Swiss Re's net income attributable to common shareholders fell by $877m to $83m (2011: $960m) in the second quarter of 2012 owing to a $1bn loss from the sale of the US business Admin Re.
The global reinsurer's premiums earned and fee income rose to $6.1bn from $5.4bn in 2011. Earnings per share in CHF made a $0.12m loss in Q2 2012 compared with $2.6m in the same period last year.
Shareholder' equity for the first six months of the year stayed flat at $31bn (2011: $30bn). Return on equity (annualised) fell from 15.6% in Q2 2011 to 1.1% in 2012. Return on investments (annualised) remained stable at 4.5% (2011: 3.9%).
In property and casualty reinsurance, net income attributable to common shareholders fell by 53% to $248m (2011: $5525m).
Premiums earned and fee income remained stable at $3bn ($2.3bn), but the combined operating ratio deteriorated from 78.1% in 2011 to 81% in 2012. Return on equity grew to 27% in Q2 2012 from 17% in 2011.
Admin Re reported a loss of $916m in the quarter owing to the loss of $1bn from the sale of the Admin Re US business (REALIC) to Jackson National Life.
This impact is higher than the figures previously estimated in the announcement of the transaction on 31 May 2012, principally due to the fall in interest rates in June. It does not affect the capital benefits of the transaction, but will continue to vary through to closing.
Admin Re shareholders' equity reduced from $7.4bn at the end of Q1 2012 to $6.6bn, the loss on sale being partly offset by rising unrealised gains owing to lower interest rates in Q2.
The sale of the Admin Re business to Jackson National Life is expected to be completed in the second half of 2012. The transaction is expected to result in a $0.9bn dividend to Swiss Re, unlocking capital for redeployment across the Swiss Re Group.
Life & Health reinsurance delivered net income of $248m (2011: $525m). Although the result benefited from realised gains on investments, the cost of claims was significantly higher.
The result also reflects lower investment income, a continuation of the negative performance of business written in the Americas prior to 2004 and slightly higher expenses owing to strategic initiatives, especially in the health area.
Consequently, the operating result was lower than expected. Premium and fee income increased slightly to $2.2bn ($2.1bn). The benefit ratio increased to 73.8% compared with 72.4% in Q2 2011.
Corporate Solutions posted a quarterly profit of $26m ($52m). Premiums earned rose by 22% to $536m (2011: $439m) in line with the business unit's growth plans.
Higher than expected claims from natural catastrophes and man-made disasters in the quarter were partly offset by investment income. The combined ratio for the quarter increased to 110.4% (2011: 99.5%).
Michel Liès, pictured, group chief executive, said: "We have delivered a profit in the second quarter. Given the impact from the sale of the Admin Re US business, this shows the strength and resilience of our underlying earnings power.
"With another successful renewal round in July behind us, we will continue to focus on implementing our strategy and capturing growth opportunities in developed and high-growth markets in the second half of the year."
Swiss Re saw a successful renewal period in July, which was focused on the Americas, Australia and New Zealand and comprised 20% of the group's reinsurance annual treaty premiums.
The group saw economic rate increases of 3% in this renewal season over last year's already strong levels. Overall, the portfolio grew by 7% in volume. Rates continued to rise, especially in Cat XL business in the US, and in key markets of Latin America as well as Australia and New Zealand.
Swiss Re has also been able to take advantage of increasing prices in casualty lines in some markets and expects this trend to continue.
Swiss Re also revised upwards its estimates of premium volume increases for the January and April renewals. Year to date, it estimates that premium volumes have increased by $2.9bn or 24%.
Liès added: "We are looking to grow our share of business from high-growth markets from the current 15% to 20-25% by 2015. We will make the necessary investments to achieve this shift.
"Profitable growth in these markets is a ‘must', as they will play an important role in achieving the five-year financial targets, the group's top priority.
"However, we will not neglect our client base in developed markets. We will capture profitable growth opportunities wherever they arise."
