Swiss Re reports half-year net income of USD 2.3 billion on solid underwriting and a strong investment result

Michel M. Li?s, Group Chief Executive Officer, says: "The first half of 2015 has again put our business model to a good test. The result adds to our long track record of solid underwriting and investment performances. In a continued volatile capital markets and challenging pricing environment, we were able to leverage our differentiated product and service offering in combination with our global scale to help our clients succeed. This is reflected in this solid set of figures. Despite the ongoing uncertainty about overall economic growth in many areas of the world — as shown by continued historically low interest rates — we were able to support our underwriting expertise with a strong investment result."

Group net income increases; strong 4.0% return on investments
All Business Units contributed to the Group net income of USD 2.3 billion for the first half of 2015 (vs USD 2.0 billion in H1 2014). Net investment income for the period was USD 1.8 billion, a decrease from the prior-year period, in part related to net asset outflows. The year-to-date Group return on investments was 4.0% (vs 3.9%).

The annualised return on equity for the first six months was 13.5% (vs 12.6%) with earnings per share of CHF 6.27 or USD 6.60, compared with CHF 5.27 or USD 5.92 for the prior-year period.

Book value per common share decreased to USD 94.10 or CHF 87.89 compared to USD 101.78 or CHF 101.12 as of 31 December 2014. The decrease followed the return of USD 2.6 billion in dividends to shareholders in Q2 2015 and was also related to lower unrealised gains due to higher interest rates. Swiss Re's Group capital position remained strong with common shareholders' equity of USD 32.2 billion as of 30 June 2015.

P&C Re net income supported by benign natural catastrophe experience
P&C Re delivered net income of USD 1.3 billion over the first six months of the year (vs USD 1.5 billion in H1 2014). The current year net income includes a higher tax impact, lower net realised gains compared to the prior-year period and market softening, partially offset by lower expenses.

The half-year combined ratio was 88.7% (vs 86.1%). The current period benefited from a benign natural catastrophe experience and positive prior-year development, but was affected by price softening and changes in the business mix.

Premiums earned were almost flat at USD 7.3 billion, compared to USD 7.4 billion in H1 2014. This reduction was largely due to foreign exchange differences between 2014 and 2015. Measured at constant foreign exchange rates, premiums grew by 6%, driven by premium growth in the Americas and EMEA as well as reduced external retrocessions.

L&H Re reports rise in net income; on track to reach its ROE targets
L&H Re net income for the first six months was USD 495 million (vs USD 112 million in H1 2014). The increase reflects a good operating result, combined with higher net realised gains and a positive foreign exchange impact.

L&H Re's annualised ROE was 16.6%, reflecting the progress on the Business segment's profitability target. At the Investors' Day in June 2013, L&H Re announced a target of 10%–12% return on equity by the end of 2015.

Premiums earned and fee income were almost flat for the first six months at USD 5.3 billion (vs USD 5.6 billion). Measured at constant foreign exchange rates, L&H Re premiums and fee income grew by 4%. This growth was supported by higher levels of new business in all markets. The operating margin was 10.3% (vs 8.6%).

Corporate Solutions net income up 64%; ROE of 20.8%
Corporate Solutions generated net income in the first six months of USD 239 million (vs USD 146 million in H1 2014). The 64% rise was driven by profitable business performance across most lines of business and net realised gains. The result was supported by the absence of natural catastrophe events but offset by higher man-made losses during the first six months.

Premiums earned grew by 3% to USD 1.7 billion. At constant foreign exchange rates, the premium growth was 7% compared to the prior-year period, with the highest growth in Europe and Latin America. The pace of growth slowed due to a challenging market environment. The combined ratio improved to 92.4% for the first half year (vs 94.2%).

Corporate Solutions continued to expand its footprint by opening an office in Melbourne, its eighth in the Asia-Pacific region. The Business Unit also completed the acquisition of Sun Alliance Insurance China Limited in May and is now licensed and operating in mainland China as Swiss Re Corporate Solutions Insurance China Ltd.

Admin Re® net income increases; dividend of USD 401 million up-streamed to the Group
Admin Re® delivered net income of USD 249 million in the first half of 2015 (vs USD 165 million in H1 2014). The increase in net income was driven by higher realised gains from sales of fixed income securities as part of the preparation for Solvency II and tax credits following the finalisation of the UK year-end statutory results.

Gross cash generation was USD 139 million (vs USD 473 million). The 2014 period benefited from a UK statutory valuation release and a reserve release against the risk of credit default. A dividend of USD 401 million was paid to the Group in the second quarter of 2015.

David Cole, Group Chief Financial Officer, says: "The Business Units have stood up well to the pressures our industry faces and the second quarter of good profitability in L&H Re is a further sign that our management actions are taking effect. Across all business lines, we have continued to move ahead with discipline while taking full advantage of the attractive opportunities in the market. These numbers highlight the value of the close collaboration with our clients and our ability to monetise our product and service offering, especially when concluding tailor-made transactions with differentiated pricing as achieved in the second quarter."

Second quarter performance across the Group
The Group net income for the second quarter was USD 820 million
(vs USD 802 million in Q2 2014) with all Business Units contributing positively to the result. The Group net investment income for the quarter was USD 898 million with net realised gains of USD 328 million. This drove the Group return on investments for the quarter of 4.2% (vs 4.1%).

For the second quarter P&C Re delivered a net income of USD 453 million (vs USD 553 million), based on an underwriting result in line with the prior-year period. Premiums decreased slightly to USD 3.5 billion (vs USD 3.6 billion), also impacted by unfavourable foreign exchange translations. P&C Re's combined ratio for the quarter was flat at 93.3% (vs 93.5%).

Net income in L&H Re showed a strong increase to USD 218 million (vs USD 48 million). The result benefited from good operating results, net realised gains and lower interest charges. Premiums earned and fee income were slightly lower at USD 2.6 billion (vs USD 2.9 billion). The operating margin was 11.0%, significantly above the 7.1% in Q2 2014.

Corporate Solutions net income was USD 72 million (vs USD 66 million), driven by continued profitable business performance on property and credit lines, increased net realised gains from investments and insurance business in derivative form. Premiums earned were USD 843 million (vs USD 841 million). At constant foreign exchange rates, the underlying premium growth was 3.8%, with the highest growth in Asia and Latin America. The combined ratio was 97.3% (vs 93.2%).

Admin Re® delivered a net income of USD 43 million for the quarter (vs USD 117 million) and quarterly gross cash generation was USD 87 million. The quarterly net income was supported by net realised gains but impacted by an unfavourable adjustment of USD 62 million largely due to the recording of income on funds withheld assets within the US business.

Successful July volume growth driven by tailored transactions
The July treaty renewals, which focus on the Americas and the Australia and New Zealand region, were successful. Swiss Re increased treaty renewal premium volume by 31%. Volume growth was driven by tailored and large transactions as well as growth with the "Regional & National" client segment. Year-to-date risk adjusted price quality of the renewed portfolio remained stable at 105%, the same level seen at the January and April renewals this year.

On track to reach targets by the end of 2015
The Group is on track to achieve its 2011–2015 financial targets. The annualised return on equity for the six-month period was 13.5% and earnings per share were USD 6.60 or CHF 6.27.

Focus on long-term opportunities
The earthquakes which struck Nepal in April and May this year were a tragic reminder of the importance of access to insurance to help individuals, governments and societies soften the economic blow of natural disasters. Two recent examples of such Swiss Re partnerships were the inclusion of reinsurance for the first time as part of the Florida Hurricane Disaster Fund and the recent expansion of the African Risk Capacity, which provides a natural disaster financing pool to participating African nations.

Group Chief Executive Officer Michel M. Li?s says: "Even though market conditions are difficult, it is important to not lose sight of the many opportunities we have for our industry. Addressing the current high levels of underinsurance presents an important long-term chance for re/insurers to grow. This is true for natural catastrophe protection, especially in emerging economies. It is also true for the large life and health protection gaps, which can leave families and individuals exposed to the financial shocks of a sudden disability, loss of a family member or need for long-term care. In this respect, insurance and Swiss Re can play an important and vital role." 

Details of year-to-date performance (H1 2015 vs H1 2014)

Details of second quarter performance (Q2 2015 vs Q2 2014)