Zurich-based reinsurer Swiss Re suffered writedowns of SFr 6 billion ($5.1 billion) linked to its legacy securitisation portfolio, according to its preliminary report for 2008.
Credit rating agency Moody's downgraded the insurer from Aa2 to Aa3 after the news, saying that there was potential for further capital erosion, especailly associated with structured credit default swaps in the firm's financial products division.
The positions contribute to a preliminary net SFr 1 billion loss for the year across the business. Shareholder equity is projected to be reduced by between SFr 12 billion and Sfr 13 billion.
Swiss Re estimates its regulatory capital was between Sfr 1.5 billion and SFr 2.0 billion below the minimum level required to maintain its current AA rating with rating agency Standard & Poor at the end of 2008 - the agency has now placed Swiss Re under review. The company is seeking Sfr 5 billion in additional capital, SFr 3 billion of which has been agreed "in principle" to come from Warren Buffet's Berkshire Hathaway investment company in return for newly-issued convertible perpetual bonds, according to the report.
Topics: Swiss Re
More on Structured Products
Hong Kong regulator issues final definition of a professional investor
Private bankers in Asia are offering CLNs issued by SPVs
Target redemption forwards declining in popularity for macro reasons
Target redemption forwards with capped loss structure set for launch
Sign up for Risk.net email alerts
Nominated for two technology awards
Nominated for post trade technology award
Sponsored webinar: Collateral and counterparty tracking
Isda directors warn on fragmentation, access and liquidity - but expect problems to pass
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.