Reinsurer sold US Admin Re book at a $1bn loss

Swiss Re’s second-quarter 2012  net profit dipped 91% to $83m (Q2 2012:$960m) after it made a $1bn loss on the sale of its US Admin Re business.

However, the reinsurer’s profit for the first half of the year was  up 315% to $1.2bn (H1 2011: $295m) thanks to far fewer first-quarter catastrophe losses.

Swiss Re sold the US part of its Admin Re business, which specialises in buying and running off closed blocks of life insurance business, to Jackson National Life in May.

The $1bn loss on the sale pushed Swiss Re’s Admin Re division overall into a loss of $916m in the second quarter.

Commenting on the $83m profit for the quarter, Swiss Re chief executive Michael Liès said: “Given the impact from the sale of the Admin Re US business, this shows the strength and resilience of our underlying earnings power. With another successful renewal round in July behind us, we will continue to focus on implementing our strategy and capturing growth opportunities in developed and high-growth markets in the second half of the year.”

P/C saves the day

Despite the 91% profit drop during the second quarter of 2012, the company’s underwriting was profitable overall.

Non-life underwriting was profitable during the quarter. The combined ratio was 85.7% (Q2 2011: 81.4%).

The property/casualty business performed well during the second quarter of 2012. The division’s profit jumped 86% to $717m (Q2 2011:$385m). The combined ratio was 81% (Q2 2011:78.1%).

However, profit at the life and health division fell 53% to $248m (Q2 2011:$525m) thanks to an increased cost of claims. The life and health result was also hit by lower investment income, continued negative performance of business written in the Americas prior to 2004 and slightly higher expenses due to strategic initiatives, especially in the health area.

And profits at the corporate solutions unit, which writes primary insurance, fell 50% to $26m (Q2 2011:$52m). The corporate solutions combined ratio jumped to a loss-making 110.4% (Q2 2011: 99.5%) after being hit by higher-than-expected claims from natural and man-made disasters.

Overall, earned premiums increased by 14% to $5.9bn (Q2 2011: $5.2bn).

Positive renewals

Swiss Re also reported that the July renewals for Americas, Australia and New Zealand business, which comprises 20% of the group’s annual treaty reinsurance premiums, were successful. The company achieved rate increases of 3%, and grew its portfolio by 7%.

It added that rates continued to rise, especially in catastrophe excess of loss business in the US, and in key markets of Latin America as well as Australia and New Zealand.

First half

For the first half of 2012, Swiss Re’s overall combined ratio improved to a profitable 85.7% from a loss-making 121% on lower catastrophes.

Premiums earned increased 18.3% to $11.9bn (H1 2011: $10bn).