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Swiss Re's third-quarter net profit tops poll, sees market turn


ZURICH (Reuters)—Swiss Reinsurance Co. Ltd. posted a third-quarter profit more than double expectations and said it saw prices firming, having just reclaimed the key credit rating it saw as a prerequisite for expanding business.

The world's No. 2 reinsurer on Thursday reported a third-quarter net profit of $1.3 billion, compared with a Reuters poll estimate of $566 million.

The result was lifted by strong investment income, lower-than-expected natural catastrophe claims and a release of reserves.

"Swiss Re believes a modest but broad market turn in the property and casualty market is underway," it said.

Swiss Re said in August renewals prices were hardening. Property/casualty is the firm's biggest underwriting segment.

But that view stands in contrast to what reinsurers and brokers said last month at the annual industry meeting in Baden-Baden, Germany. Prices look set to remain flat when European insurers renew their policies in January, as record catastrophe claims this year have failed to eliminate excess capacity in the industry, they said.

The combined ratio—a measure of profitability—increased to 80.8% in the quarter, "reflecting successful renewals and new business written during 2011, particularly in Asia," the firm said.

Last week, Swiss Re regained an AA- rating from Standard & Poor's Corp., a key step toward its goal of expanding business.

It lost the rating in 2009 after risky investments forced it to take a 3 billion Swiss franc ($3.47 billion) loan from U.S. billionaire Warren Buffett. It repaid the loan late last year.

Like many rivals, Swiss Re saw disproportionately high disaster claims in the first half of the year, including for the New Zealand floods and the earthquake and tsunami in Japan.

Yet third-quarter payouts for natural catastrophes were low.

Flooding in Thailand has killed 427 people since July and hit economic growth as the water swamped industrial estates in the central Chao Phraya river basin, disrupting global supply lines for auto and computer parts.

Carmakers, including in Japan, are bracing for the impact of production cuts due the floods.

Swiss Re said it was as yet too early to say how big the financial impact of the flooding was.

"It is currently not possible to evaluate damage, repair times and supply chain interruptions," it said. "A reliable claims estimate cannot be determined at this time."

Swiss Re also said it was well on track to achieve its 2015 financial targets—including annual earnings per share growth of 10% over five years—after delivering a return on equity of 20.5% in the third quarter.

Exposure to peripheral euro zone government debt remained low at $74 million and includes no Greek sovereign holdings, Swiss Re said.