CDS losses hit Swiss Re

Swiss Re, the world’s second largest reinsurer, has reported a third quarter net loss of SFr 304 million ($262 million) after being hit by heavy mark-to-market writedowns on its structured credit exposures.

Despite the losses, the insurer maintained its AA- rating from credit rating agency, Standard and Poor’s. At the same time last year, it announced a net profit of SFr 1.5 billion.

In the third quarter, Swiss Re saw mark-to-market losses of SFr 289 million on structured credit products - the mark-to-market value of the insurer's portfolio of asset-backed and mortgage-backed securities declined from SFr 2.23 billion to SFr 1.95 billion, due mainly to losses on commercial and residential mortgage-backed products, Swiss Re said.

The operating result for the property and casualty division more than halved to SFr 710 million, down from SFr 1.8 billion in the second quarter of 2008. This was not helped by an expected $365 million worth of claims from hurricanes Ike and Gustav.

The life and health division’s operating result also fell to SFr 22 million from SFr 868 million in the second quarter of this year. Swiss Re blamed higher mortality rates in North America, as well as net investment losses of SFr 572 million that have resulted from the financial crisis.

The reinsurer has suspended its SFr 7.75 billion share buy-back program due to high volatility in the financial markets and a rise in demand for reinsurance. The company said it could still complete the buy-back by April 2010, but preferred to keep hold of excess capital in the meantime.

See also: Protection policies
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