Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF), the world's second largest reinsurance company, is planning to return approximately $2.8 billion capital to shareholders through dividend payments, after reporting strong profit in 2012, due to lower claims related to natural disasters.
The board of directors of Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF) will propose a special dividend payment of CHF 4.00 per share during the annual general meeting of the company. The board also plans to recommend the increase of its dividend payments from CHF 3.00 per share to CHF 3.50 for 2012. According to the company, the dividend will be paid in the form of Swiss withholding tax exempt distributions out of legal reserves from capital contributions after receiving approval from shareholders.
Data from Bloomberg showed that the proposed total dividend payout exceeded the consensus estimate of analyst at CHF 6.21 per share.
George Quinn, Chief Financial Officer, of Swiss Re Ltd said, “The commitment to our capital management strategy remains a top priority. We announced the possibility of a special dividend one year ago and we are now in a position to make a significant distribution to shareholders.”
Quinn added that the priorities of the reinsurance company in capital management will remain over the coming years, which include increasing regular dividend, growing its business in areas where new opportunities meet Swiss Re Ltd’s profitability expectations, and to maintain high level of adequate capital.
Bloomberg cited a report from Aon Benfield, the world’s largest reinsurance broker, that reinsurers amass a record of $500 billion capital last year because losses from claims related to natural catastrophe declined by almost 5o percent. Swiss Re Ltd capital increased by $10 billion, more than the Standard & Poor’s AA requirements by the end of 2012.
Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF) reported a net income of $4.2 billion in 2012 due to strong results from property & casualty reinsurance. The company also achieved excellent gains from investments. According to the company, its premium and fee income increase by 15% to $25.4 billion and its investment income climbed by 4% to $4.5 billion, its investment-related realized gains for 2012 was $1.5 billion. The reinsurance company posted $11.85 (CHF 11.13) earnings per share. Its shareholders equity increased to $34.4 billion and its book value per common share rose to $95.87 (CHF 87.76).
According to Quinn, the company was not satisfied with the performance of its life and health business unit due to the 56 percent decline in net income to $739 million, while Admin Re’s net income also dropped by 44 percent to $183 million. Quinn said, “As for our life & health businesses, both reinsurance and for Admin Re, we have work to do. Part of this work is around capital management, but we will also focus on the operational side of these businesses.”
The company said over the next two years it will benefit from the expiration of its property and casualty share agreement with Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B). Swiss Re Ltd (PINK:SSREY) estimated a 25 percent increase in its property and casualty premiums.
Last December, ValueWalk reported that Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is seeking $1 billion in damages from the reinsurance company related to their “stop loss” and “coinsurance” agreement in 2010. Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF) already repaid the $3.3 billion emergency loan it received from Buffett’s conglomerate after suffering significant losses from its derivative investments during the financial crisis. The reinsurance company said Berkshire Hathaway’s claim has no merit.
Stefan Schuerman, analyst at Vontobel Holding AG, commented that the shareholders of Swiss Re Ltd. (PINK:SSREY) (PINK:SSREF) should be happy because the underlying result is good and the ordinary dividend is “very good.”