S Re, the world’s second largest re-insurer, has turned around its fortunes and recorded a profit for 2009 following a dismal set of results in 2008.
Annual net profit stands at SFr506m (£300.6m), up from the heavy 864m loss in 2008.
The company’s core businesses have maintained strong earnings resulting in a improved balance sheet and a restored capital base in excess of SFr9bn.
“Today, I am proud to say: we have come a long way,” said chief executive Stefan Lippe.
But heavy losses on securitised products and corporate bond hedges meant the net profit results were below analyst’s expectations.
Last year, the re-insurer needed capital and took a SFr3bn convertible loan from Warren Buffett’s Berkshire Hathaway. Swiss Re said it is now in a position to repay the loan before the March 2012 deadline. After that date Berkshire Hathaway has the option to convert its loan into shares.
“Berkshire Hathaway won’t want Swiss Re to repay the loan,” one analyst said. “They will want the cheap shares.”
A top priority for Swiss Re is regaining the AA rating that was lost during the financial crisis and the firmer capital base is likely to give the group a better chance of returning to the top bond grade.
Net profit for the three months to the end of December was SFr403m, up from a year earlier net loss of SFr1.7bn – a result of cost savings and stable markets.
The company said that it would re-establish targets and aim to achive a return on equity of 12 per cent over the cycle.