Swiss Re, the world’s second-largest reinsurer, posted a lower-than-expected profit for 2016 as sluggish economic growth and exceptionally low interest rates weighed on the company’s revenue. Despite this, Swiss Re promised to raise the dividend.
Swiss Re, which is based in Zurich, had net income of $3.6 billion last year, compared with $4.6 billion a year earlier, the company said in a statement today.
Analysts on average expected a full-year profit of $3.72 billion, according to a survey conducted by «AWP».
Tough Fourth Quarter
«The environment was more challenging in 2016 than in past years, but we achieved and exceeded the group performance target we set ourselves,» said Christian Mumenthaler, the chief executive officer of Swiss Re.
Swiss Re in the fourth quarter achieved net income of $517 million, down from $938 million in the same period of 2015.
«We were reminded in the fourth quarter that large losses do occur, but paying claims and helping to make the world more resilient is what we're here for,» said Swiss Re CFO David Cole.
Higher Dividend
Common shareholders’ equity increased to $34.5 billion at the end of 2016, up from $32.4 billion at the end of 2015. The return on equity dropped to 10.6 percent from 13.7 percent, but exceeded the group’s over-the-cycle target, the company said in the statement.
The combined ratio at property and casualty was 93.5 percent, in line with analysts’ expectations, and compared with 85.7 percent in 2015. Corporate solutions by contrast missed the expectations (99.3 percent) with a ratio of 101.1 percent.
Despite the decline in profit, Swiss Re promised shareholders a higher dividend. The board of directors proposes to raise the dividend 5.4 percent to 4.85 francs per share, up from 4.60 francs a year ago. The dividend will be paid after shareholder approval at the annual general meeting on April 21, 2017.
Share Buy-Back
The company also plans to continue returning capital to shareholders and the board proposes a new share buy-back program of as much as 1 billion Swiss francs to be executed before the 2018 AGM.
Swiss Re cautioned that the buy-back would only be executed if excess capital was available, no major loss occurred and no other business opportunities met the company’s strategic and financial objectives.
Novartis Chairman to Join Swiss Re Board
The company also said it appointed a new group chief underwriting officer. Edouard Schmid will replace Matthias Weber, who decided to step down after 25 years at the company’s service. Schmid has been at the reinsurer since 1991 and currently manages the Property & Specialty Reinsurance unit.
The board of directors will propose for election two new non-executive and independent members. Jay Ralph holds dual U.S. and Swiss citizenship and previously worked for Allianz, including as CEO for the reinsurance business of the German company. Joerg Reinhard is the chairman of Novartis.
