* Q2 net loss 381 million Sfr vs forecast 139 million net profit
* Charges total 2.131 bln Sfr
* Combined ratio 89.4 percent vs year-earlier 91.0 percent
* Cost savings seen ahead of target
* Shares down 2.8 percent after brief early rally
(Adds CFO quote, shares, analysts' comments)
By Jason Rhodes
ZURICH, Aug 5 (Reuters) - Swiss Re posted a surprise second-quarter net loss on Wednesday as charges on corporate bond hedges, securitised products and its own credit spreads ate up operating returns.
Zurich-based Swiss Re said it made a net loss of 381 million Swiss francs ($359.1 million) after charges totalling 2.1 billion Swiss francs.
That missed an average forecast for a net profit of 139 million in a Reuters poll of 12 analysts.
"These results are only a warning shot, the start of the demonstration that earnings and capital are not what they seem," said Kepler Capital Markets analyst Fabrizio Croce.
The world's second-biggest reinsurer said its excess capital at AA level had improved to 4.5 billion francs and its cost savings would be ahead of target in 2009, increasing its chances of repaying a costly convertible investment by Warren Buffett's Berkshire Hathaway.
"We have significantly increased our confidence in our ability ... to redeem the investment that Berskshire Hathaway made," Chief Financial Officer George Quinn said on a media conference call.
Chief Executive Stefan Lippe said the company was still confident of delivering on its targets.
"During the second quarter of 2009, our core business, despite the reported loss, continued to deliver strong underwriting results and solid earnings power," he said.
The combined ratio in Property and Casualty was a healthy 89.4 percent, better than 91.0 percent a year earlier. A combined ratio below 100 percent shows insurance operations are profitable.
SHARES UNDERPERFORM
Shares in Swiss Re traded down 2.8 percent at 0733 GMT after strong gains in the run-up to Wednesday's results, compared to a 0.5 percent rise in the DJ Stoxx European insurance index. They swung between positive and negative territory in early trade, as investors welcomed improvements to the reinsurer's capital base but expressed disappointment at the net loss.
The stock has fallen more than 14 percent this year, lagging a 2 percent rise in the European insurance index, with the reinsurer being punished for accepting the Buffett investment after writing down billions on toxic assets.
Larger German rival Munich Re said on Tuesday it expected only a small hit from the economic crisis and that it might resume share buybacks this year after posting forecast-beating earnings for the second quarter.
Analysts Marco Schwender and Marco Koch at Swiss private bank Wegelin said they favoured Munich Re, describing its Swiss competitor as a "big building site" with big risk positions.
"An investment is still only recommended for investors with strong nerves," they said in a note. (Editing by David Holmes and Jason Neely)