Swiss Re Posts Quarterly Loss Of $359 Million

Swiss Reinsurance Co. reported Wednesday a surprising second-quarter net loss of 381 million francs ($359 million) as investment losses and impairments offset an improved business environment.

The loss compared with a profit of 564 million francs in the April-June period last year, and analysts had expected more earnings from the Zurich-based company. Losses per share were 1.13 francs.

In contrast, Munich Re, the world's biggest reinsurer in the industry by premiums, on Tuesday posted a 12 percent increase in net profits to euro703 million ($1 billion) on solid underwriting growth.

"Our core business, despite the reported loss, continued to deliver strong underwriting results and solid earnings power," said Swiss Re Chief Executive Stefan Lippe.

He said the company had done well to increase its capital base and rid itself of old risk exposure, and "this powerful combination increases our confidence in delivering on our targets."

Swiss Re said gross premiums, a key measure of revenue, rose 1 percent to 6.2 billion francs.

But the overall result was a net loss as hedges on corporate bonds generated losses, and because of 600 million francs in impairments. The company also took a charge of 431 million francs to record the effects of its credit spreads according to U.S. accounting rules.

Shareholders' equity rose slightly to 23.8 billion francs at the end of June, compared with 23.6 billion francs a year ago.

Reinsurers sell back up coverage to primary insurers to absorb shocks in case of large losses or catastrophes.

Swiss Re said its property and casualty business delivered "excellent" underwriting business. Operating income in the unit rose 11 percent to 1 billion francs in the quarter.

But the company's life and health sectors were impacted by markets and produced an operating loss of 10 million francs, compared with a profit of 535 million francs in the year-ago period.

Going forward, Swiss Re said it would continue to focus on relieving itself of risk.

It said conditions in the reinsurance market improved in the quarter, with the strongest immediate boost coming in the life segment, particularly in the United States. Catastrophe markets also improved, but in sectors such as property and casualty reinsurance the market has yet to really rebound, it said.

Swiss Re added that the overall economic environment remains uncertain and that the company's investments and risks "remain exposed to market volatility."

"The financial market volatility and the shift towards lower risk investments, which allowed Swiss Re to reduce its exposures significantly, may adversely impact future earnings," the company said.

Zurich private bank Vontobel said Swiss Re's results amounted to "mixed figures with a positive trend."

Swiss Re shares slipped 3 percent to 42.10 francs during morning trading in Zurich.