Swiss Re reported their 4Q14 and FY14 results on 19 February 2015. Overall the results were solid and are not expected to impact credit margins or ratings. However they did demonstrate a continuation of two key trends in play for the past 18 months for Swiss Re (and the broader reinsurance market). These trends are as follows:
- Tougher conditions in the reinsurance market with softer pricing/renewals (CEO said he expects the “the overall reinsurance market environment to remain challenging over the next years”).
- Return of excess capital to shareholders.
The Swiss Re AUD Tier 1 securities are seen as fairly priced at current levels.
Key figures:
- FY14 NPAT US$3.5bn, down 20% from US$4.4bn in FY13 due to a number of one-off items but also continued reduction in reinsurance pricing (i.e. a softer market)
- 4Q13 NPAT US$245m, down from US$1.2bn in 4Q13 and below consensus estimates of $325.1m
- Continuation of the trend of returning excess capital to shareholders with a CHF(Swiss Franc) 4.25 ordinary dividend, CHF 3.00 special dividend and announcement of a CHF1bn share buyback program
- Solid investment performance including US$3.8bn increase in net unrealised gains, predominately long dated Government and corporate bonds. As a result, shareholder’s equity has increased from US$31.9bn at 31 December 2013 to US$34.8bn at 31 December 2014 (see chart below). The company cite that capital levels remain more than US$10bn over those required by Standard & Poor’s at the AA rating level
Source: Swiss Re Company Presentation