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Swiss Re awaits hefty claims from stormy weather

Hurricane Jeanne left a trail of destruction in its wake Keystone

Reinsurance company Swiss Re says it expects claims from four recent hurricanes in the United States and a typhoon in Japan to total $750 million (SFr947.7 million).

Swiss Re said on Thursday that the last major hurricane, Jeanne, which devastated Haiti, would probably result in claims of $150 million alone.

In a statement from its Zurich headquarters, Swiss Re insisted it was still aiming to hit its operating target for the year as a whole.

But analysts said the size of the estimated claims cast doubt on whether it could now achieve that.

The company is aiming for a combined ratio – a key measure of profitability in the non-life insurance business – of 96. A ratio below 100 indicates that business is profitable.

Dip into reserves

Swiss Re also announced that it would dip into its funds for unforeseen estimates – known as equalisation reserves – if claims estimates remained at present levels.

“If we should use equalisation reserves, then we expect that the equalisation level will be on the level or around 96 per cent, which we communicated with our half-year results,” commented company spokesman Henner Alms.

But some analysts said they would be revising their forecasts for Swiss Re’s combined ratio this year, based on the higher-than-expected claims estimates.

“We believe that the group will not now hit its 96 per cent combined ratio target for this year, even after some use of the claims equalisation reserves,” said analyst Tim Dawson at Pictet.

Raise prices

On the plus side, Swiss Re repeated an earlier statement that the recent hurricane damage should allow it to increase rates when property contracts came up for review later this year.

Analysts had been predicting a fall in property rates by up to 15 per cent.

Total insured claims from hurricanes Charley, Frances, Ivan and Jeanne have been put at between $20 and $25 billion.

The reinsurer estimated that industry losses for Hurricane Jeanne would be around $6-8 billion.

Shares in Swiss Re, which is the world’s second-largest reinsurance company after Germany’s Munich Re, have fallen by nearly 12 per cent this year.

Munich Re reported at the end of last month that it expected claims of about €500 million from the four major Atlantic hurricanes and two Pacific typhoons.

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Swiss Re is in the business of reinsurance, which basically means it offers insurance to insurers.
The company is the second-largest reinsurance company after Munich Re.
It operates through more than 70 offices in over 30 countries.
Founded in 1863, the company showed a profit of SFr1.7 billion in 2003, after a loss of SFr91 million the previous year.

Swiss Re estimates it will receive claims totalling $750 million (SFr947.7 million) from major hurricanes and a typhoon this year.

Hurricane Jeanne alone is expected to result in claims of $150 million.

Swiss Re says it will dip into some of its reserves to absorb some claims, but maintains that it is still on course to achieve its operating target for 2004. Analysts are wary.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR