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Global economic crisis: Swiss Life becomes another casualty

GENEVA: Insurer Swiss Life (SL) became another casualty of the global economic crisis on Wednesday after warning it will miss its profit targets for 2008, sending its shares down more than 14 percent.

“The pronounced intensification of the financial crisis since the end of September... means that we cannot confirm our earnings guidance for 2008,” Swiss Life chief executive officer Bruno Pfister said in a statement. The company had previously said it was aiming for a full year net profit of 1.8-1.9 billion Swiss francs ($1.5-1.6 billion, 1.2-1.3 billion euros).

“Since reliable predictions are impossible in view of the current uncertainty on the financial markets, we are refraining from updating our earnings guidance,” Pfister said.

“It will be difficult for investors to see anything positive” in the results, analysts from Bank Wegelin said in a note. However, Pfister insisted that the company’s capitalisation was ‘good’.

“Despite the severe crisis on the financial markets, we have a good capital base. In recent weeks we have significantly reduced the risks in the balance sheet in order to protect shareholders’ equity against further negative repurcussions from these extraordinary developments,” he said.

Swiss Life said its premiums grew one percent in the first nine months of the year to $14 billion. However it also said that it was halting its share buyback programme and would review whether to pay a full year dividend. The company said it had bought back around three million shares by the end of October for 686 million Swiss francs.

“Given the clearly altered situation, Swiss Life no longer assumes that the dividend will come to 600 million Swiss francs, as in the original outlook,” it said. Swiss Life said in September that its exposure to collapsed US investment bank Lehman Brothers came to 20 million Swiss francs and less than 100 million francs to insurance giant AIG which had to be bailed out by the US taxpayer.

The US government announced Monday an expanded bailout for AIG of more than $150 billion, as the Treasury tapped into emergency funds originally set for banks. The latest bailout plan, the largest in US history, came as AIG burned through billions of dollars of cash and reported a third-quarter loss of $24.47 billion.

Swiss Life’s profit warning sent its shares crashing on the Zurich stock exchange where they were showing a fall of 14.68 percent to 93 Swiss francs in midday trade. afp

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