Swiss Re reported a shock 1.2 billion Swiss franc ($1.07 billion) writedown due to the subprime crisis, sending its shares down sharply and making it the first reinsurer to suffer a big, direct hit from the crisis.
The losses announced today stemmed from protection Swiss Re sold to a client against a fall in the value of a portfolio -- underscoring the depth of the crisis and how it has hit financial firms like banks, insurers and hedge funds in often unexpected ways.
Rival Munich Re said it had nothing new to announce after the news, meaning Swiss Re may be alone among the big reinsurers to have taken a direct hit so far from the credit crisis.
The unexpected loss may raise questions about Swiss Re's push into novel investment bank-like services, a cornerstone of group strategy under Chief Executive Jacques Aigrain in a move to diversify away from its core business of providing insurance to insurers.
Swiss Re has conducted a thorough review of other credit default swap exposures and was satisfied it has no similar exposures, according to a slide presentation before a conference call with analysts.
Its shares were down 4.3 per cent this morning, making it the biggest loser among the index of Europe's top 300 companies, which was up 0.54 per cent at the same time.