* 2012 net income $4.2 bln vs $3.65 bln in poll
* To raise dividend to 3.50 Sfr per share
* Proposes special dividend of 4 Sfr per share
* Shares up 2.5 pct, hit near 5-yr high
(Re-leads, adds analyst comments, shares, details)
By Martin de Sa'Pinto
ZURICH, Feb 21 Swiss Re set out plans
for a hefty special dividend on Thursday as it was able to draw
back $1 billion previously set aside for disaster payouts,
helping send its shares to a near five-year high.
The world's second-biggest reinsurer by market value after
Germany's Munich Re said it would pay out a one-off 4
francs per share, as well as raising its annual payout 17
percent to 3.50 francs a share.
Reinsurers such as Hannover, Munich and Swiss Re
help insurance company customers cover the cost of major damage
claims like hurricanes or earthquakes in exchange for part of
Swiss Re said it was able to release funds set aside for
unrealised claims despite $900 million in estimated losses from
Superstorm Sandy, which swept the east coast of the United
States late last year.
The company had said last November it might pay a special
dividend if it could not find ways to plough earnings back into
Its shares rose 2.5 percent to 75.65 francs by 0822 GMT,
outperforming a 1.1 percent decline in the European insurers as
a whole. The stock rose as high as 76.6 francs, its
highest since June 2008.
The group also posted a 60 percent rise in net income to
$4.2 billion, ahead of average estimates for $3.65 billion in a
Reuters poll, driven by a 22 percent rise in property and
casualty reinsurance premiums and the $1 billion pretax reserve
The company said its property and casualty business had
begun the year strongly, with 11 percent premium growth and
average price increases of 2 percent.
The expiry of a quota share agreement with Warren Buffet's
Berkshire Hathaway is expected to bring a significant
rise in premium income in 2013, Swiss Re said.
"This alone could lead to 25 percent net premium growth
during 2013-14, which is pleasing and brings Swiss Re back to
the company it used to be in the good years," said analyst
Fabrizio Croce at brokerage Kepler Capital Markets in a note.
"Capital is at a suitable level, with a book value of $96
(88 Sfr)... Reasons for a discount to the book value are
difficult to find at this point," Croce added.
The company reported a combined ratio, an insurance industry
measure of profitability weighing payouts against premium
income, of 80.7 percent, well ahead of the 86.3 percent average
poll estimate. Adjusted for natural catastrophes and reserve
releases, the ratio was 90.1 percent.
It said it expected a group combined ratio of 93 percent in
2013 and forecast a combined ratio for property and casualty of
92 percent, implying reduced expectations for investment returns
and reserve releases.
Chief Executive Michel Lies said in a statement the company
was on track to achieve its 2011-2015 financial targets.
Swiss Re shares have been on an upward trajectory since
2011, when huge natural catastrophes including the Japanese
earthquake and tsunami and flooding in Thailand created the
market conditions which allowed insurers to charge higher prices
on property and casualty policies.
(Editing by Helen Massy-Beresford and David Holmes)