group could offset drop with release of chf1.18bn reserves from 2004; damage from catastrophes hit record levels of $75m last year
Swiss Reinsurance Co, the world's second-largest reinsurer, will probably report lower profits in the second half of 2005 on record storm claims.
Net income may fall to CHF449m (£195.7m) from CHF1.03bn a year earlier based on the median estimate of 10 analysts surveyed by Bloomberg.
The decline may be cushioned by the release of some of the CHF1.18bn of reserves Zurich-based Swiss Re had at the end of 2004 that must be dissolved by year-end as it switches to US accounting standards.
Swiss Re said in November that it expected total weather-related claims, including those from Hurricane Katrina, of about $2.3bn (£1.4bn) in 2005.
The same month, the company led by chief executive Jacques Aigrain announced its biggest deal, the $7.6bn purchase of General Electric US insurance unit.
Swiss Re, which expects the GE Insurance Solutions acquisition to close by mid-year, would surpass Munich Re to become the world's biggest reinsurer on completion of the deal. The purchase still requires the approval of US and European regulators.
Daniel Langenegger, who manages a fund investing in European stocks at LGT Capital Management in Vaduz, Liechtenstein, says: "People are waiting to see first if they can integrate the acquisition and deliver the earnings they are aiming to achieve."'
Langenegger does not hold Swiss Re shares, though he has Munich Re stock.
Swiss Re's shares are the worst performers this year on the 31-member Bloomberg Europe Insurance index, falling 2.4%compared with a 7.1% gain in the index.
First-half earnings slid 6.3% to CHF1.35bn, while second-half profit estimates, which range from CHF779m to CHF115m, may fall less than some analysts expect if Swiss Re releases reserves accumulated under Swiss accounting rules.
"If they do not release them for a record claims year like 2005, when will they release them?" says analyst Georg Marti at Zuercher Kantonalbank, who believes Swiss Re has used all of the so-called equalisation reserves for 2005.
Last year, Swiss Re announced it would miss its profit target of 10% growth in earnings per share in 2005 because of hurricane claims.
It says the second half alone includes $1.2bn for Katrina, which hit in August and $750m for Hurricanes Rita that struck Texas and Louisiana in September as well as Wilma, which moved across Florida in October.
The stock's underperformance "has primarily been driven by disappointment over the January renewals season", according to William Allen and Paul Goodhind, analysts at Bear Stearns & Co.
Swiss Re also said in February that non-life premium volume rose 1% as the reinsurer and rivals try to maintain premium levels.
Damage from catastrophes reached a record in 2005, almost doubling from the year before, to more than $75bn. More than $60bn of that damage came from the US hurricanes.
Swiss Re said it is seeking to sell bonds backed by insurance to shift exposure to claims off its books.
Record weather-related claims means Swiss Re will announce drop in profits for H2 2005
First-half earnings fell 6.3% to CHF1.35bn
$60bn of $75bn damages from catastrophes last year was from US hurricanes
£92bn transferred since 2015
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