The Swiss private insurance sector has warned that the outlook for the year ahead remains bleak after a "difficult" 2002.
In its annual review, the Swiss Insurance Association, the industry's umbrella organisation, revealed that the previous 12 months had been worse than expected.
Association chairman Hansjörg Frei told a news conference in Zurich that after the turbulences of 2001, he had expressed a "certain amount of confidence" for 2002. However, he admitted this had been misplaced.
"2002 turned out to be an even blacker year for the insurance industry - although looking ahead to the end-of-year financial results, it would be more apt to talk of a red one!" he said.
His comments took on added significance as the Baloise Group on Thursday said it expected to make a loss of between SFr550 million ($405 million) and SFr650 million for 2002 - far worse than analysts' expectations.
Frei explained that in summer 2002 - and even before that - many insurers were forced to mass-sell equity holdings at any price.
"This only served to speed up the stock market free fall, which in turn drove down companies' equity capital as share prices continued their downward spiral," he commented.
"In some cases, the contraction was quite dramatic," he added, without mentioning by name the notable cases of Swiss Life, Zurich Financial Services and Winterthur.
All three companies were last year threatened as a result of stock market falls. Winterthur parent Credit Suisse Group pumped SFr3.7 billion ($2.71 billion) to shore up the capital base of its insurance unit, while a rights issue was the action taken at Swiss Life and ZFS.
A dark year for Swiss Life also saw the Zurich-based life insurer embroiled in a major management shake-up amid investigations into a secretive investment fund and the disclosure of accounting errors.
"Even though some companies have meanwhile managed to shore up their equity bases, a question mark still hangs over the financial strength of a handful of companies," Frei commented.
He said that the media had "quite rightly" brought to light errors that had been made, but the industry still had its fair share of positive news to report.
"The sector has identified its shortcomings, learned its lesson and is now ready to face the major challenges that lie ahead," he said.
Ray of hope
In particular, he cited a ray of hope in non-life business, with the combined ratio - the most important measure of business success - being brought down significantly in many lines of business.
In other words, the ratio between premium income on the one hand and claims expenditure plus costs on the other was improving.
Turning to business in 2002, Frei said that the growth trend in non-life business was upward. The Association estimated the growth in insurers' premium income to be four per cent, rising from SFr17.6 billion to SFr18.3 billion.
In life insurance, the Association predicts growth of six per cent, pushing premium volume up from SFr33.1 billion to SFr35.1 billion
Looking ahead to what 2003 had in store, Frei said that the Association was being realistic.
"We envisage considerable difficulties, particularly with regard to the prospects on the financial markets. But we should not paint too back a picture," he said.
"The supervisory authorities have given the Swiss insurance industry a clean bill of health as regards solvency, despite the fact that equity levels in general have contracted strongly," he added.
Frei stressed that there had been no bankruptcies in the sector in Switzerland and that all companies were "fortunately" in a position to honour their obligations to the insured.
"On the whole, the Swiss insurance industry has demonstrated a remarkable ability to adapt during the extremely difficult periods we have seen in 2001 and 2002," he said.
swissinfo, Robert Brookes
The Swiss private insurance sector is looking back on a difficult 2002.
The main causes are the continued bear stock markets and ongoing drop in interest rates.
"Considerable difficulties" are also expected in 2003.
Premium revenues in Swiss non-life business increased in 2002 by four per cent from SFr17.6 billion to SFr18.3 billion (estimate).
In Swiss life business, revenues rose by six per cent from SFr33.1 billion to SFr35.1 billion (estimate).
The number of people employed in the Swiss private insurance sector is believed to have dropped in 2002 from 48,000 to 46,000 (about four per cent).
The Swiss per head spend more money on insurance than anyone else in the world - some $4,343 per year.
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