Swiss Re reports strong net income of USD 2.6 billion for the full-year 2011, despite an exceptional natural catastrophe burden. By focusing firmly on its core businesses and the implementation of its strategy, the Swiss Re Group is well positioned to outperform and to capture unique growth opportunities in 2012.
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Michel M. Liès, Swiss Re’s Group Chief Executive Officer, says: “With a successful year behind us and a modest but broad market turn  underway, Swiss Re is well positioned to perform and grow in a low-yield environment. Our risk management has proven robust in 2011 with strong Group and P&C results, as well as the excellent performance of our Asset Management portfolio in challenging markets. This solid foundation, combined with unique growth opportunities, means that we are positioned well heading into 2012. We will further capture excellent opportunities in P&C Reinsurance and Corporate Solutions, while focusing on the profitable development of our L&H business, including high-growth markets.”
Strong full-year 2011 results and increase in shareholders’ equity
Net income increased strongly in 2011 to USD 2.6 billion. Underlying performance continued to improve while the result also benefited from a low tax rate. Earnings per share were USD 7.68 or CHF 6.79
(vs USD 2.52 or CHF 2.64 in 2010). The prior-year result included a charge related to the redemption of the convertible perpetual capital instrument issued to Berkshire Hathaway. Shareholders’ equity rose by USD 4.3 billion compared to the previous year to USD 29.6 billion, due to the strong Group result and a USD 3.2 billion increase in unrealised gains, mostly driven by declining interest rates on government bonds.
Book value per common share increased to USD 86.35 or CHF 80.74 at the end of December 2011, compared to USD 81.20 or CHF 73.75 at the end of September 2011.
Strong P&C result despite exceptional nat cat losses
Property & Casualty was significantly impacted by the exceptional accumulation of natural catastrophe events that occurred in Asia,Australia, New Zealand and the United States during the year. The P&C operating result for 2011 declined 48.1% to USD 1.3 billion (vs USD 2.5 billion) due to this burden and reduced investment income. This was partly offset by the favourable development of prior accident years, leading to reserve releases of around USD 1.3 billion.
The combined ratio increased to 101.6% in 2011 (vs 93.9%), reflecting the significant natural catastrophe burden which contributed 29.6 percentage points. Adjusted for natural catastrophes and reserve releases, the combined ratio was a strong 92.9%.
L&H result impacted by market conditions and one-off costs
Operating income in Life & Health was USD 464 million (vs USD 810 million), reflecting the financial market volatility, as well as increased costs in Admin Re® relating to the strategic realignment of the business to the new segment structure. The benefit ratio improved 0.8 percentage points to 87.9%.
Excellent performance in Asset Management
Asset Management delivered an excellent operating income of USD 5.0 billion (vs USD 4.5 billion) and a return on investments of 5.1% (vs 3.5%), driven by realised gains, primarily on government bonds, higher net investment income from net purchases, and lower impairments during the year. The total return on investments, including unrealised gains and losses, rose to 9.7% (vs 6.5%).
Despite recent improvements in market sentiment, the euro sovereign debt crisis continues to create market uncertainty. Swiss Re’s prudent investment stance has paid off under these circumstances. Swiss Re’s exposure to sovereign debt issued by peripheral euro zone countries has been further reduced to USD 59 million at year-end (vs USD 74 million at end of September 2011). Exposure to Greek sovereign debt was nil over the entire year.
Delivering on financial targets remains top priority
During 2011 Swiss Re made very good progress towards achieving its 2011-2015 financial targets. The return on equity was 9.6%  (vs 3.6%) and earnings per share were USD 7.68 or CHF 6.79 (vs USD 2.52 or CHF 2.64). Swiss Re is firmly focused on continuing to implement and further develop its strategy under the leadership of new Group CEO Michel M. Liès. The company’s top priority is to deliver on its financial targets.
As reflected by recent rating upgrades from Standard & Poor’s and A.M. Best, as well as an outlook upgrade from Moody’s, Swiss Re’s capitalisation remains a key strength. At the end of 2011, Swiss Re held excess capital over “AA” of more than USD 7 billion.
Group CEO Michel M. Liès comments: “Despite the challenging environment, we made considerable progress on our strategic priorities in 2011 by building on our core strengths of disciplined underwriting and prudent asset management. After regaining our targeted rating level and establishing our new corporate structure, our three Business Units, Reinsurance, Corporate Solutions and Admin Re®, are in an excellent position to implement their respective growth strategies.”
As a result of the profitable growth achieved in the past 12 months, Swiss Re’s Board of Directors is pleased to propose to shareholders aÂ
dividend for 2011 of CHF 3.002. After paying a dividend to  shareholders, the company’s priority will continue to be the deployment of capital to those lines of business where expected returns are strong. In the event that it is not possible to fully deploy capital at favourable terms, the possibility exists to pay special dividends to shareholders for 2012 and beyond.
Successful January renewals
Swiss Re’s P&C treaty renewals showed strong premium growth of 20% across all regions. Thanks to its strong capital position, Swiss Re was able to respond to increased client demand for natural catastrophe cover and for capital relief transactions, where prices were above the thresholds set. The average price increase for the renewed book was 4% and risk-adjusted price quality improved slightly to 108%.
Swiss Re’s 2012 combined ratio is estimated at approximately 94%, assuming the burden of large claims is as expected. Compared to lastÂ
year, the company anticipates that the combined ratio will increase slightly, due to the higher proportion of capital relief transactions in theÂ
portfolio.
Swiss Re’s future – perform and grow
Swiss Re intends to capture fully business opportunities offered in its core reinsurance and insurance activities, including the 25% growth opportunity offered by the expiry of the quota share agreement with Berkshire Hathaway at the end of 2012. While Swiss Re’s focus will remain resolutely on traditional markets, the company will also seek to capitalise on the potential for re/insurance solutions in emerging and fast-growing markets in Asia and South America.
New Group Chief Underwriting Officer and new Chairman Global Partnerships
Diligent underwriting remains a hallmark of Swiss Re and will continue to be so in the future. Swiss Re is pleased to announce that Matthias Weber will assume the position of Group Chief Underwriting Officer and will join the Group Executive Committee, effective 1 April 2012. He is
currently Division Head Property & Specialty Reinsurance and a
member of the Group Management Board.
In addition, Martyn Parker, CEO Reinsurance Asia and Regional
President Asia, will become Chairman Global Partnerships and will thus succeed Michel M. Liès in this function. Martyn Parker will step down from the Group Executive Committee and become a member of the Group Management Board. As announced on 19 January 2012,  Moses Ojeisekhoba will succeed Martyn Parker as CEO Reinsurance Asia, Regional President Asia and member of the Group Executive Committee, with effect from 15 March 2012.
Group CEO Michel M. Liès comments: “I am very pleased that in Matthias Weber we have found a worthy successor to Brian Gray from within our own ranks. Matthias can look back on a 20-year career in underwriting with Swiss Re and will undoubtedly be a resolute and determined promoter of our underwriting model and standards.
Additionally, Martyn Parker, our new Chairman Global Partnerships, has wide-ranging experience in emerging Asian markets and profound knowledge of the re/insurance industry, which qualify him to be a credible partner for governments, international organisations and NGOs seeking innovative re/insurance solutions to address the major challenges that our society faces.”
