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Swiss Life posts sixfold increase in net profit

Something to smile about for Swiss Life CEO Rolf Dörig Keystone Archive

Insurance giant Swiss Life has beaten market expectations for its half-year figures, recording a sixfold increase in net profit.

The results indicate that Switzerland’s largest life insurer is now back on the growth path, following several years of cost-cutting and asset sales.

“We have systematically moved forward along the path we charted out nearly two years ago and can report further operational progress in all areas in the first half of 2004,” said CEO Rolf Dörig on Tuesday.

Net profit for the first half of 2004 reached SFr398 million ($314 million), compared with SFr66 million for the same period last year.

The company attributed the sixfold increase to a combination of further operating improvements in all core markets and a “one-off” gain amounting to SFr164 million.

A Reuters poll of nine financial analysts earlier this week produced an average net-profit forecast of SFr217 million – almost half Tuesday’s figure.

Pensioners lose

Analysts pointed out that the exceptional gain was due to regulatory changes affecting the company’s Swiss occupational pensions business.

Swiss Life profited from the government’s decision to lower the minimum rate of return guaranteed to pensioners from 3.25 per cent last year to 2.25 per cent in 2004.

From 1985 through to 2003, the government had guaranteed a minimum payout of four per cent.

Mandatory occupational pensions make up the “second pillar” of Switzerland’s three-tier pension system.

Shareholders win

Operating income was up to SFr605 million, compared with SFr207 million for first half of 2003.

Operating expenses dropped 11 per cent to SFr1.3 billion – or six per cent after adjustment for one-time impacts and currency effects.

Annualised return on equity for the first half of 2004 was 15.3 per cent – or 8.9 per cent after adjusting for the one-off impact.

First-half gross premiums rose by one per cent to reach SFr12 billion.

Domestic gratification

Swiss Life described the premium growth in its three largest markets – Switzerland (up three per cent), France (up 16 per cent) and Germany (up eight per cent) – as “particularly gratifying”.

In the wake of the half-year figures, shares in the Swiss Life Group rose slightly in trading on the Zurich stock exchange.

The group’s share price has risen by about 15 per cent since mid-August, after losing almost 30 per cent since the start of the year.

swissinfo with agencies

Net profit: SFr398 million for first half 2004 (2003: SFr66 million).
Operating income: SFr605 million (SFr207 million).
Gross premiums: SFr12 billion (up 1%).
Financial result: SFr2.7 billion (down 7%).
Insurance benefits: SFr9.1 billion (down 11%).
Operating expenses: SFr1.3 billion (down 11%).
Equity: SFr858 million (up 17%).

Swiss Life has increased its half-year net profit by nearly twice as much as analysts predicted.

Analysts say the turnaround is largely due to a successful cost-cutting programme and the sale of many banking assets.

The company has also benefited from a reduction of its financial obligations in the domestic occupational pensions sector.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR