* Reinsurance price pressures to continue
* High-growth markets more resilient
* Buys Sun Alliance Insurance China Limited
(Adds CFO comments, details)
ZURICH, July 3 Swiss Re, the world's
second largest reinsurer, said it can cope with increased
competition from pension funds and other new players in its
industry by putting greater focus on more resilient high-growth
markets such as in Asia.
Reinsurers like Swiss re and its rivals Munich Re
and Hannover Re, which help primary insurers cover
the cost of big claims, are facing pressure on prices as a
result of competition from the new entrants.
Ultra-low interest rates since the financial crisis have
attracted investors such as pension funds, institutional
investors and high-net worth individuals known as "alternative
capital" to pour money into the reinsurance market in search of
Swiss Re Chief Financial Officer David Cole said he expected
the downward price trend seen in previous periods to continue
when reinsurance contracts with Swiss Re's insurance company
clients are renewed in July.
But while prices in mature markets have come under pressure,
prices in high-growth markets, where Swiss Re earns about one
fifth of its premiums, have shown more resilience, Cole said
during a call with journalists ahead of the company's investor
day in London on Thursday.
Swiss Re said it would put greater emphasis on a selection
of these high-growth markets.
"Current pricing pressures that we see in certain lines of
business, typically coming from developments in alternative
capital, at this point have not significantly impacted high-
growth markets," Cole said.
Brokers said this week that reinsurance prices had fallen by
as much as 25 percent in key markets at the mid-year point as
pension funds poured in money and demand for cover from
insurance companies remained subdued.
Credit rating agency Moody's changed its outlook on the
reinsurance sector to negative from stable last month, in part
due to the industry's weak pricing power.
Cole said the company expected clients to continue to turn
to reinsurers for services and long-term support.
"Consequently, we believe that alternative capital is
unlikely to replace the traditional reinsurance market, although
it may have a disproportionate impact on some, perhaps less well
positioned reinsurers," he said.
The Zurich-based reinsurer also said it was acquiring
Chinese insurer Sun Alliance Insurance China Limited, a
subsidiary of RSI Insurance Group, for 71 million pounds
($120.81 million), allowing it to sell corporate insurance
directly from mainland China.
Emerging Asian countries in particular are expected to lead
real premium growth with around 9 percent in the next few years,
outpacing premium growth of around 3 percent in mature markets,
the company said.
Swiss Re said it would redeploy its excess capital only if
it satisfied a target return on equity of at, or above, 11
percent, otherwise it would return capital to shareholders. The
company did not specify where it might invest or spend the
The reinsurer, which recorded a profit of $1.2 billion for
the first three months of the year, raised its dividend in 2013
to 3.85 Swiss francs a share and paid a special dividend of 4.15
francs per share.
Analysts at Main First Bank forecast an increase in ordinary
dividend to 4.25 Swiss francs per share, but a reduced special
dividend to 1.75 Swiss francs per share for 2014.
"We have a primary goal to at least maintain the regular
dividend," Cole said, adding that there were quite a number of
opportunities to redeploy funds in 2014 and 2015.
Swiss Re said it would announce its 2016 financial goals in
February, and confirmed that it was on track to meet its
The company's shares were trading up 0.1 percent by 1225
GMT, underperforming a 0.6 percent rise in the European insurers
($1 = 0.5877 British Pounds)
(Reporting by Alice Baghdjian; Editing by Jane Merriman)