LEADING EUROPEAN insurance players predicted tough going in 2009 and pledged to focus on their bread-and-butter business as they struggle with write-downs and depressed income from investments.
The sector got a boost yesterday from Swiss Re, the world’s second-biggest reinsurer, which posted better-than-expected first-quarter earnings and showed it was making progress in grinding down a pile of risky assets that have worried investors for the past 18 months.
French insurer AXA and Swiss rival Zurich Financial Services AG said they were confident of their prospects this year in spite of adverse markets.
Swiss Re said it had cut risky holdings of corporate bonds and complex structured finance products by 6.5 billion Swiss francs in the first three months of the year alone, but said it may face further writedowns. “It will take some time to reduce the asset risk in our portfolios, and we may suffer volatility in the process,” chief executive Stefan Lippe said.
Investors hailed the return to profit after writedowns had helped push Swiss Re to a one billion Swiss francs loss in 2008. Swiss Re shares rose nearly 20 per cent, helping the DJ Stoxx European insurance index post a 3.4 per cent gain.
Collins Stewart analyst Ben Cohen raised his recommendation on Swiss Re to “buy” from “sell” on the better-than-expected result. “With asset prices showing some signs of stabilisation, our concerns that the group will need to raise equity at distressed prices have lessened materially,” Mr Cohen said.
Munich Re this week said it was too early to declare the financial crisis over, and it expected no swift market recovery.
“We expect the environment to remain difficult throughout 2009,” agreed Axa chairman Henri de Castries yesterday, after unveiling a 2 per cent fall in first-quarter revenue.
Axa and Zurich Financial, which posted a 75 per cent drop in first-quarter net profit, both said they were confident their business strategies would see them through the crisis. Insurance companies, and the reinsurers that help them shoulder risks and losses from hurricanes, earthquakes and fires, have seen their investments hit hard by the financial crisis. – (Bloomberg)
