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Swiss Re fourth-quarter net profit falls US$87 percent on bad loans

Swiss Re fourth-quarter net profit falls US$87 percent on bad loans

Swiss Reinsurance Co. reported an 87 percent drop in fourth-quarter net profit on Friday, blaming massive write-downs linked to bad loans.
Swiss Re said its net profit during the three months to December was 170 million Swiss francs (US$161.7 million; euro106.9 million) compared with 1.3 billion francs in the year-earlier period.
The Zurich-based reinsurer said a 1.2 billion franc pretax loss reported in November hit its bottom line, and it expects further write-downs of some 240 million francs (US$228.3 million; euro151 million) in the current year.
The losses were the result of credit default swaps gone bad, Swiss Re said.
Credit default swaps are usually bought by bond investors, who seek insurance against potential market losses. When bonds lose their value fast, the insurer has to pay out claims that help investors recover some losses.
Swiss Re said the business unit at which the losses occurred was marginal to its credit underwriting operations and would be closed down.
"We have learned from the mistake and are confident that we have a stronger organization as a result," the company said in a statement.
The world's largest reinsurer said it would raise its dividend by 18 percent to 4 francs (US$3.81; euro2.52) from 3.40 francs in 2006.
Reinsurance companies sell backup coverage to other insurers, spreading risk so the system can handle huge losses from major disasters.


Updated : 2021-05-18 10:39 GMT+08:00