European reinsurers ride stormy 2004
Munich Re profit built on primary turnaround
World's largest reinsurer Munich Re made a solid start to its 125th anniversary year with the announcement of EUR1.8bn 2004 profit, marking the mid-point of its own projected range of EUR1.7bn to EUR1.9bn - lowered after an associated company revealed EUR2.5bn property loan write-downs.
The EUR1.8bn profit represented a dramatic turnaround on the EUR434mn loss booked in 2003, although that figure - the company's first loss in 98 years - was largely a result of a one-off EUR1.8bn tax charge brought about by reform in Germany's tax laws.
The turnaround was also driven by improvements at Munich Re's ERGO primary insurance division, which transformed a EUR1.43bn loss into a EUR202mn profit.
Munich Re's reinsurance business also fared well, increasing its 2003 profit by EUR100mn to EUR1.7bn. Although heavy natural catastrophe losses added 4.5 points, the combined ratio in the division only deteriorated by 2.2 points from 96.7 percent to 98.9 percent.
The company took EUR713mn natural catastrophe losses in the second half of the year, with EUR613mn resulting from hurricanes and typhoons in the third and fourth quarter, and EUR100mn from the South Asian tsunami.
The company has set a target of 12 percent return on equity for its anniversary year.
Swiss Re expects to continue earnings ascent
World number two reinsurer Swiss Re announced profits up from SFr1.7bn to SFr2.5bn, as it committed to earnings growth through the insurance cycle, targeting 10 percent a year increases in earnings per share.
The profits were the Zurich based company's second best ever, and were earned on premiums broadly flat at constant exchange rates. Premiums fell 4 percent from SFr30.7bn to SFr29.4bn, allowing for the impact of foreign currencies and the weaker dollar.
Despite the industry suffering from a year of record natural catastrophe losses, Swiss Re's property and casualty division saw earnings grow 29 percent from SFr1.8bn in 2003 to SFr2.3bn in 2004, with the sector's combined ratio holding steady at 98.4 percent.
The group's life and health division booked operating profits up 7 percent to SFr1.3bn, while growth in Swiss Re's closed book arm Admin Re contributed to a 4 percent rise in premiums, adjusted for currency movements.
The group's board of directors will recommend a 45 percent increase in dividend to SFr1.60 a share, "reflecting Swiss Re's confidence in its business direction as well as a very strong financial position".
Hannover Re profits fall as hurricanes hit Clarendon
The record round of industry natural catastrophe losses thwarted Hannover Re's hopes of generating a new record result, as net profits fell 12.9 percent from EUR354.8mn in 2003 to EUR309.1mn in 2004 on the back of an EUR88.5mn loss in the group's program business.
As a result of the high losses from the Floridian hurricanes, Hannover Re's subsidiary Clarendon Insurance booked a loss for the first time since its acquisition in 1999.
The impact of the program business unit reduced consolidated net income by 73 cents a share, compared to a contribution of 39 cents a share in 2003. Total net income a share fell from EUR3.24 to EUR2.56 for the year.
Operating profits fell 21.1 percent from EUR732.1mn to EUR577.6mn. As expected, gross premium income contracted by 15.7 percent to EUR9.6bn, as part of Hannover Re's "More from less" strategy in the softening market.
But despite an overall burden of major losses totalling EUR775.4mn, and EUR377.2mn net, the German reinsurer beat its return on equity target of 12.5 percent and, indeed, achieved a sharp rise in profitability in its property casualty reinsurance division, its combined ratio deteriorating by just a point to 97 percent.
Looking ahead, the reinsurer described the property casualty market environment as favourable, going as far as to say: "The so-called hard market will be sustained in 2005."
Overall, the reinsurer is projecting net income of EUR430mn to EUR470mn for 2005, said Hannover Re's chief executive Wilhelm Zeller.
Slim-line SCOR back in the black
French reinsurer SCOR looks to have put the difficulties of 2003 behind it as it reported a return to profitability at the end of last month and earned an upgrade from Fitch Ratings - despite record natural catastrophe losses in 2004 and a fourth quarter reserve charge relating to the latest legal decision in the World Trade Center fallout.
SCOR turned 2003's operating income of EUR252mn into a EUR106mn profit, with net income coming in at EUR68.7mn, reversing the prior-year EUR314mn loss.
SCOR chairman and chief executive Denis Kessler commented: "SCOR has restored its credibility with its clients. SCOR has restored its solvency thanks to the support of its shareholders. SCOR has restored its profitability thanks to the quality of its underwriting. We are resolutely continuing to implement the Moving Forward Plan."
Net combined ratio for non-life reinsurance came in at 100.1 percent, including the reserve charges - a significant improvement on the 121.3 percent recorded in 2003.
Fitch responded by upgrading SCOR's insurer financial strength rating from BB+ to BBB, commenting: "In particular, Fitch notes the recovery of SCOR's group capital adequacy with regard to its risk profile. This is the result of a sharp reduction in the group's capital requirements due to much lower levels of business assumed, while the resumption of positive earnings at group level contributed to an increase in the equity base."