By Warren Giles Nov. 4 (Bloomberg) -- Swiss Reinsurance Co., the world's second-biggest reinsurer, posted its first loss in almost six years and suspended a share buyback program after wrong-way bets on credit derivatives. Swiss Re slumped in Zurich trading after reporting a third- quarter loss of 304 million Swiss francs ($259 million) compared with net income of 1.47 billion francs a year earlier, the Zurich- based reinsurer said today. The median estimate of eight analysts was a 150 million-franc profit. Swiss Re booked a writedown of 289 million francs on credit default swaps written to protect a client, bringing mark-to-market losses on the securities over the past year to 2.81 billion francs. Chief Executive Officer Jacques Aigrain has increased hedging against corporate credit risks as the global financial crisis worsened. ``The company delivered awful figures,'' said Fabrizio Croce, an analyst at Kepler Capital Markets in Zurich who has a ``reduce'' rating on the stock. Today's writedown is ``only the tip of the iceberg -- the present is cloudy and the future looks stormy,'' he added. Swiss Re dropped 7.4 percent to 47 francs at 9:11 a.m. in Zurich, bringing its decline this year to 42 percent. That compares with the 43 percent decline in the Bloomberg Europe 500 Insurance Index. Investment Losses The insurer reported investment losses of 1.5 billion francs in the quarter. It cut investments in corporate bonds through hedging, reducing the notional value of its portfolio to zero at the end of September from 25.7 billion francs three months earlier. ``There are big distortions from investment losses, as expected, and the numbers overall look slightly worse than consensus,'' said Tim Dawson, an analyst at Helvea in Geneva who rates the company ``neutral.'' Swiss Re suspended its 7.75 billion franc share buyback program, which was 51.2 percent complete at the end of October. ``Swiss Re can still meet the completion of the program by April 2010, but this will depend on some stability returning to the capital markets,'' the company said in the statement. The insurer has ``excess capital'' of between 5 billion and 5.5 billion francs, Chief Financial Officer George Quinn told journalists on a conference call today. Swiss Re has dropped 37 percent in Zurich trading this year, cutting the company's value to 17.9 billion francs. That compares with the 43 percent decline in the Bloomberg Europe 500 Insurance Index. Hurricane Costs Credit-default swaps, designed to protect bondholders from nonpayment, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. The company reiterated a target for earnings-per-share growth of 10 percent and a return on equity of 14 percent ``over the cycle.'' Swiss Re reported a third-quarter loss per share of 93 centimes, after earnings per share of 4.20 francs, a year earlier. Net insured claims from hurricanes Ike and Gustav cost the company $365 million, Swiss Re said. On the asset side, Swiss Re had a total of 39.9 billion francs invested in structured products, compared with 38.9 billion francs at the end of June, it said, as currency effects increased the value of the portfolio. Swiss Re reported in September that it had a total of 250 million francs of exposure to AIG and bankrupt Lehman Brothers Holdings Inc. To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.net

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