Swiss Re Records $359.4 Million Net Loss

NU Online News Service, Aug. 5, 3:47 p.m. EDT

Swiss Re reported mark-to-market losses on hedges and impairments created a second-quarter net loss of CHF 381 million ($359.4 million at current exchange rate), compared with 2008 second-quarter net income of CHF 564 million ($532 million).

The Zurich-based company said three factors drove down the results: mark-to-market losses on hedges on corporate bonds of CHF 1.1 billion ($1 billion); impairments of CHF 600 million ($566 million), primarily on securitized products; and the effects of its own credit spreads in certain financial liabilities, which resulted in a charge of CHF 431 million ($406.6 million).

For the first six months of 2009, the company reported a net loss of CHF 231 million ($217.9 million), compared to net income of CHF 1.2 billion ($1.1 billion) in the first half of 2008.

Swiss Re warned that the economic environment may affect future earnings. The company said the environment "remains uncertain and the company's investment and Legacy portfolios remain exposed to market volatility. The financial market volatility and the shift toward lower risk investments, which allowed Swiss Re to reduce its exposures significantly, may adversely impact future earnings."

For its property and casualty operations, Swiss Re reported CHF 3.5 billion ($3.3 billion) in 2009 second-quarter premiums earned, compared to 2008 second-quarter premiums earned of CHF 3.4 billion ($3.2 billion). The combined ratio in the quarter improved to 89.4 compared to 91 for the same period a year ago.

Swiss Re estimated that its excess capital at the "AA" level has improved to CHF 4.5 billion, prompting chief executive officer Stefan Lippe to say in a statement, "During the second quarter of 2009, our core business, despite the reported loss, continued to deliver strong underwriting results and solid earnings power."

He added, "Most importantly, the measures we implemented to improve our capital base have proven to be effective, considerably increasing our excess capital at the 'AA' level. We have also made significant progress in de-risking Legacy with the termination of substantially all of our portfolio credit default swap contracts. This powerful combination increases our confidence in delivering on our targets."