Geneva - Swiss Re, the world's second-largest reinsurance company, reported Wednesday it lost 381 million Swiss francs (358 million dollars) in the second quarter, saying it still had assets exposed to volatile markets.

The result was worse than analysts had expected, though the hedged positions at the root of the loss had been anticipated.

In the same period last year, the company made a profit of 564 million francs.

Swiss Re said earnings were offset as it took mark-to-market losses on hedges on corporate bonds, impairments on securitized products and costs as its own credit spreads improved.

"During the second quarter of 2009, our core business, despite the reported loss, continued to deliver strong underwriting results and solid earnings power," said Chief Executive Officer Stefan Lippe.

Lippe said Swiss Re was improving its capital base and ridding itself of legacy assets, as it had reached the "termination of substantially all of our portfolio credit default swap contracts."

Lippe said the company's "underlying operating trends are positive" even as some assets remained exposed to market volatility. Also, the shift away from toxic assets and towards de-risking may impact on future earnings.

The reinsurer was hit hard by the financial crisis, especially owing to its exposure to bad assets, and shook up its senior management at the beginning of the year, following significant losses in 2008.

The economic downturn sent the reinsurer to seek capital from Warren Buffet's Berkshire Hathaway, selling it convertible bonds worth 3 billion francs. In the second quarter report, it made no comment on paying the investment back.