Swiss Life warns of record loss
Swiss Life has announced that it expects a record net loss of around SFr1.7 billion ($1.3billion) for 2002 when it releases its annual results on April 8.
The figure is double the SFr839 million loss forecast by analysts.
Switzerland’s largest life insurer said market uncertainty had hit its investments and resulted in one-off costs.
Company figures were also affected by restructuring costs and heavy losses in the core insurance business and at the Banca del Gottardo private banking arm, Swiss Life said in a statement on Thursday.
Challenging environment
CEO Rolf Dörig said the news was not all bad for Swiss Life, although tough imes lay ahead.
“Despite the negative result, there were also positive aspects to 2002, a watershed year. However considerable effort is still required if we are to achieve lasting success with our ambitious goals in this very challenging market environment.”
The announcement came after a string of Swiss companies – including Credit Suisse and Zurich Financial Services – posted billion franc losses last week.
Investors reacted badly to the warning, driving shares down 7.3 per cent by mid-afternoon to SFr63.15.
Like other insurers, Swiss Life has been forced to slash the equity portion of its investment portfolio, to below two per cent at the end of February from 16 per cent at the start of 2002.
Last year, it threw out an expensive foreign expansion plan in a bid to focus on its core European life business.
It also launched a cost-cutting programme designed to save SFr515 million by 2004.
Return to profit
The company said it expected to return to profit this year. It said that despite the losses it would still have a capital reserve of SFr4 billion, and would not need to tap investors for fresh funds.
The insurer raised SFr1.1 billion in new capital last year boosting its solvency levels.
However, Swiss Life stock has shed a third of its value this year alone.
A key aim for 2003, the company said, was to salvage its company pensions business, which has been struggling to meet fixed-return guarantees.
“Pulling the group pensions business in Switzerland out of the red is an important objective for Swiss Life,” the company said.
Troublesome units
It said it would also be looking to sell Banco del Gottardo this year, after the bank posted a 2002 loss of SFr160 million.
Swiss Life, which reported a net loss of SFr578 million in the first half of 2002, has written off SFr600 million against soured investments, including Banca del Gottardo and asset manager STG.
It has been looking to sell off the two units, but says buyers have been scared away by weak markets.
Swiss Life was beset by a string of problems last year, including several accounting errors and the revelation of a shady investment vehicle that made millions for top executives while investors saw the value of their shares plunge.
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Swiss Life has warned that it expects a SFr1.7 billion loss for 2002 – double analysts’ estimates.
It blamed the losses on weak markets, heavy restructuring costs and one-off writedowns.
It said it faced a “very challenging” but hoped to return to profitability in 2003.
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