Europe's insurers count the cost of the credit crunch

Swiss Re and Axa book billions of writedowns on investments

European insurers were yesterday counting the cost of the credit crunch as Swiss Re and Axa suffered what the Swiss group called "extreme financial market turbulence".

Swiss Re, the world's second-biggest reinsurer, swung to a Sfr864m (£518m) loss last year from a profit of Sfr4.2bn in 2007, following huge losses in its sales and trading division. This followed a record loss of Sfr1.7bn in the fourth quarter.

The group slashed its dividend and could look to raise Sfr2bn from investors just days after Warren Buffett made a multibillion-franc investment.

Swiss Re's new boss, Stefan Lippe, said the results were "clearly disappointing", adding that while some divisions had been robust, the numbers had "been impacted by investment losses". Writedowns on its assets came in at Sfr5.89bn.

Axa avoided falling into a loss, but profits were smashed by 82 per cent. The group announced profits of €923m (£818m) for 2008, down from €5.6bn after it was hit by fair-value adjustments on assets and mark-to-market losses. Henri de Castries, the chairman of Axa, said: "The 2008 financial market turmoil was unprecedented and had a significant impact upon our industry. In this adverse environment, Axa was not immune."

The French group's outlook for the industry remained bearish. "2009 will be another challenging year, in light of the current global economic environment," according to Mr de Castries.

Swiss Re's announcement yesterday, while ahead of the forecast of €1bn losses, caps a miserable few weeks for the Swiss insurer. At the beginning of the month, it shocked the market by forecasting the full-year losses and huge writedowns.

Jacques Aigrain, the group's chief executive, who had pioneered the move into offering risky products, including insuring mortgage bonds using credit default swaps, was replaced by Mr Lippe last week.

This came as the company revealed it had approached Warren Buffett's Berkshire Hathaway to bolster its capital position. The move, carried out through a $3bn (£2.1bn) convertible bond issue, could see the US investor's stake reach 20 per cent.

The original announcement prompted Standard & Poor's to downgrade the group's credit rating to A+ from AA- earlier this week. The move will prove costly as the group admitted funding requirements will jump by $1.5bn as a result.

Swiss Re has taken measures to reduce the risk in its investment portfolio "to further protect the long-term financial strength of the company. These measures are all contributing to building a stronger firm for the years to come", Mr Lippe said. The group added that its renewals in January were up 6 per cent, which Mr Lippe called "a clear vote of confidence".

In Paris, Europe's second-largest insurance group, Axa, yesterday announced that underlying earnings had fallen by 17 per cent to €4.04bn last year. Full-year profits plunged after mark-to-market losses on bonds and the adjustments in fair value of its securities wiped off €1.8bn, as the group posted a loss in the second half for the first time in seven years.

The group also announced it was to cut its dividend to 40c from €1.20 the previous year. It also intends to raise €2bn through the issue of preference shares to boost its capital ratio.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
This weekend's 'Big Hero 6' by Disney Animation Studios
arts + ents
News
i100
News
Budapest, 1989. Sleepware and panties.
newsDavid Hlynsky's images of Soviet Union shop windows shine a light on our consumerist culture
Arts and Entertainment
Eleanor Catton has hit back after being accused of 'treachery' for criticising the government.
books
News
In humans, the ability to regulate the expression of genes through thoughts alone could open up an entirely new avenue for medicine.
science
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee