Swiss Re back to profitability
The world's biggest reinsurer said its first quarter net profit fell 76 percent from 2008, but losses were also reduced.ZURICH - The world's biggest reinsurer Swiss Re said Thursday it returned to profitability in the first quarter after a record annual loss in 2008, sending its shares soaring almost 20 percent.
"We are pleased to report that Swiss Re was able to return to profit in the first quarter of 2009," said the Zurich-based group's chief executive Stefan Lippe in a statement.
The CHF 150 million (USD 99 million or USD 132 million) net profit was a 76 percent fall from the CHF 624 million achieved in the first quarter of 2008.
But it showed a turnaround from the 2008 annual loss of CHF 864 million.
Lippe warned however that there may be further problems.
"It will take some time to reduce the asset risk in our portfolios, and we may suffer volatility in the process," he said.
At the same time, Lippe said there was increased demand and reduced capacity in the reinsurance market, both factors which raise prices.
"Swiss Re is in a strong position to seize such market opportunities," he said.
The group's combined ratio in the property and casualty division also showed a sharp improvement, which progressed from 96.4 percent in 2008 to 90.2 percent.
As a general rule, the lower the combined ratio, the better the profitability. A ratio above 100 percent means that the insurer is paying more in claims than it is receiving in premiums.
Analysts described the results as "beating expectations," with the stock opening up 9.17 percent at CHF 31.92.
The stock continued to gain during the day, soaring 19.15 percent at 11h25 GMT at CHF 34.84, leading the Swiss Market Index, which was up 1.36 percent.
"These are surprisingly solid results," said Bank Wegelin, noting the positive combined ratio in particular.
"The reinsurer must now prove that it can achieve solid results again, and that its planned return to its core business will be implemented," said the bank.
Swiss Re was hurt by the financial crisis, with its troubles beginning to emerge in November 2007, when it warned of CHF 1.2 billion in losses from the US subprime home loan crisis.
It sold a 3.0 percent stake in the company in January 2008 to Warren Buffett for an undisclosed sum as it sought to support its finances.
But as asset values fell through 2008, it asked Buffett for an additional CHF 3 billion in February 2009.
The group's chief executive officer Jacques Aigrain resigned a week following that recapitalisation announcement, after he was blamed for leading the reinsurer into investment banking.
The group in April said it would cut around 1,000 jobs worldwide in the next 12 months to trim costs.
AFP / Expatica