Zurich-based Swiss Re, noting "a challenging financial market environment" reported second-quarter net income fell 50 percent to CHF 600 million ($569 million).
The latest results compared with net income of CHF 1.2 billion ($997 million) for the period last year.
Jacques Aigrain, Swiss Re chief executive officer, said in a statement that the difficult market environment had created "new opportunities" and the company announced it was buying Barclays Life Assurance Company Ltd. for ?753 million ($1.47 billion).
Swiss Re said that it considered its property-casualty and life-health businesses to have delivered "strong performance" with earnings per share of CHF 1.70 ($1.61) and annualized returns on equity of 8.5 percent for the quarter and 8.4 percent for the half year.
Mr. Aigrain said, results from Swiss Re "Property & Casualty and Life & Health demonstrate our ability to generate healthy operating earnings, even in challenging market conditions.
"The financial market turbulence continues, but, despite this, we are strongly capitalized and our investment portfolio remains sound."
Compared to the first quarter of 2008, shareholders' equity decreased 8 percent in the second quarter to CHF 25.6 billion ($24.3 billion) due to valuation effects on the investment portfolio of CHF 1.7 billion ($1.61 billion), resulting from interest rate moves and dividends paid of CHF 1.3 billion ($1.2 billion).
Swiss Re said in its statement that it has a significant excess over the capital required for a "double-A" rating.
The company reported that unrealized mark-to-market loss on the structured credit default swaps in run-off was CHF 362 million ($343 million) for the quarter. While this business is in run-off, Swiss Re said it continues to be exposed to market value fluctuations on the underlying securities and estimates mark-to-market losses on the structured credit default swaps in run-off of CHF 163 million ($154 million) for the month of July 2008.
At the end of July, the company said it had completed 49 percent of its CHF 7.75 billion ($7.36 billion) share buyback program target, ahead of schedule.
Swiss Re said its property-casualty combined ratio was 92.3, and despite falling prices and a sharply lower investment return allocation in the quarter, a focus on underwriting enabled property-casualty businesses to deliver operating income of CHF 800 million (($759 million).
Life-health operating income was CHF 600 million ($573 million), an increase of 1 percent compared to the second quarter of 2007, benefiting from significantly improved mortality and morbidity experience.
Financial Markets delivered operating income of CHF 1.3 billion ($1.2 billion), excluding the mark-to-market loss on structured credit default swaps in run-off, reflecting an investment yield of 5.2 percent.
Annualized return on investments, excluding the impact of structured credit default swaps in run-off, was 3 percent for the quarter, the company said. It said the decrease in the return on investments was mainly due to the impact of hedging programs, which effectively protect the portfolio against the risk of impairments, but lead, in the shorter term, to volatility in Swiss Re's return on investments on an accounting basis.
Swiss Re said investment portfolio quality continues high, with only minor impairments totaling CHF 175 million ($166 million) and low net exposure to listed equities.
Concerning the Barclays Life Assurance Company Ltd acquisition, Swiss Re said it will acquire approximately 760,000 life insurance and pension policies, as well as annuity contracts, representing approximately ?6.8 billion ($13.3 billion) in invested assets.
Swiss Re said the purchase will allow it to grow its business in the United Kingdom and North America, and to venture into new markets as opportunities arise.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.