Swiss Life cuts dividend but raises key targets

City A.M. Reporter
EUROPEAN insurer Swiss Life will cut its dividend payout ratio to between 20 and 40 per cent until at least 2012 in a bid to protect its balance sheet.

Switzerland’s largest life insurer said the move would strengthen its capital base, an essential step, and restore its “A” credit rating. Currently Swiss Life aims to pay out between 40 and 60 per cent of profit in dividends.

The company also shifted up its target for return on equity (ROE) to between 10 and 12 per cent for 2012, a range analysts said was ambitious.

Chief executive Bruno Pfister said the firm would not make bolt-on acquisitions but would try to grow organically by developing its distribution channels, pushing its own products through the likes of German subsidiary AWD.

Pfister said: “We will ensure that the group grows profitably, despite the increasingly tough competitive climate.”

Stefan Schuermann, analyst at Vontobel, said: “The new ROE target of 10 to 12 per cent for 2012 appears challenging but achievable assuming stable financial markets and including the full impact of [Swiss Life’s] cost and growth initiatives.”

Earlier this year Swiss Life kicked off a CHF400m (£236.7m) cost saving programme, cutting 500 jobs to balance losses from asset write-downs.