Swiss Re Q3 Net Income Doubles at $618 Million; Berkshire Loan Terminated

Swiss Re reported third-quarter net income of $618 million, compared to $314 million in the prior-year period. The reinsurer also announced that the” convertible perpetual capital instrument issued to Berkshire Hathaway has been terminated with effect from 3 November 2010.”

CEO Stefan Lippe commented: “Today we are pleased to report that our improved capital position allowed us to reach an agreement to repay Berkshire Hathaway, with no additional charge for bringing forward the repayment date.” The bulletin added that Swiss Re would “expense the interest charges and the 20 percent premium in the fourth quarter, adjusted for foreign exchange. The charge to earnings is expected to be approximately $1 billion pre-tax. After making the termination payment, Swiss Re will still hold significant excess capital above the ‘AA’ level.

Shareholders’ equity increased by $2.4 billion to $29.9 billion in the third quarter of 2010. Return on equity for the third quarter was 9.5 percent, compared to 6.1 percent in the prior-year period. Book value per common share was CHF 77.81 ($79.65) at the end of September 2010, versus CHF 78.44 ($72.51) at the end of June 2010.

Swiss Re also indicated that its Property & Casualty business “delivered excellent operating income of $1.1 billion in the third quarter of 2010, compared to $0.9 billion in the third quarter of 2009. The combined ratio improved to 76.4 percent (or 74.8 percent excluding the unwind of discount) from 84.5 percent (82.7 percent) in the prior-year period, despite an earthquake in New Zealand that impacted operating income by $160 million.

“The combined ratio for the first nine months of 2010 was 95.6 percent. The 2010 third-quarter result benefited from below-average natural catastrophe activity, the company’s continued disciplined underwriting and cycle management approach, and positive prior-year development.”

For the future, Swiss Re said that in view of the “challenge that the low interest rate environment presents,” it would continue to “focus on writing profitable business while opening up new sources of income through its capacity for innovation. The company’s (re)insurance portfolio is well positioned for this environment. Swiss Re remains committed to active cycle management and portfolio steering and will deploy capital to those lines of business where it expects to achieve an appropriate return.”

Lippe added: “At the beginning of 2009, we set out a series of firm commitments aimed at restoring trust in Swiss Re. We have delivered on our promises and successfully turned around the company’s performance. We are now firmly focused on the future, implementing our strategy and leveraging our core capabilities.”

The full earnings report and the presentation slides for media and analysts, prepared for the earnings conference, held are available today, November 4, are available on the Group’s web site.

Source: Swiss Re