Swiss Re Ltd., the world’s second- biggest reinsurer, reported better than expected third-quarter profit after non-life premiums rose by a fifth.
Net income fell 51 percent to $1.07 billion from a year ago, the Zurich-based reinsurer said in a statement today. That beat the $755 million average estimate of 10 analysts surveyed by Bloomberg. Swiss Re shares rose the most in five months.
Profit last year was boosted by a $626 million gain from the sale of Swiss Re’s U.S. Admin Re business to London-based Prudential Plc. Swiss Re reiterated its 2015 financial targets and said it may pay another special dividend.
“This is a solid result helped by a better than expected non-life segment,” Stefan Schuermann, a Zurich-based analyst at Vontobel Holding AG who has a buy rating on the stock, said in a note to investors. “The wording in regard to a special dividend being possible” should increase market confidence for a high payout, he said.
Swiss Re rose as much as 3.4 percent and was up 3.2 percent to 82.40 francs at 9:01 a.m. in Zurich trading, valuing the company at 30.6 billion Swiss francs ($33.6 billion). The stock has risen 25 percent this year.
Non-life premiums increased by 20 percent to $3.95 billion, Swiss Re said.
“This strong result demonstrates our excellent underlying earning power,” said Chief Executive Officer Michel Lies in the statement. “Property and casualty reinsurance was clearly in the lead this quarter.”
The combined ratio, or claims and expenses as a percentage of premiums, worsened to 83.4 percent from 72 percent a year earlier after an increase in losses, including $240 million from hail storms in Germany.
Hannover Re, the world’s third-biggest reinsurer, said earlier this week that third-quarter profit fell 23 percent on lower investment income.
Swiss Re’s solvency ratio under a Swiss test dropped to 229 percent in the first half of the year from 245 percent at the end of 2012 because the company switched some investments to corporate debt and equities from government bonds. The rules require insurers to provide a mark-to-market valuation of assets and liabilities taking into account their investments.
The company said asset rebalancing is “largely completed” with “high-quality” corporate bonds accounting for 28 percent of total investments and equities 7 percent after deploying $3 billion of capital.
The reinsurer said it remained on track to meet its targets of a return on equity of 700 basis points above the average risk-free rate, plus 10 percent average annual growth in both earnings per share and economic net worth per share plus dividends.
Swiss Re said last month it will invest as much as $425 million in Richard Li’s FWD Group as it pushes for growth in Asia. The company said in July it’s in preliminary talks about combining its Admin Re business with Phoenix Group Holdings.
Michel Lies said in June that the company’s priority is to increase its dividend after paying out 3.50 francs per share and a special dividend of 4 francs earlier this year.
“Our priority is to achieve our financial targets while providing a sustainable, growing dividend,” Chief Financial Officer George Quinn said today. “Further capital management measures such as a special dividend are possible but no decision will be made until we have finalized our year-end results.”
–Editors: Dylan Griffiths, Dale Crofts