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Swiss Re eyes emerging markets as profit slips

Swiss Re has reported a first-quarter profit of $US1.2 billion ($1.56 billion), down from $US1.4 billion ($1.82 billion) in the corresponding period last year.

The property and casualty (P&C) reinsurance combined operating ratio deteriorated to 93.3% from 84.3%.

Group premium and fee income totalled $US7.9 billion ($10.31 billion), up from $US7.6 billion ($9.91 billion).

P&C reinsurance premium totalled $US4 billion ($5.2 billion), up from $US3.8 billion ($4.99 billion). This was driven by large transactions in the US and Europe, and partially offset by unfavourable foreign exchange movements.

Net investment income fell by $US41 million ($53.51 million) to $US230 million ($300.3 million) in the first quarter due to reduced income from equity-accounted positions.

Chairman Walter Kielholz says about half of Swiss Re’s revenue growth over the next decade will come from emerging markets.

He says premium volume in such markets has increased from about 8% of the total to more than 20% over the past 10 years.

“We expect about 50% of top-line growth and incremental capital requirements will come from emerging markets in the next 10 years,” he told shareholders at the global reinsurer’s recent AGM.

“In contrast to the highly saturated markets of the industrialised world, we have still great potential there.”

Mr Kielholz says insurance penetration is low in these areas and urban growth, the emerging middle class and complex industrial sectors will support demand for risk transfer.

“Currently we are investing only about 15% of our global resources in these markets.

“If we take into account top management, research and local offices, that percentage falls even further. This will have to change.”

Mr Kielholz says with large underinsurance gaps in many countries, the group can be optimistic about the future.

Last year Swiss Re’s profit grew to $US4.6 billion ($6.04 billion) from $US3.5 billion ($4.6 billion) in 2014.

Outgoing CEO Michel Liès called it “one of the best results in our history”.