European (Re)insurers Swing to Profitability in 4Q

Swiss Re and Allianz Group, citing a lack of catastrophe payouts and austerity programs, return to profitability.

By CYRIL TUOHY, managing editor of Risk & Insurance®

The absence of major natural catastrophes helped Swiss Reinsurance Co. Ltd., one of the world's largest reinsurance companies, report net income of $372.2 million for the fourth quarter of 2009, compared with a loss of $1.5 billion in the year-ago period, the company reported.

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CEO Stefan Lippe said in a statement that that company had "come a long way" from its dismal financial position a year ago, which led to ratings downgrades, the ouster of former CEO Jacques Aigrain and a companywide restructuring program.

"First, we have fully restored our capital position," said Lippe, in a press release. "Second, we have significantly derisked and strengthened our balance sheet. And third, we have maintained the strong earnings power of our core business through underwriting profitability and cost discipline throughout the group."

Swiss Re's combined ratio also improved to 88.3 percent compared with 104.6 percent in the prior year period.

Operating income generated by the firm's property/casualty segment more than doubled to $787.8 million in the fourth quarter, compared with $377.7 million in the year-ago period, the company also reported.

Swiss Re's life and health segment reported fourth-quarter operating income of $ 81.2 million, down more than 100 percent from operating income of $206.8 million in the year-ago period. The drop was due to tightening credit spreads, the company also said.

The Zurich-based reinsurer's asset management segment also reported a return on investment of 3.3 percent for the fourth quarter, compared with 4.9 percent in the prior year period. Company officials in a release said the drop reflected the shift to higher-quality assets and short-term investments, as well as write-downs of $229 million.

Swiss Re also said it had "terminated substantially all" of its exposures to so-called "legacy" risks, or nonperforming real estate loans bundled into collateralized debt securities.

Legacy risk exposures, the company also said, generated fourth-quarter operating income of $31.4 million, up from a net operating loss of $2.8 billion in the year-ago period.

ALLIANZ

Allianz Group, the Munich, Germany-based primary property and life insurer, reported fourth-quarter net income of $1.4 billion from continuing operations, up from a net loss of $196.1 million in the year-ago period.

Michael Diekmann, CEO of Allianz, also pointed to the absence of major natural catastrophes and the performance of the stock market as reasons for the change in fourth-quarter numbers.

"While the financial crisis undoubtedly impacted our results, we have nevertheless delivered a very robust and sound performance quarter on quarter," he said, in a press release.

Allianz's property/casualty sector saw net income jump 21.9 percent to $1.07 billion, the company also reported. Net income from the company's life and health sector rose, to $584.2 million from a loss of $683.0 million in the year-ago period, the company also said.

Fee and commission income, along with investment gains, helped the company's asset management unit post net income from continuing operations of $262.3 million, up 49.2 percent over the year-ago period, the company also said.

March 2, 2010

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