Swiss Re hit by subprime mortgage crisis

Swiss Re is another victim of the US subprime mortgage financial crisis Keystone

The world's biggest reinsurer Swiss Re has become the latest company to suffer a major loss as a result of the subprime crisis in the United States.

This content was published on November 19, 2007 - 09:47

The Zurich-based group announced on Monday that it wrote down SFr1.2 billion ($1.1 billion) from credit default swaps designed to provide protection for a client against a fall in the value of a portfolio.

Shares in Swiss Re closed down 10.3 per cent at SFr87.55 in trading at the bourse.

A detailed review of exposure in both the investment and trading portfolios revealed no similar concerns, the company said in a statement.

Swiss Re said the securities remained exposed to market value changes. However, it added that they were mitigated by the group's conservative market value estimated for collateralised debt obligations in the portfolio.

"You have to ask which reinsurance groups have similar announcements to make. Now comes the question whether this new-found transparency will be welcomed or whether the already weak share will be punished further," analysts said.

Rival Munich Re said it had nothing new to announce. Earlier this month the company announced it was on track to achieve record results for 2007.

The biggest Swiss bank, UBS, made a pre-tax loss of SFr726 million - the first in nine years - for the third quarter as a result of exposure to US market woes, while Credit Suisse reported a 31 per cent decline in its net profit for the third quarter to SFr1.3 billion.

Swiss Life

In other business news, Switzerland's largest insurance company, Swiss Life, said it was selling its Dutch and Belgian units for SFr2.5 billion ($2.2 billion) to the Dutch bank, SNS Reaal.

Last month, Swiss Life said it was considering the sale of the units, which would enable it to make investments in faster growing markets.

The company said it planned to launch a SFr2.5 billion share buy-back over the next 18 months.

The sale comes less than two weeks after it announced it was selling its Banca del Gottardo private banking unit to Italian rival Generali for SFr1.8 billion.

Swiss Life, which has a market capitalisation of around $9 billion, is expected to unveil more aggressive growth targets in December.

swissinfo with agencies

In brief

Swiss Re, based in Zurich, is the world's largest reinsurer, which is basically the business of insuring the insurers.

Founded in 1863, it operates through offices in more than 30 countries.

It made a net profit in 2006 of SFr4.6 billion, double that of the previous year.

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