Swiss Re confirms huge loss

Swiss Re has confirmed dire results for 2008 with a net loss of CHF864m –down from a CHF4.2bn profit the previous year - and a return on equity of -3.4%, driven by investment losses.

It said it had taken steps to de-risk its investment portfolio and reinforce its capital position.

Stefan Lippe, Swiss Re’s chief executive, said: “This result is clearly disappointing. Although our property & casualty and life & health business segments continue to perform extremely well even in these adverse conditions, the result has been impacted by investment losses.”

Highlights

• Net loss of CHF 864m compared to CHF4.2bn net profit in 2007.
• Earnings per share of CHF -2.61 compared to CHF 11.95 in 2007
• Return on equity of -3.4% compared to 13.5% in 2007.
• Shareholders’ equity decreased to CHF 20.5bn from CHF 31.9bn, primarily due to the loss for the year, unrealised losses on investments, and the impact of exchange rate movements.
• Book value per share decreased to CHF 60.96 compared to CHF 92.00 at the end of 2007.
• Dividend cut to CHF 0.10.
• Property & casualty and life & health generated operating income of CHF 4.5bn.
• P&C combined ratio of 97.9% (96.1% excluding unwind of discount) for the full year.
• P&C operating income was CHF 2.7bn, a 39% decrease compared to 2007.
• Life & health benefit ratio of 85.5%,
• L&H operating income decreased to CHF 697bn, a 47% decrease compared to 2007, mainly driven by non-cash items.
• Asset management return on investments of 0.6% for 2008.
• Operating income was CHF 5.9bn, a decrease of 30% compared to 2007.

The company said: “Swiss Re’s strong earnings power is supported by an improving outlook in terms of client demand and reinsurance pricing for both property & casualty and life & health. Demand for reinsurance has increased as insurers become more risk averse in the face of a reduction in their capital base.

“The 2009 January renewals resulted in an increase in rates of around 2%, leading to a volume increase of around 6%, at constant foreign exchange rates.”

“Swiss Re continues to manage the cycle actively with growth in the lines with the highest price increases, such as property, and reduced volume in the areas where pricing is less attractive, namely liability, motor and accident. The group expects the trend of improving prices to continue and extend to other products and markets. As life insurers around the world face significant challenges, Swiss Re anticipates a growing need among clients to release capital from their in-force portfolios through Admin Re® or other reinsurance solutions.

“The company will continue to focus on its consistently strong underwriting performance, which will be the key to success in a low yield environment. For 2009, Swiss Re is targeting a treaty year combined ratio of 95% assuming a normal level of natural catastrophes.