Swiss Re offers cash to shareholders as reinsurance rates fall
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(Reuters) — Swiss Re Ltd., the world's second largest reinsurer, offered a bumper dividend payout and a share buyback on Thursday, as falling prices make it harder for reinsurers to put capital to work.
Swiss Re and other reinsurers help insurance companies cover the cost of major damage claims, such as for hurricanes or earthquakes, in exchange for part of the premiums their customers pay.
Fierce competition and falling prices for the risk cover they provide insurance company clients, mean reinsurers are preferring to return money to their investors.
The Zurich-based firm said it would pay a dividend per share of 4.25 Swiss francs ($4.56) and a special dividend for 2014 of 3 francs ($3.22), and announced a share buyback of up to 1 billion Swiss francs ($1.07 billion).
Chief Financial Officer David Cole told reporters on a conference call that the company wanted “to see additional ways to return funds to shareholders, given a very strong financial position”.
January 2015 renewal rates fell in the property catastrophe market, and July renewals were also likely to be weak, Mr. Cole said.
Sarasin analysts said in a note they saw “pricing pressure holding up with regard to continued oversupply of capacity and in the absence of big and expensive catastrophes”, reiterating their “neutral” recommendation on the stock.
Swiss Re's cash payouts sweetened the pill of a fourth-quarter net profit of $245 million, 30% below the $361 million seen in a poll of analysts by Reuters.
Net profit for the year was $3.5 billion, a drop of 20% from 2013, following a loss of $462 million at the firm's life & health division, the result of “management actions” to improve the business.
Swiss Re said it was on track to meet 2011-2015 financial targets, and announced new targets, starting in 2016, to grow economic net worth per share by 10% a year.
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