Swiss Reinsurance Co on Thursday reported a 1.75 billion Swiss francs ($1.5 billion) loss in the fourth quarter (October-December) of 2008, hit by a series of risky investment. The loss compares with net profit of 170 million Swiss francs in the fourth quarter of 2007.
For the full year 2008, Swiss Re reported a net loss of 864 million Swiss francs, compared to a net profit of 4.2 billion Swiss francs in 2007. Earnings per share were -2.61 Swiss francs compared to 11.95 Swiss francs in 2007 and return on equity was -3.4 per cent compared to 13.5 per cent in 2007.
Swiss Re said its its losses offset strong underwriting performance, adding that it is determined to further de-risk asset portfolio and reinforce capital position.
''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,'' Stefan Lippe, Swiss Re's chief executive, 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,'' he added.
Shareholders' equity decreased to 20.5 billion Swiss francs from 31.9 billion Swiss francs at the end of 2007, 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 60.96 Swiss francs compared to 92.00 Swiss francs at the end of 2007.
Swiss Re said it has taken measures to reinforce its capital position in order to take advantage of business opportunities. It was able to secure a private capital solution in a short period of time. Subject to shareholders' approval, Swiss Re said it will issue 3 billion Swiss francs of convertible instruments to Berkshire Hathaway Inc.
Swiss Re will intensify and accelerate its efforts to further simplify the organisation, improving efficiency by delivering globally aligned services.
In order to further strengthen Swiss Re's capital position, the board proposes to reduce the dividend to 0.10 Swiss francs.
Swiss Re said its core business of property and casualty and life and health generated operating income of 4.5 billion Swiss francs in 2008 - delivering superior underwriting performance for the fourth consecutive year and achieving an excellent combined ratio of 97.9 per cent (96.1 per cent excluding unwind of discount) for the full year.
Operating income was 2.7 billion Swiss francs, a 39 per cent decrease compared to 2007.
Life and health achieved a benefit ratio of 85.5 per cent, reflecting a strong underwriting performance. Operating income decreased to 697 million Swiss francs, a 47 per cent decrease compared to 2007, mainly driven by non-cash items.
Asset Management delivered a strong performance with a total return on investments of 0.6 per cent for 2008. Operating income was 5.9 billion Swiss francs, a decrease of 30 per cent compared to 2007.