Swiss Re Embedded Value Falls, Share Price Too

May 18, 2004

Swiss Re picked a poor time to announce a drop in the embedded value of its life and health business. The reduction to Sw. Frs.16 billion ($12.6 billion) from Sw. Frs.16.3 billion ($12.8 billion) a year ago, coincided with a sharp rise in world oil prices and further bombings in Iraq. As a result the world’s second largest reinsurer’s shares lost almost 6 percent of their value in heavy trading yesterday.

The company announced that embedded value earnings were Sw. Frs. 1.1 billion ($866 million), up Sw. Frs. 700 million ($551 million) from the prior year’s earnings of Sw. Frs. 400 million ($315 million). But it also said that the value added by new business was lower in 2003 at Sw. Frs. 314 million ($247 million) “reflecting lower capital investment and foreign exchange effects.” Swiss Re added Sw. Frs. 627 million ($493.7 million) to embedded value in 2002.

John Fitzpatrick, Head of Swiss Re’s Life & Health Business Group commented: “The embedded value earnings of CHF 1.1 billion [$866 million] reflect a substantial recovery from the low experienced in 2002 when the negative investment environment affected earnings. New business value was lower in 2003 as we seized the profitable opportunities in our non-life business. However, we continue to see attractive new growth opportunities for life and health, as demonstrated by the successful closing of the CNA Admin ReSM transaction at the end of April 2004.”

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