Earnings

Swiss Re rules out capital hike for any SoftBank deal

Reuters with CNBC.com
Key Points
  • The world's second-biggest reinsurer posted net profit of $331 million, down from $3.56 billion a year earlier, but beating the average estimate of $119 million in a Reuters poll.
  • Swiss Re's results were hit by a run of catastrophes during 2017, having earlier estimated that total global insured losses from catastrophes in 2017 would hit $136 billion, the third-highest on record for the sector.
  • Swiss Re had said this month it was in talks about SoftBank taking a minority stake in a deal that could be worth $10 billion or more.
VIDEO1:2401:24
Swiss Re CFO: Too early to comment on timing of possible SoftBank deal

Swiss Re reported better-than-expected 2017 net income on Friday despite huge claims during a disaster-heavy 2017 and ruled out a capital increase to ease an investment approach from Japan's Softbank that it was weighing.

The world's second-biggest reinsurer posted net profit of $331 million, down from $3.56 billion a year earlier, but beating the average estimate of $119 million in a Reuters poll.

Swiss Re had said this month it was in talks about SoftBank taking a minority stake in a deal that could be worth $10 billion or more.

"We want to extend our access to risk pools, we want to stay on the forefront of technology and we want to make sure that we're helping the world address this protection gap," David Cole, chief financial officer at Swiss RE, told CNBC on Friday.

When asked whether talks with Softbank could lead to the Japanese tech giant taking a minority stake thought be worth as much as $10 billion or more, Cole said he would not be able to comment on the timing of a possible deal or the current speculation regarding its rumored value.

"If we come to the conclusion that we can reach an agreement that is in the interest of our shareholders and in the interest of the company, then we will have something to say about it then," he added.

VIDEO2:2902:29
Swiss Re CFO: Our capital position remains very strong

On Friday, Swiss Re said in a statement that there was no certainty any deal would be concluded, but it would not be issuing new shares to enable SoftBank to make an investment.

"Swiss Re's capital position remains very strong; the issuance of new capital is not under consideration," the reinsurer said in a press release.

"There is no certainty that any transaction will be agreed, nor as to the terms, timing, or form of any transaction," Swiss Re added.

Claims from large natural catastrophes total $4.7 billion in 2017

Swiss Re shares were indicated 1.4 percent higher in pre-market activity. They have gained 2.3 percent in the past 12 months, trailing the Stoxx European sector index, which has risen 6.9 percent.

Swiss Re's results were hit by a run of catastrophes during 2017, having earlier estimated that total global insured losses from catastrophes in 2017 would hit $136 billion, the third-highest on record for the sector.

It estimated claims on Swiss Re from large natural catastrophes would be $4.7 billion in 2017.

As a result, Swiss Re's combined ratio for its main property and casualty business worsened to 111.5 percent from 93.5 percent a year earlier. The figure is a measure of underwriting strength, with a figure above 100 meaning it paid out more to customers than it received in premiums.

Swiss Re and other reinsurers act as financial backstops for insurance companies, helping them cover the cost of claims from natural and man-made disasters.

Despite hurting profits, higher catastrophe costs can allow reinsurers to achieve higher prices for their coverage, which have been in decline for years.

Philipp Schmidli | Bloomberg | Getty Images

Swiss Re said its January renewals, which account for roughly 55 percent of its main property and casualty business, increased by 8 percent to $8.1 billion as the company won new business and achieved higher rates. Prices rose by 2 percent.

Peer Hannover Re said this month prices had stabilized in the annual round of contract renewals at the start of the year. Munich Re said prices in January were up by about 0.8 percent, compared with drops of 0.5 percent in 2017 and 1 percent in 2016.

Swiss Re proposed raising its dividend to 5 francs from 4.85 francs. It also said it wanted to launch a new buyback of up to 1 billion Swiss francs ($1.07 billion) after the previous 1 billion scheme expired on Monday.