Swiss Re Posts Loss For '02

A possible surprise for some Swiss Re shareholders, however, is a proposed dividend cut announcement, which was larger than some expected. Swiss Re said due to its losses and a company policy of paying dividends out of current earnings, it is proposing to cut its dividend to 1 Swiss franc, or about 63 cents, a share, from 2.50 Swiss francs a share, or one dollar and 60 cents.

"The dividends were not covered by net income," said Henner Alms, spokesperson for Swiss Re in Zurich. He pointed out that the company's net premium income gained ground by 15 percent to 29.1 billion Swiss francs, ($18.63 billion) but this improved operating performance was overshadowed by a loss in equity values.

The company's 2002 impairment charges, primarily on equities, of 3.9 billion Swiss francs ($2.49 billion) ultimately led to the loss, he noted.

The proposal to cut dividends will be voted on at the annual shareholders meeting May 12, Mr. Alms told National Underwriter. If the dividend cut is approved, it would be the first since 1906 when the reinsurer took huge losses from the San Francisco earthquake, a Swiss Re spokesperson said.

Despite the 2002 loss, company executives offered a rosy picture for the current year during a conference call after the release of its annual report. John Fitzpatrick, chief financial officer at Swiss Re, said the company plans to return to profit this year.

John Coomber, chief executive officer at Swiss Re also noted, "Swiss Re's improved operating performance during 2002 was offset by the severe capital markets' downturn leading to a second consecutive loss. The favorable business outlook for our reinsurance operations should lead to a strong recovery in earnings in the coming years."

Mr. Fitzpatrick also said current equity impairments would be sharply below last year's level, thanks to the company's much-smaller exposure to equities in its current investment portfolio.

Despite the loss and a 26-percent fall in its capital base, Mr. Fitzpatrick said the company has no plans to raise new equity.

He also said the company improved on its Property & Casualty Business Group, with the combined ratio now at 104 percent, reduced from 110 percent the year before. He said the company will work on bringing it down even further, to 100 percent in the current year.

Property & Casualty Business Group's operating income, excluding the impact of capital gains, hit a profit level of 920 million Swiss francs ($589.06 million) last year compared to a loss of 1.6 billion Swiss francs ($1.02 billion) the year before.

The 2001 results, however, were heavily affected by the 9/11 terrorism event. Earned premiums for the p-c group in 2002 also rose, reaching 15.1 billion Swiss francs, ($9.67 billion) a boost of nine percent compared to the previous year.