Reinsurer Swiss Re (SWI.L, SWCEY.PK) on Thursday, posted profit for the first quarter, after incurring consecutive losses for the preceding two quarters. However, net profit fell sharply from last year, as net investment income decreased 38% year-on-year mainly due to derisking.
Commenting on the results, 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."
Net profit for the first quarter dropped to CHF 157 million from CHF 624 million in the same period last year. Net income attributable to common shareholders declined to CHF 150 million or CHF 0.45 per share, from CHF 624 million or CHF 1.78 per share a year ago.
Total revenues for the three-month period declined 14% to CHF 5.96 billion from CHF 6.95 billion last year.
Premiums earned for the quarter rose to CHF 6.53 billion from CHF 6.46 billion prior year, while net investment income declined sharply to CHF 1.31 billion from CHF 2.1 billion last year. "The shift of positions to lower risk assets like government securities and short-term investments caused a year-on-year reduction in the running yield to 4.9% from 5.3%," the company said.
Across the group's segments, premiums earned at Property & Casualty was up to CHF 3.9 billion from CHF 3.7 billion, while premiums earned at Life & Health segment dropped to CHF 2.6 billion from CHF 2.8 billion last year. The group's Legacy unit earned premium of CHF 12 million, up from CHF 8 million in the comparable period.
Net realised investment losses of CHF 0.5 billion were wider than a loss of CHF 0.4 billion in the first quarter last year, primarily due to impairments of CHF 0.8 billion in the current period.
Net unrealised investment losses for the quarter were CHF 2.1 billion, primarily caused by interest rate movements but partially offset by positive foreign exchange movements of CHF 1.4 billion.
Stefan Lippe stated, "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."
Looking forward, the group sees increased demand and reduced capacity in the (re)insurance market and said it intends to generate a 14% return on capital in (re)insurance pricing. Swiss Re also mentioned that it aims towards AA level of capital adequacy and reduction of CHF 400 million in expenses run-rate by the end of 2010.
SWI.L is down 2.26 pence, trading at 41.04 pence on the LSE.
SWCEY.PK last traded Wednesday at $26.25 on the Pink Sheets.
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