Swiss Re reported a net loss for 2008 of CHF 864 million ($736.3 million at current exchange rate), down from net income of CHF 4.2 billion ($3.6 billion) in 2007, and a 2008 fourth quarter net loss of CHF 1.7 billion ($1.4 billion).
The Zurich-based global reinsurer cited investment losses as the reason for the poor results.
"This result is clearly disappointing," Stefan Lippe, Swiss Re's new chief executive officer said. "Although our property-casualty and life and health business segments continue to perform extremely well even in these adverse conditions, the result has been impacted by investment losses."
Mr. Lippe replaced Jacques Aigrain as CEO last week after the company reported an early estimate of losses driven by credit derivatives and was downgraded by rating agencies despite a capital infusion from Berkshire Hathaway.
Swiss Re reported net realized investment losses of CHF 9.4 billion ($8 billion) for the year, compared to losses of CHF 739 million ($629.8 million) in 2007. In the 2008 fourth quarter, Swiss re reported net realized investment losses of CHF 3.4 billion ($2.9 billion).
The reinsurer said it has worked to restructure its investment portfolio. The company added, "Those products no longer offered by Swiss Re are now being managed by the Legacy unit. These products include the structured page Credit Default Swaps (SCDS), the portfolio Credit Default Swaps, Financial Guarantee Re and former trading activities.
"As indicated in our preliminary 2008 results communication on Feb. 5, these activities produced a mark-to-market loss for the full year of approximately CHF 5.9 billion ($5 billion), including mark-to-market losses of CHF 2 billion ($1.7 billion) for SCDS."
Mr. Lippe said, "We have already taken extensive measures to de-risk the investment portfolio and to further protect the long-term financial strength of the company. These measures are all contributing to building a stronger firm for the years to come."
The company said it announced on Feb. 5 that it was "able to secure a private capital solution in a short period of time," in which Swiss Re will issue CHF 3 billion ($2.6 billion) of convertible instruments to Berkshire Hathaway Inc, subject to shareholder approval.
For p-c operations, Swiss Re reported CHF 14.4 billion ($12.3 billion) in premiums earned for the year, down 18 percent from CHF 17.6 billion ($15 billion) in 2007.
The company said, "Lower premiums [were] driven by quota share agreement with Berkshire Hathaway [of] CHF 1.9 billion ($1.6 billion) and foreign exchange movements of CHF 1.4 billion ($1.2 billion)." Swiss Re also cited strict underwriting and higher client retentions.
The combined ratio jumped to 97.9 in 2008 from 90.1 in 2007. Swiss Re said natural catastrophes were close to expectations, but higher than 2007, driven by Hurricane Ike.
On Feb. 18, Standard & Poor's lowered Swiss Re's financial strength ratings by one notch to A plus, with a stable outlook. Swiss Re said the impact of the downgrade is an additional funding requirement of approximately $1.5 billion.
(Phil Gusman may be reached at pgusman@nuco.com, 201-526-2346)
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