The Telegraph
Since 1st March, 1999
Email This PagePrint This Page
Zurich Financial in red, to cut 4500 jobs

Zurich, Sept. 5 (Reuters): Zurich Financial plunged to a first-half loss of $ 2.03 billion—far worse than analysts had expected—and said on Thursday it would cut 4,500 jobs and raise capital to bolster its balance sheet.

Seeking to restore profitability and investor trust after a dismal performance of late, Europe’s third-largest insurer said it had embarked on an “tough and thorough” scheme that aimed to boost net profit by $ 1 billion in 2003.

The daunting $ 2.03 billion loss reflects special provisions of $ 2.7 billion after tax to cover increasing its reserves by a pre-tax $ 2 billion and writing off $ 954 million in goodwill and previously capitalised software expenses after tax.

Confirming analyst expectations, Zurich said it planned to issue new shares worth $ 2.0-2.5 billion via a rights issue and wrap this up by the end of October.

In all, Zurich intends to bolster capital by around $ 5 billion via the rights issue and by saving $ 2.5-$ 2.7 billion by cutting its dividend, selling some stocks in its investment portfolio and using reinsurance selectively.

Zurich had in June started reducing the percentage of shares in its portfolio, chief executive Jim Schiro said, adding Zurich expected to have cut back the level by two percentage points to around 10 per cent in 6-12 months.

He declined to discuss the likely terms of the rights issue or confirm market talk that the new shares would be issued at a 35-70 per cent discount to current market levels.

Schiro, who replaced Rolf Hueppi as CEO in May, said Zurich would raise around $ 1 billion by selling non-core activities over the next six to nine months and get roughly $ 500 million from selling off stocks.

He declined to be specific as to which operations would be sold and refused to confirm or deny that these included the Farmers insurance management firm in the United States or UK fund manager Threadneedle, as had been rumoured in the markets.

Analysts’ estimates had on average ranged from a loss of $ 145 million to a profit of $ 326 million.

The earnings drop came despite a pre-tax gain on the sale of US funds arm Zurich Scudder to Deutsche Bank.

Email This PagePrint This Page