Swiss Re cuts dividend after posting loss
Swiss Re, the world's second-largest reinsurer, has cut its 2002 dividend by more than half after posting its second annual net loss in a row.
The first dividend cut in nearly 100 years came as the company reported a loss for 2002 of SFr91 million ($66 million).
Swiss Re posted a loss of SFr165 million in 2001.
The firm said weak equity markets had pushed it into the red, but added that the outlook for the insurance sector remained bright.
“Obviously the financial result was disappointing but it’s inevitable given the extraordinary capital market situation that we’ve suffered in the last three years,” Swiss Re spokeswoman Samantha Whiteley told swissinfo.
“We suffered SFr3.9 billion of impairment charges which led to the loss, but on the overall business, the operational performance is improving strongly,” she added.
Presenting its results on Thursday, Swiss Re announced it was cutting its 2002 dividend to SFr1 per share from SFr2.50.
The group had given advanced warning of the dividend reduction last month when it said it expected a net loss for 2002 of around SFr100 million. It had billed the cut as part of a plan to “live within its means”.
However, the cut to SFr1 was bigger than analysts had anticipated.
The last time Swiss Re cut its dividend was after the San Francisco earthquake of 1906 when earnings declined by 20 per cent.
New CEO John Coomber said that two consecutive years of loss, caused by the September 11 tragedy in 2001 and the three-year decline in equity markets, had created the “unsatisfactory situation” whereby dividends had to be paid out of retained earnings rather than current income.
“In these circumstances, the board believes a reduction of the dividend is in line with Swiss Re’s tradition of prudent financial management,” Coomber wrote to shareholders.
He added that, paradoxically, the events leading to this situation had produced “exceptional opportunities” for Swiss Re’s core products.
“The favourable business outlook for our reinsurance operations should lead to a strong recovery in earnings in the coming years,” he said.
Coomber repeated assurances given last month that Swiss Re would not seek a capital increase. “Swiss Re has no plans to raise new equity,” he said.
swissinfo with agencies
Reinsurance is basically insurance for insurance companies.
Swiss Re is the world’s number two reinsurance company behind Munich Re, which on Thursday announced a 2002 profit of €1.1 billion (SFr1.63 billion).
The Swiss Reinsurance Company was founded in 1863, two years after a major fire in Glarus.
The 1906 earthquake and fire in San Francisco helped Swiss Re gain worldwide reputation. Although it brought the company a loss of SFr8.4 million, which was paid “promptly and fairly”, the result was a substantial increase in business.
Swiss Re made a loss of SFr91 million in 2002, after a loss of SFr165 million in 2001.
It has blamed poor equity markets over the past three years for the “disappointing” result.
The company says it has no plans to raise new equity.
New CEO John Coomber says the group is confident that Swiss Re can return to profit in 2003.
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