Swiss Re has reported net attributable income of $802m for the second quarter of 2014, up from $786m in the same period last year. Premiums earned and fee income rose to $7.56bn, from $6.79bn in Q2 2013. Shareholders' equity rose by 2% year on year to $33.6bn.
In Property & Casualty Reinsurance net income was up 22% year on year, to $553m, on premiums earned up 12% year on year to $3.56bn. The combined ratio improved to 93.5%, from 101.1% in the corresponding period last year. Swiss Re attributed the improvement to a better claims experience and higher investment returns. The property combined ratio improved to 90.9%, from 110.3% in Q2 2013, when there was an impact from floods in Europe and Canada. However, the casualty combined ratio rose to 104.7%, from 101.3% in Q2 2013. Swiss Re said that this was due to lower net reserve releases, as well as a change in business mix towards more proportional business.
Swiss Re noted that property natural catastrophe rates remained under pressure, because of a lack of natural catastrophe events and excess capital from both traditional and non-traditional sources. "Our superior risk selection remains a key driver in a softening market", said Swiss Re.
The increase in premium volume in P&C was mainly a result of lower external retrocession volumes, plus an increase in business volumes in Asia and Americas from large quota share treaties written at the end of 2013.
Life & Health Reinsurance reported a 69% decline in net attributable income, to $49m, on earned premiums and fee income of $2.89bn, up 16%. The decline was attributed by Swiss Re to "non-economic realised investment losses in the current period from an interest rate hedge and foreign exchange impacts". The rise in premium income was attributed to a growth in health business in Asia and EMEA.
Looking ahead, Swiss Re said that growth in traditional L&H business was expected to be muted, "with cession rates decreasing as primary insurers retain more risk, in particular in mature markets". The reinsurer also conceded that the current low interest rate environment "continues to have an unfavourable impact on the growth of long-term life business for our cedants".
At Corporate Solutions, net attributable income for the quarter was up 20% year on year to $66m. Premiums earned rose 23% to $841m, and the combined ratio improved to 93.2%, from 96.9%. Swiss Re said that the 2014 Q2 result reflected "continued profitable business growth across all lines of business and benign natural catastrophe losses compared to the same period in 2013". This was partially offset "by a larger number of medium-sized man-made losses". The property combined ratio for the quarter improved to 84.5%, from 105.1% in the corresponding quarter last year, with both periods benefiting from favourable prior-year development. In casualty the combined ratio deteriorated by 9.2pp year on year to 116.4%. Swiss Re said that this was mainly due to unfavourable prior-year reserve development.
Swiss Re noted that pricing trends for commercial insurance were generally softening, although there were differences between geographies and types of business.
Finally at Admin Re there was a 7% rise in net attributable income for Q2, to $117m, on premiums earned and fee income of $264m, down 40%. The fall in premiums was mainly a result of the acceleration of premiums in 2013 from a block of business in the US. That in turn was offset by an increase in claims reserves. Swiss Re said that the result was driven by realised gains, profits recognised from a reinsurance agreement covering UK business acquired in June, and lower finance costs following the establishment of a credit facility in April 2014.
Admin Re continues to intend to generate some $900m in cash from 2014 to 2015, paying dividends to the group of the same amount.
In the letter to shareholders, chairman Walter Kielholz and chief executive Michel Liès said that there had been "a continued strong performance", but that "there are also some things we need to fix, such as the underperforming parts of the Life & Health Reinsurance business". Swiss Re said that management was "working hard to improve the underlying earning power of this segment, and the good news is: we are making progress here".
Looking ahead, Swiss Re reiterated that "by 2020 we expect (high-growth markets) to generate 24% of the world's direct insurance premiums, up from about 18% currently".