Story Published: Nov 19, 2007 at 9:39 AM PDT
Story Updated: Nov 19, 2007 at 9:39 AM PDT
Swiss Re, in a trading statement, said the loss, which occurred in October, stems mainly from its so-called credit default swaps.
But the company said it will still post a full-year net profit for 2007 and the year-end return on equity would be above its 13 percent target.
"The excellent performance of the group throughout the year to date means that Swiss Re is able to absorb the extraordinary financial market developments in October," said Chief Executive Jacques Aigrain.
Swiss Re earlier this month posted a 5 percent drop in third-quarter earnings saying net income was 1.47 billion Swiss francs ($1.28 billion) compared with 1.55 billion francs in the same period last year.
Shares in Swiss Re fell 5.5 percent to 92.15 francs ($82.49) in Zurich trading.
Credit default swaps are usually bought by bond investors who seek insurance against potential losses in the bond market. When bonds lose their value fast, the insurer has to pay out claims that help investors recover some losses.
Swiss Re also said it has written down the subprime securities to 62 percent of their original value and that the market value of the portfolio is now at 3.6 billion francs ($3.2 billion).
The company said it will continue its share buyback program for 6 billion francs ($5.4 billion).
Reinsurance companies sell backup coverage to other insurers, spreading risk so the system can handle huge losses from major disasters.