Sunday, November 18, 2007

Swiss Re Writes Down $1.07 Billion on Credit Swaps

What a difference a few days made.....The headline from the earnings release on Nov. 6th was "upbeat"..... How they can be surprised from this downgrade is beyond me. Lets hope their "models" to forecast Hurricanes etc is more up to date......

Schon lustig wenn die Pressemitteilung zu den Ergebnissen am 06. November noch nahezu euphorisch klingt .... Wie man bei all den Meldungen der letzten Monate von den Herunterstufungen dieser Schrottpapiere durch die Ratingagenturen immer noch überrascht sein kann ist mehr als bedenklich. Bleibt zu hoffen das die "Modelle" für die Schadensberechnungen bei Naturkatastrophen besser sind......

Swiss Re Writes Down $1.07 Billion on Credit Swaps
Nov. 19 (Bloomberg) -- Swiss Reinsurance Co., the world's biggest reinsurer, said it wrote down 1.2 billion Swiss francs ($1.07 billion) related to two credit default swaps.

The loss, worth 981 million francs after tax, was from credit default swaps designed to provide protection for a client against a fall in the value of a portfolio, Zurich-based Swiss Re said today in an e-mailed statement.

The portfolios ``consist largely of mortgage-backed securities,'' Swiss Re said in the statement, with the ``majority of the exposure'' to prime and mid-prime securities. There is ``exposure to subprime and asset-backed securities in the form of collateralized debt obligations,'' the reinsurer said.

Swiss Re Press Release

"The unprecedented and severe ratings downgrades undertaken by the Rating Agencies in October and the lack of any truly liquid market for these securities has resulted in a significant and material reduction of the value of the underlying assets."

Swiss Re Presentation Mark-To-Market Loss

Swiss Re valued the ABS CDOs to zero and the subprime securities to 62 percent of their value, bringing the market value of the portfolio to 3.6 billion francs, the company said.

The reinsurer ``remains committed'' to its share buyback program and reiterated its targets for earnings per share target of 10 percent and return on equity of 13 percent ``over the cycle.''

> Now they can buy back the shares at a much cheaper price.....

> Nun können Sie die Aktien noch günstiger zurückkaufen........

Swiss Re shares down 6.6%; details $1.1 billion hit

Another take from the FT A big penny drops in Switzerland

But what should shock, is that the whole whack - 1.1bn - is on just two CDS contracts written for “a client”.

Now Swiss might be an insurer - and therefore erring on the plus ultra side of conservatism, but the scale of those writedowns is still something to take stock of. CDOs to zero!

A single deal has gone badly, badly wrong.

> Indeed.... In der Tat......

NYT Swiss Re Takes $1 Billion Write-Down

Swiss Re, whose financial services division is run by Roger W. Ferguson Jr., a former governor of the United States Federal Reserve, said that it incurred the losses, which it called deeply embarrassing, when it sold two credit-default swaps as protection against declines in the value of investments mainly backed by mortgages.

> This explains a lot....... :-) Das erklärt einiges....... :-)

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Anonymous Anonymous said...

Hi J-M,

Not a disaster, but still a part of the pattern of what seems like 'partial disclosure', which contributes to the air of uncertainty that is hurting the financial stocks.

However, when you see data like this, it is hard not to get the idea that we are seeing only the tip of the iceberg.


2:59 AM  
Blogger jmf said...

Moin Moin,

the problem is that until a few days ago they didn´t see this coming..... What a farce!

Nobody is believing the data that is coming from any financial institution right now. And they right....

Libor etc is at new highs.....

What a mess!

Time for the central banks to cut rates.

Didn´t help so far but that´s what they have always done..... ;-)

3:06 AM  
Anonymous Anonymous said...

the problem is that until a few days ago they didn´t see this coming..... What a farce!

Ja, stimmt. This is what I meant by 'partial disclosure': they never seem to be telling the whole truth at any particular time. Which makes people wonder: are they that inkompetent at keeping track of their assets, or are they, at times, just plain lying/trying to hide things?


3:19 AM  
Blogger jmf said...

I agree 100 percent.

The next rumor
is already spreading....

3:27 AM  
Blogger jmf said...

Just in time....

Citigroup cut to sell by Goldman on CDO write-down fears

C was downgraded to sell from neutral at Goldman Sachs, with the broker seeing up to $15 billion in write-downs from collateralized debt obligations over the next two quarters

3:43 AM  
Blogger Rob Dawg said...

The ABS CDOs to 0 may not be enough. Toxic waste disposal costs money. They seriously might have to pay lawyers for years and incentivize whomsoever actually takes these off their books at 0. These are not non-performing products, these are anti-performing products.

9:15 AM  
Blogger jmf said...

A born-again Citi tells Swiss Re to face facts and be dull

Swiss Re suffered a ‘collective failure’ of risk management say Citi:

No fewer than four times does Citi say Swiss Re “didn’t understand” the contracts.

The criticism is reinforced by the secretive operations of Swiss Re’s “Financial Services” division, which operates as a virtual “black box” say Citi.


2:33 AM  

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