Swiss Re swings to 2009 net profit, misses forecast

The world's second-largest reinsurer, Swiss Re, swung to a 2009 net profit but just missed expectations as it wrote down 1.9 billion Swiss francs on corporate bond hedges.                                           

"The group believes now is an appropriate time to re-establish targets. Swiss Re aims to achieve a return on equity of 12% over the cycle," said chief executive, Stefan Lippe, adding this target reflected lower investment returns as the company shifts to lower-risk investments.                                            

Lippe, appointed after the company was forced to turn to competitor Berkshire Hathaway for a costly 3 billion franc convertible loan a year ago, has said Swiss Re will only go after the most profitable business, even if this means missing out on some sales.                                           

His safety-first approach and low catastrophe payouts widened Swiss Re's operating margins, enabling it to reward shareholders with an improved dividend of 1.00 franc after it paid out only a nominal sum of 0.10 francs for 2008.                                            

Swiss Re increased its shareholder equity by 5.7 billion francs, giving it more breathing space as it tries to earn enough to repay Berkshire, owned by billionaire investor Warren Buffett, and to illustrate a return to capital strength by winning back the coveted 'AA' credit rating it lost in the crisis.                                           

Munich Re, Swiss Re's larger competitor, beat expectations on Feb 2 after a fortuitous combination of low disaster claims and a financial market revival boosted its earnings.