By Warren Giles
May 7 (Bloomberg) -- Swiss Reinsurance Co., the world’s second-biggest reinsurer, returned to profit in the first quarter on higher premiums after a record loss in the previous three months. The stock gained the most in 14 weeks.
Net income fell to 150 million Swiss francs ($132 million) from 624 million francs a year earlier, the Zurich-based company said in a statement today. That beat the 44 million-franc median estimate of seven analysts in a Bloomberg survey. The reinsurer reported a loss of 1.75 billion francs in the fourth quarter.
Swiss Re increased premium income from property and casualty, its biggest business, by 5 percent. The reinsurer, which is cutting more than a 1,000 jobs this year after turning to Warren Buffett for a 3 billion-franc injection, expects to generate 1 billion francs in capital over the next 12 months from cutting investment portfolio risk.
“With asset prices showing some signs of stabilization, our concerns that the group will need to raise equity at distressed prices have lessened,” Collins Stewart analyst Ben Cohen wrote in a note to investors. He upgraded his rating on the stock from “sell” to “buy.”
Swiss Re gained as much as 12 percent and was 10 percent higher at 32.28 francs at 9:55 a.m. in Zurich, trimming this year’s decline to 36 percent. The stock is the worst performer in the 33-member Bloomberg Europe 500 Insurance Index
The company has changed its top management after a strategy of trading securities led to a loss last year. Walter B. Kielholz, who replaced Chairman Peter Forstmoser this month, and Chief Executive Officer Stefan Lippe, who succeeded Jacques Aigrain in February, have promised shareholders to invest premium income “more conservatively.”
“We have restored our capital position and continue to de- risk our balance sheet,” said Lippe in the statement. “We see increased demand and reduced capacity in the reinsurance market driving prices higher.”
Swiss Re is disbanding its financial markets unit as part of a “de-risking” strategy after losses on contracts sold to protect clients against declines in fixed-income securities network and centralize support functions to save costs.
The company reiterated a plan to cut 400 francs of costs by the end of 2010 and said it aims to repay the Berkshire Hathaway debt at the earliest possible date in March 2011.Related Links
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