Swiss Re reports net profit of CHF 150 million for first quarter of 2009

Stefan Lippe, Swiss Re CEO

Earnings per share were CHF 0.45 Annualised return on equity 2.9%

Swiss Re reports a net profit of CHF 150 million for the first quarter of 2009. Property & Casualty delivered premium growth and excellent underwriting performance, while Life & Health income grew as a result of favourable mortality developments.

CEO Stefan Lippe said: “We are pleased to report that Swiss Re was able to return to profit in the first quarter of 2009. More importantly, we strengthened our capital base and made progress on our plans to reduce risk. The results show that even in this challenging economic environment Swiss Re’s earnings power in its core business remains strong.”

Group results back to profit in the first quarter
Swiss Re reported a net profit of CHF 150 million in the first quarter of 2009, compared to CHF 0.6 billion for the same period last year. Earnings per share declined to CHF 0.45. Annualised return on equity for the first quarter of 2009 was 2.9%, compared to 8.5% for the same period of 2008.

Shareholders’ equity increased by 15% to CHF 23.6 billion, compared to year end 2008. This increase is largely due to the convertible perpetual capital instrument issued to Berkshire Hathaway in March 2009, which contributed CHF 3.0 billion to the Group’s equity. Net unrealised investment losses of CHF 2.1billion, mainly caused by
interest rate movements, were partially offset by positive foreign exchange movements of CHF 1.4 billion.

Property & Casualty benefited from excellent underwriting
Property & Casualty posted an operating income of CHF 1.0 billion and an outstanding combined ratio of 90.2%, (or 88.6% excluding unwind of discount). These positive results were driven by premium growth, excellent underwriting performance and favourable claims experience.

Robust January 2009 renewals also supported the result, and confirmed the trend towards stronger prices in several major business lines. This further reflects the trust that our clients place in our ability to Swiss Re reports net profit of CHF 150 million for first quarter of 2009 Earnings per share were CHF 0.45 Annualised return on equity 2.9% provide innovative and sustainable (re)insurance solutions, and to meet the continued demand for significant solvency support.

Operating income improved in Life & Health
Life & Health operating income grew to CHF 280 million in the three first months of 2009 from CHF 17 million in the first quarter of 2008. The benefit ratio improved to 86.9%, from 91.3% in the same period of 2008. Favourable mortality experience in the US, as well as better pricing, had a positive effect on the results of our Life & Health unit in the reporting period.

Asset Management maintained focus on de-risking
Asset Management delivered a return on investment of 1.9%. In line with our previously announced intention to de-risk our portfolio, we have sold selected positions, continued to implement hedging strategies, increased the proportion of short-term maturity securities and invested new cash inflows in lower risk asset classes. While this shift into cash, short-term and government-backed securities reduces the level of investment returns, it allows us to deploy our capital more effectively to core (re)insurance risks.

Legacy generated small gain in 2009
The Legacy unit generated a net operating income of CHF 12 million for the first quarter of 2009. Gains from former trading activities were offset by losses related to the structured credit default swaps.

Priorities and targets
Swiss Re’s priorities are geared to delivering superior client services and sustainable shareholder value, building on our strengths in (re)insurance and the expertise of our people. We have established clear priorities to focus on our core business, ensure capital strength and position the company to compete successfully in this challenging environment. We continue to allocate capital to the most profitable parts of the business and develop innovative solutions for our clients.

“Rebuilding trust with our stakeholders is essential,” Stefan Lippe said. “We have restored our capital position, and continue to de-risk our balance sheet and allocate our capital to those markets and clients that provide sustainable returns. We remain committed to reducing the risks in our legacy portfolio, while holding on to higher rated assets in order to capitalise on improving market conditions. Simplifying the organisation to reduce costs and improve efficiencies, while strengthening our client focus, are other important measures we are
taking to become more competitive.”

Swiss Re’s mid-term financial targets have been revised as a result of the volatile market conditions. Over the next three years, we will focus on generating the necessary capital to avoid potential dilution of our existing shareholders‘ capital. Furthermore, we seek to generate a 14% return on capital in (re)insurance pricing. We are targeting a AA level of capital adequacy, and as previously announced we aim for a reduction in expenses run-rate of CHF 400 million by the end of 2010.

Outlook
CEO Stefan Lippe holds a positive view of the future. “It will take some time to reduce the asset risk in our portfolios, and we may suffer volatility in the process. However, we see increased demand and reduced capacity in the (re)insurance market driving prices higher. Swiss Re is in a strong position to seize such market opportunities,” he continued. “The successful 2009 renewals clearly underscore our ability to deliver unique value to our clients, and confirm the trust they place in our (re)insurance expertise.”