Swiss Re to cut costs up to $300m, reduce debt by $4bn

Reveals financial targets for 2011-15.

New Statesman
Photograph: Getty Images.

Insurance company Swiss Re is planning to cut costs of $250m to $300m by 2015 and reduce debt levels by over $4bn by 2016, to redirect its resources to high growth insurance and reinsurance markets and enhance return on equity.

The company intends to redeploy the saved costs in areas that offer attractive financial returns.

As part of its efforts to rebalance its assets by reducing leverage, a subsidiary of the company has made a tender offer to repurchase three tranches of its senior debt.

Swiss Re plans to shift to corporate debt while cutting down on government bonds.

George Quinn, chief financial officer of Swiss Re Group said: "A strong capital position allows us to continue our policy of deploying Group capital to take advantage of profitable business growth opportunities after having delivered on our first priority, which is paying an attractive, growing regular dividend to our investors. We have also used our capital strength to rebalance our asset allocation."

The insurer has also said that it will establish a new organisational set up for its Life & Health (L&H) Reinsurance business, which is targeted to generate ROEs of 10 to 12 per cent by 2015.

The near-term management actions are expected to reduce earnings of L&H Reinsurance by approximately $500m before tax in 2014.

Michel M Liès, group CEO of Swiss Re, said: “In February this year, I highlighted the need to address issues in our L&H Reinsurance business. Today we are outlining the management actions that we believe will strengthen the performance of this important segment of our business.

“Our financial performance going forward will also benefit from the capital management measures we are outlining today and continued rebalancing of our asset allocation.”