Swiss Re Posts 2008 Loss, Cancels Rights Issue

 

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February 19, 2009 Thursday 06:56 AM EST

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Swiss Re Posts 2008 Loss, Cancels Rights Issue

Marc Jones

ZURICH, Switzerland

Swiss Re posted a net loss for 2008, and while the reinsurer continues to struggle with massive losses in its capital markets operations, it pointed to improved conditions since it announced preliminary loss figures more than two weeks ago and cancelled a planned rights issue as no longer necessary.

The reinsurer's 2008 net loss was 864 million Swiss franc (579.4 million euro), a slight improvement on its initial estimated loss of 1 billion francs (BestWire Feb. 5, 2009) after being hit hard by the ongoing financial crisis. For 2007, the company posted a net profit of 4.2 billion francs.

Speaking at a conference call on the results, Swiss Re's new chief executive officer, Stefan Lippe, said that while he is disappointed with the results the company is moving to address its problems. "What we have to do is put the money where the earnings are," he said. "In 2009 there will be key changes. We will focus on the core business of the company and go back to basics. We have to write quality reinsurance business."

Lippe was appointed CEO on Feb. 12 after his predecessor Jacques Aigrain abruptly resigned (BestWire, Feb.12, 2009).

When Swiss Re announced its preliminary 2008 results is also announced that it needed to retain a level of capital in the region of 5 billion francs to maintain its current rating level, and that more than half of this would be provided by a 3 billion franc capital injection from Berkshire Hathaway.

Swiss Re planned to raise the remaining 2 billion francs via a rights issue. But Chief Financial Officer George Quinn said the company has since taken steps to reduce required capital and the rights issue is no longer needed.

Quinn said the final results showed shareholders equity had slightly improved since the publication of preliminary figures for 2008 on Feb. 5. Quinn reiterated that Swiss Re's property and casualty and life and health businesses had performed well and were showing healthy growth.

Property and casualty operating income for the year was 2.7 billion francs, down 39% from the previous year. Life and health operating income fell 47% to 697 million francs.

The financial and capital market products that had caused Swiss Re much of its trouble, and which had since been discontinued and moved into a legacy segment, produced a mark-to-market loss of 5.9 billion francs for the year. This includes 2 billion francs in losses related to structured credit default swaps.

Quinn said the company will continue to focus on its "consistently strong" underwriting performance, as this will be the key to success in a low-yield investment environment. He added the company had re-established its traditional focus on risk management and is also looking at risk reduction, especially in the area of its legacy business.

Swiss Re said it will focus on managing the pricing cycle by concentrating on growth on lines with highest price increases, such as property, and reducing volume where pricing is less attractive, such as liability, motor and accident.

Lippe confirmed that he will be conducting a further strategic review of the company's situation and that he would be able to provide more information on future plans when the company announces its first-quarter 2009 results on May 7.

Swiss Re also announced its 2009 annual general meeting will be in Zurich on March 13, a month earlier than originally planned.

(By Marc Jones, London news editor: marc.jones@ambest.com)

February 20, 2009

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