Switzerland's largest life insurer has issued a profit warning after its first-half net profit fell short of expectations due to writedowns on its investments.
The warning resulted in the share price closing on Thursday down 8.84 per cent at SFr204.20 ($186) after the worst daily decline in four years.
Although Swiss Life reported income of SFr1.64 billion ($1.5 billion), an increase of 158 per cent compared with the same period last year, this was only due to extraordinary sales.
Net profit from continuing operations fell by 64 per cent to SFr152 million.
Analysts on average had expected net profit of SFr1.82 billion after a one-off book gain of SFr1.5 billion from the sale of its Banca del Gottardo business and its Dutch and Belgian life insurance operations.
Swiss Life shares have lost almost a third of their value since the group announced two weeks ago it was buying a 26.75 per cent stake in the German pension sales specialist MLP for about SFr500 million.
It said in a statement on Wednesday that "due to the distortions on the financial markets in the first half of the year and their repercussions, it has become clear that the Swiss Life Group cannot achieve its financial targets for 2008".
"We expect a profit for 2008 of between SFr1.8 and 1.9 billion," commented chief executive Bruno Pfister.
Swiss Life said it would miss its earnings per share target for next year without share buybacks it recently cancelled to finance the MLP stake.
"It's tough for everyone and they are suffering from the markets but the numbers are far below consensus," said analyst Viktor Dammann at Bank Vontobel in Zurich.
An analyst at the Zurich cantonal bank called the results "disappointing".
"The company has had problems on financial markets and investors will be particularly disappointed about its outlook," the analyst said. "The share had been under pressure in recent sessions over MLP. This is now bound to increase."
Another analyst, Marc Effgen at Helvea, described the result as "a weak set of figures with net profit ten per cent below our and consensus expectations".
CEO Pfister argued that pensions and long-term savings remained a growth market and Swiss Life was in an "excellent position" to reap the benefits.
"Looking beyond 2009, we are certain that our business model will enable us to achieve the targeted annual profit growth of 12 per cent and a 12 per cent return on equity.
swissinfo with agencies
Swiss Life was founded in 1857 in Zurich as Schweizerische Rentenanstalt.
The group is one of Europe's leading providers of life insurance and pension solutions.
It reported a net profit of SFr726 million in 2007, with gross written premiums, policy fees and deposits received of SFr21.2 billion.
At the end of 2007, it employed a staff of 8,556.
Swiss Life is the majority shareholder of the Hanover-based AWD Group, a financial services provider for the medium- and high-income customer groups.
AWD employs about 6,600 financial consultants in ten European countries.
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