Zurich, Switzerland-based Swiss Re reported a third quarter net loss today of 304 million Swiss francs ($259 million), compared to net income for the same period in 2007 of 1.5 billion Swiss francs ($1.29 billion).
The company said in a statement that "Despite the severe market circumstances, Swiss Re earned 884 million Swiss francs ($759.7 million) during the first nine months of 2008." Swiss Re upped its hurricane loss estimate by $65 million.
Book value per share was 74.16 Swiss francs ($63.79) at the end of September 2008 compared to 77.65 Swiss francs ($66.8) at the end of June 2008.
The reinsurer also reported premiums earned were down 24 percent, from 4.75 billion Swiss francs ($4.08 billion). Still, management reassured that its balance sheet is "strong, and the company's capital adequacy remains at very high levels."
Standard & Poor's Ratings Services said today that Swiss Re's 'AA minus' insurer financial strength and long-term counterparty credit ratings on Swiss Re are unaffected by the group's loss announcement and, "The outlook on all ratings remains stable."
S&P said that when taken in the context of the "extreme turbulence seen in financial markets during the third quarter, which has had a heavy impact on the results reported to date for most (re)insurers, the loss reported by Swiss Re is within expectations.
"The extent of the turbulence seen in financial markets during 2008 has been such that Standard & Poor's is viewing this as a 'capital event,' which means that our analytical focus will be on the resilience to investment-related losses shown by an entity's capital position (rather than its earnings)."
S&P said that despite the likelihood of further material write-downs during the fourth quarter, "we continue to expect Swiss Re to hold a substantial surplus to our 'AA' level capital target for the financial year ended Dec. 31, 2008. Consequently, we expect that Swiss Re will be well placed to benefit from the more favorable underwriting environment we believe will emerge in 2009."
Jacques Aigrain, Swiss Re's chief executive officer, said, "Swiss Re's strong capital base together with our high level of diversification and the longstanding expertise of our people place us in a competitive position to benefit from the current market developments."
Swiss Re reported that third quarter annualized return on equity was minus-2.7 percent and was 6.4 percent for the first nine months. In 2007 ROE was 18.8 percent for the third quarter and 17.2 percent for the first nine months.
Earnings per share for the third quarter were down 3 percent to 4.20 Swiss francs per share ($3.61).
Return on equity was equivalent to an annualized rate of minus -2.7 percent for the quarter and 6.4 percent for the first nine months of 2008, Swiss Re said, noting that as a result of its prudent investment approach, shareholders' equity decreased 6 percent in the third quarter to 24.1 billion Swiss francs ($20.7) compared to the second quarter of 2008.
Book value per share decreased to 74.16 Swiss francs ($63.8) at the end of September 2008, compared to 77.65 Swiss francs ($66.8) at the end of June 2008.
As a consequence of the high volatility in the financial markets and a significant increase in client demand for reinsurance, Swiss Re said it has suspended its share buy-back program.
At the end of October 2008, the Group had completed 51.2 percent of its 7.75 billion Swiss franc share buy-back program ($6.66). Swiss Re said it can still meet the completion of the program by April 2010, but this would depend on "some stability returning to the capital markets and the business opportunities arising for the Property & Casualty and Life & Health divisions."
Operating income in property a casualty decreased to 99 million Swiss francs, mainly as a result of lower investment returns, selective underwriting as well as materially higher natural catastrophe claims, the company said.
Excluding realized gains and losses, the operating result declined to 710 million Swiss francs in the third quarter compared to 1.8 billion Swiss francs in the second quarter of 2008.
The combined ratio was 99.8 for the quarter (97.6 excluding the unwind of discount) and 96.4 for the first nine months of 2008 (94.4 excluding the unwind of discount) despite a higher natural catastrophe burden.
Swiss Re said its effective protection successfully mitigated the impact of increased natural catastrophe claims.
The reinsurer said it remains focused on underwriting quality versus quantity to ensure shareholder value is maximized. Should the early indicators of market hardening be confirmed, Swiss Re said it will redirect capital to Property & Casualty.
On Sept. 23, Swiss Re communicated a preliminary net claims estimate for hurricane Ike of $250 million. The company said it now estimates these net claims to be $315 million due to indications of higher insured claims in the U.S. Midwest, and offshore energy. Estimates for hurricane Gustav remain unchanged. Swiss Re said it expects its aggregated net claims for hurricanes Gustav and Ike to be approximately $365 million.
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