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Swiss Re remains dividend champion, despite heavy loss

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The Swiss Re group has been hit hard by the effects of the pandemic. The group that Sergio Ermotti will chair from this year also presents two results on Friday, with and without the cost of the Covid-19. In one communicated, he announces a net loss of 878 million dollars (787 million francs) in 2020. Financial analysts expected better, since they expected on average a negative result of 526 million. Without the coronavirus, the company would have posted a profit of $ 2.2 billion, which would have greatly exceeded the $ 727 million the previous year.

The group’s profitability target, which is 7% above the 10-year yield on US bonds (1.3% Thursday evening) has not been reached, however, since the return on equity is negative (-3 , 1%). Without taking into account the pandemic, this return amounts to 7.3%.

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Covid-19 costs the reinsurer $ 3.9 billion over the year. At the end of September 2020, during the third quarter results, the bill for the pandemic was limited to $ 3 billion. Christian Mumenthaler, CEO, says he expects an additional cost of $ 0.5 billion in 2021.

Dividend unchanged

The group proposes to pay an unchanged dividend of 5.9 francs. The shareholder of Swiss Re thus benefits from the highest direct yield of the Swiss quotation (7.1%), according to analysts. However, the debate on the distribution of profits to investors remains topical. The Socialist Party attacked Thursday companies that receive state aid through partial unemployment and distribute dividends.

Swiss Re’s equity remains very solid, with a solvency rate of 220%, ie within the targeted objectives (200 to 250%). The group’s own funds reach $ 27.1 billion (30.2 billion without the Covid-19). They are, however, slightly lower than the $ 27.6 billion expected by most analysts.

The group headed by Christian Mumenthaler highlights the progress made by his company and the improvement of the reinsurance market. When renewing non-life insurance contracts in January 2021, premiums are up 6.5%. And, in the division specializing in commercial insurance, Corporate Solutions, the turnaround seems to have started. The return on equity is 16.5% without the costs of the Covid-19.

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