Bloomberg News

Swiss Re Plans to Issue More Contingent Capital Notes, CFO Says

February 27, 2012

Feb. 24 (Bloomberg) -- Swiss Re Ltd. Chief Financial Officer George Quinn said the world’s second-biggest reinsurer plans to issue more contingent capital notes to help fund growth.

“Over the course of the next few years, I expect to see contingent capital to become a far more significant part of the group’s available capital,” Quinn said in a telephone interview from the company’s Zurich headquarters. It’s an “efficient way of financing the firm,” he said, declining to elaborate on Swiss Re’s capital plans.

Swiss Re’s first public issuance of contingent capital was a five-year 320 million-Swiss-franc ($353 million) note sold to Swiss investors on Jan. 27. Quinn said the company also wants to sell contingent securities, which inflict losses on investors when capital buffers weaken, internationally.

“Swiss Re is a global institution so we would look to finance ourselves globally,” said Quinn. “We need to see how investor appetite for these instruments develops. The initial signs are positive.”

Swiss Re regained its AA- credit rating from Standard & Poor’s in October after shedding risky assets, repaying a 3 billion-franc loan from Warren Buffett’s Berkshire Hathaway Inc. and stabilizing earnings. The reinsurer had $7 billion of excess capital at the end of last year, Swiss Re said yesterday.

Swiss Re is cautious about investing in contingent capital bonds issued by banks because it might expose the reinsurer to risks in the financial system, said Quinn.

Rates Growth

“Contingent capital can play a role in the portfolio, but won’t become a major part of our investment portfolio because of you’d be transferring the risk of the banking sector into the insurance sector,” he said.

Swiss Re expects more growth in property and casualty contract renewals in April and July, Quinn said.

The company reported premium growth of 20 percent from renewals in January, when it typically renews about two-thirds of its annual non-life contracts, and saw an average price increase of 4 percent.

“There are signs that we will continue to see price rises through the remainder of the year,” said Quinn.

--Editors: Dylan Griffiths, Keith Campbell.

To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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