Swiss Life recovers on 2003 stock market surge

Swiss Life has recovered from its worst loss in 147 years.

Insurance giant Swiss Life returned to profitability last year with a net gain of SFr233 million ($182 million), shrugging off its biggest loss in 147 years in 2002.

This content was published on March 30, 2004 - 10:20

However, the profit was overshadowed by a SFr1.15 billion cash call which sent the share price tumbling more than ten per cent.

The profit was the first for Switzerland's largest life insurer since 2000, coming after three years of cost cutting and the sale of many of its banking assets.

The company's chief executive, Rolf Dörig, has been lauded for refocusing the bank's attention on insurance, unwinding a SFr4 billion strategy of expansion into banking.

However, Dörig's efforts to sell Swiss Life's Ticino-based Banca del Gottardo fell apart early this year. Swiss Life said on Tuesday it would keep the bank and transfer ownership from its insurance arm to its holding company.

The insurer was hoping to sell the bank - which it bought in 1999 for SFr2.4 billion - for SFr1.5 billion. The ownership transfer will cost SFr1.34 billion.

Swiss Life Holding plans to finance the Banca del Gottardo transaction with internal resources of up to SFr250 million, an equity issue of SFr800 million and a convertible bond of up to SFr350 million.

Another cash call

It will be the third time in a little over two years that Swiss Life has tapped the markets, after a SFr1.1 billion capital increase late in 2002 to prevent the group's collapse and last year's SFr350 million convertible bond issue.

The move means Swiss Life will not pay a dividend for 2003, disappointing analysts who had expected a SFr1 dividend after a two-year drought.

"I do not see what this has to do with Gottardo, this is simply a capital increase," said analyst Roger Degen at Lombard Odier Darier Hentsch.

"While earnings have improved, this is a surprise and it will put the stock under pressure."

Positive reaction

The company said it would continue to improve its profitability in 2004, adding that it anticipated an increase in earnings from insurance premiums. Premiums fell four per cent to SFr18.8 billion last year.

"We aim to gain market share in all our core markets, while adhering to our strict profitability targets," said Dörig in a statement.

Analysts welcomed the result, describing it as evidence that the company was successfully restructuring.

Swiss Life said it had cut costs by 16 percent to SFr2.9 billion and shed 1,800 jobs by the end of last year, exceeding targets set for the end of 2004.

It has also sold businesses in Spain, Britain and Switzerland.

Last year's stock market recovery helped push Swiss Life into profit, by halting the legally-required investment writedowns that fuelled a SFr1.7 billion loss in 2002.

Equity rose by 19 per cent to SFr5 billion.

Swiss Life, which has around 10,000 employees, was owned by its customers until 1997, when it was publicly listed.

swissinfo with agencies

Key facts

Net profit for 2003 was SFr233 million.
Equity rose 19% last year to SFr5 billion.
Premium volume fell 4% to SFr18.8 billion.

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In brief

A SFr1.15 billion capital increase overshadowed Swiss Life's return to profit.

The cash call is the third by Swiss Life in two years.

The insurer disappointed analysts by not paying a dividend for 2003.

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