Canadian Underwriter

Swiss Re sees 2015 net income increase 31% to US$4.6 billion compared to 2014

February 23, 2016   by Canadian Underwriter

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All of Swiss Re’s business units contributed positively – although Life and Health (L&H) Reinsurance was a standout – to the 31% increase in net income of US$4.6 billion in 2015 compared to US$3.5 billion in 2014.

Swiss Re's net income climbs to US$4.6 billion  in 2015

“The result benefited from strong underwriting, the absence of major natural catastrophes and from reserve releases, as well as from the strong result in L&H Re,” notes a statement from Swiss Re. The strong 2015 results, together with the strategic framework, provide an excellent base for the future, it adds.

“These results show that we are well-positioned to capture available opportunities, despite headwinds that the entire industry is experiencing as a result of the tough market environment,” David Cole, chief financial officer for Swiss Re Group, suggests in the statement. “Looking ahead, we are in a solid position to combine our capital strength with financial flexibility in order to continue to profitably grow our business,” Cole offers.

Net income attributable to common shareholders was also up for 2015 Q4 compared to 2014 Q4, Swiss Re reports, reaching US$938 million compared to US$245 million. “The comparable prior quarter result reflected the impact of management actions and the unwinding of an asset funding structure supporting a longevity transaction, both in L&H Re,” the statement notes.

Looking at full-year net income by line, Swiss Re reports the following:

  • Property & Casualty Reinsurance was about US$3.0 billion in 2015 compared to $3.6 billion in 2014 (the company cites price softening, large man-made loss burden and lower realized investment gains);
  • Life & Health Reinsurance was US$939 million in 2015 compared to a loss of US$462 million in 2014 (this reflects a strong operating result, lower interest charges and net realized gains);
  • Corporate Solutions was US$340 million in 2015 compared to US$319 million in 2014 (reflecting continued profitable business performance across most lines of business and increased investment income); and
  • Admin Re was US$422 million in 2015 compared to US$34 million in 2014 (driven mainly by higher realized gains from sales of assets as part of the preparation for Solvency II and tax credits in the United Kingdom during 2015).

Premiums earned and fee income for the Group totalled US$30.2 billion for 2015, down from US$31.3 billion for 2014, Swiss Re points out, “mainly reflecting unfavourable foreign exchange rate movements. At constant exchange rates, premiums and fees increased by 4%.”

For net premiums earned (NPE), these amounted to US$15.1 billion in 2015 compared to US$15.6 billion in 2014, mainly driven by foreign exchange rate movements. “Excluding this impact, premiums earned increased by US$497 million, driven by higher premiums in U.S. (United States) casualty and higher earnings from contracts written in prior years in the EMEA (Europe, Middle East and Africa) region,” the company reports.

For L&H Re, premiums earned and fee income decreased by 2.7% to US$11.0 billion in 2015 compared to US$11.3 billion in 2014; for Corporate Solutions, these decreased year-over-year 1.9% to US$ 3.4 billion in 2015; and for Admin Re, gross cash generation for 2015 was US$543 million.

Other results for full-year 2015 and 2014 include the following:

  • P&C Re had a return on equity (ROE) of 22.2% compared to 26.7%;
  • attractive portfolio was maintained at January P&C treaty renewals, despite challenging markets, showing continued success of differentiation through large and tailored transactions;
  • Group return on investments (ROI) was 3.5% compared to 3.7%;
  • net investment income reported was US$3.4 billion compared to US$4.1 billion; and
  • common shareholders’ equity was US$32.4 billion at the end of 2015 compared to US$34.8 billion at the end of 2014.

Looking at 2015 Q4 results, Swiss Re reports P&C Re’s net income declined to US$703 million compared to US$1.2 billion in 2014 Q4. “The quarter was impacted by flood losses in the U.K. and in India,” the statement adds.

With regard to premiums earned, these declined to US$3.7 billion, Swiss Re notes, pointing out that “growth in U.S. casualty was offset by lower motor business in Asia and property business in EMEA and Asia.”

For the other lines, L&H Re reported a net income of US$176 million in 2015 Q4 compared to a US$734 million loss in the prior-year period; Corporate Solutions reported net income of US$16 million compared US$70 million; Admin Re delivered net income of US$152 million compared to a loss of US$185 million.

Michel Lies

“With a clear focus during the past five years on the 2011-2015 group financial targets, Swiss Re successfully delivered on its return on equity and earnings per share targets,” notes the company statement.

“Given the strong business performance and the very strong capital position, Swiss Re’s Board of Directors will propose raising its regular dividend to CHF 4.60 per share,” the company states, adding that the dividend will be paid after shareholder approval at the Annual General Meeting on Apr. 22.

“We have delivered a strong performance based on our underwriting discipline over the past five years and end this period with one of our highest-ever profits,” says Michel M. Lies [pictured upper left], Swiss Re’s Group CEO.

“We maintained a strong capital position, increased the regular dividends with earnings and launched a share buy-back program. At the same time, we broadened the offering of the services we can bring to our clients,” continues Lies, who will be retiring this summer.

Christian Mumenthaler

The strategic framework unveiled in December 2015 “will further ensure our ability to respond to market challenges by being agile,” he says, adding that the framework will “continue to support us as we drive to further differentiate Swiss Re in a challenging environment and broaden and diversify our client base.”

Thanking Lies for more 35 years of service to Swiss Re, Walter B. Kielholz, chairman of the Board of Directors, reports that “under his leadership over the past four years, net income has almost doubled, the capital base has increased significantly and we have distributed more than US$12 billion of excess capital back to shareholders.”

Effective July 1, Christian Mumenthaler [pictured upper right] will become Swiss Re’s Group CEO. With Swiss Re for 17 years, Mumenthaler is currently CEO of Reinsurance. The Reinsurance Business Unit is responsible for about 85% of the Group’s revenue.