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Helvetia Patria joins the loss-making list

Helvetia Patria has cut its dividend to SFr2 after making a loss in 2002 (Helvetia Patria)

Helvetia Patria has joined the growing list of Swiss insurance companies, which chalked up huge losses last year.

The group, based in St Gallen, reported the first loss in its history for 2002 - plunging into the red to the tune of SFr362 million ($261.66 million).

It blamed impairment charges on depressed equity values and losses in its Swiss business for the poor result.

It comes a day after the Baloise company - Switzerland's fifth insurer - announced a loss of SFr634 million, the worst since its foundation in 1863.

Worse than expected

The result is worse than analyst estimates and represents a sharp downward swing from the profit of SFr101 million in 2001.

As a result, the company is proposing reducing its dividend to SFr2 per share (SFr8.75 in 2001) and is asking shareholders for permission for a cash increase of up to 50 per cent of existing capital.

A statement said such a move was aimed to fund organic growth and possible acquisitions at home and abroad, and to have adequate finances in the event of a further massive slide in the value of equities.

The authorisation would be valid for two years, it added.

Helvetia Patria joins other industry firms which have sought to raise cash as earnings and shareholder equity have been hit by falling equity values.

Equity has traditionally made up a sizeable part of their investment portfolios. Helvetia Patria said it had booked charges of SFr880 million for impaired equity values.

Hit by weak markets

But Swiss insurance companies have also been hit by weak markets in the sense that they cannot now make the returns required to cover guaranteed minimum interest rates on group life policies.

As a result, the collective pension business, in which the guaranteed rates are fixed by law, is unprofitable.

This has forced them to cover the shortfall from their own pockets.

Insurers have called on the government to cut the rate, which at the current 3.25 per cent, is above the 2.00-2.25 per cent yield on government bonds.

No rate cut in sight

A reduction is not considered on the cards with parliamentary elections due later this year.

Many insurance experts have said that in such a situation, the industry can only raise policy premiums, cut costs and reduce their equity exposure to tackle the pressure on earnings.

swissinfo with agencies

Key facts

Helvetia Patria made a loss of SFr362 million in 2002.
Baloise on Thursday announced a SFr634 million hole.
The Zurich Financial Services group posted a 2002 loss of SFr3.4 billion.
Swiss Re last week reported a SFr91 million loss.
Swiss Life expects a loss of SFr1.7 billion. It will announce 2002 figures on April 8.

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