporters during a conference call. The company targets a return on equity for the unit of 10 percent to 12 percent by 2015.

“We are not yet satisfied with the unit’s net profit level,” Cole said. “We remain committed to delivering on our life and health reinsurance target.”

Losses from natural catastrophes declined to $158 million in the quarter from $426 million a year earlier. Man-made losses dropped to $26 million from $94 million, Swiss Re said. The losses from catastrophes were about $60 million lower than expected, it said.

The combined ratio, a measure of profitability in property and casualty reinsurance, improved to 93.5 percent compared with 101.1 percent a year earlier, when it was pushed up by higher- than-expected claims from catastrophes and lower reserve releases. The company confirmed it targets a combined ratio of 95 percent for the full year.

Swiss Re, which renews about 20 percent of its annual premiums during the July 1 renewals, the second-largest by volume after the January renewals, said prices were softening in many markets with margins falling.

Most reinsurers negotiate contracts with customers in parts of the U.S. market, Australia and Latin America during the July renewals round.

Reinsurance prices declined on policies renewed for July 1 amid lower losses and as record levels of catastrophe bonds drove an oversupply of capital, Guy Carpenter & Co. LLC said July 8.

Swiss Re said its quarterly return on investments increased to 4.1 percent from 3.8 percent.