Net income up, property combined ratio down at Swiss Re

Swiss Re Ltd. released Thursday its financial results for 2013, recording a 2.4-point improvement in the property combined ratio from 2012, a 15% increase in total premiums and a 51% increase in fourth-quarter net income.

In property and casualty, Swiss Re recorded premiums earned of $14.5 billion in 2013, up 18% from $12.3 billion in 2012. All figures are in United States dollars.

The 18% increase was “mainly driven by the expiry of the quota share retrocession agreement and new business written in the Americas,” Swiss Re stated.

Claims and adjustment expenses in P&C were up 25%, from $6.3 billion in 2012 to $7.88 billion last year.

The claims ratio increased three points year over year, from 51.2% in 2012 to 54.2% in 2013.

Swiss Re’s underwriting result in P&C was $2.424 billion in 2013, up 2% from $2.38 billion in 2012. Its combined ratio increased 2.6 points, from 80.7% in 2012 to 83.3% in 2013.

For the fourth quarter, the combined ratio was 88.6% in 2013, down from 90.5% in the same period in 2012.

“The property combined ratio improved to 71.8% in 2013, compared to 74.2% in 2012,” Swiss Re stated. “Both periods benefited from benign natural catastrophe loss experience and favourable prior-year claims experience. 2013 included further positive development on Hurricane Sandy (2012) and on the floods in Thailand (2011).”

The combined ratio in casualty increased from 94% in 2012 to 101.9% in 2013, due mainly to “reserve strengthening” for liability claims arising from asbestos in the U.S.

Swiss Re’s obligations for claims “also includes obligations for long-latent injury claims arising out of policies written prior to 1986, in particular in the area of U.S. asbestos and environmental liability,” the firm noted.

Net reserves for U.S. asbestos and environmental was $1.95 billion as of Dec. 312, 2013, while Swiss Re incurred net losses of $352 million and paid $393 net against those liabilities.

Another factor contributing to the increase in the casualty combined ratio was a negative impact in auto due to the hailstorm in Germany and “reserve strengthening” in Britain and France.

The combined ratio in liability jumped 36.2 points, from 54.6% in 2012 to 90.8% in 2013, due mainly to a large net reserve release in 2012.

Swiss Re listed several large natural catastrophe and man-made claims. For example, the floods in Central Europe last spring are estimated to have cost the insurer $291 million this year and hailstorms in Germany were estimated at $267 million. In Canada, the floods last June Calgary are estimated at $177 million while the July 8 rains storm in Toronto is estimated to have cost Swiss Re $63 million in claims.

“Man-made” losses in 2013 included a fire at a chip plant in China in September ($84 million) and water damage at a power station in Russia in September ($58 1million).

For the entire company, Swiss Re reported total revenue was up 10% year over year, from $33.6 billion in 2012 to $36.9 billion in 2013, while premiums earned were up 15%, from $24.661 billion in 2012 to $28.276 billion in 2013.

Net income attributable to common shares was up 6%, from $4.2 billion in 2012 to $4.4 billion in 2013. For the fourth quarter, net income rose from $795 million in 2012 to $1.2 billion in 2013.

“Other than loss-affected layers, natural catastrophe reinsurance rates are softening significantly for all regions due to the strong supply of traditional and alternative capacity in the market,” Swiss Re stated in its financial report. “Casualty rates are generally softening with the exception of Latin America, where rates are stable, and weather-affected motor rates, where there are some increases. Most proportional covers experienced flat to small commission increases for P&C.”

Swiss Re reported net investment income (non-participating) was down 12%, from $4.47 billion in 2012 to $3.9 billion in 2013.