Battered life insurer announces a new wave of job cuts to combat its financial problems.
Swiss Life, the struggling Swiss Life insurer, announced a new round of job cuts as part of its restructuring plans. It's attempting to weather a financial crisis that has forced it to abandon a share buyback program and cast down on dividends for its shareholders.
Swiss Life said it would be cutting 200 jobs in Switzerland, over two-thirds of which would be taking place in its headquarters, as part of a plan to save 90.0 million Swiss Francs by 90.0 million Swiss Francs ($75.4 million). This represents 2.3% of its workforce at the end of last year.
Unlike in the banking sector, where firms such as UBS have been shedding thousands of jobs as subprime-related losses mount, smaller insurers have been streamlining their business since 2002 to make themselves more competitive with larger firms such as France's AXA. "For smaller insurers, such as Swiss Life, it has been getting more and more difficult to compete with the larger companies ...[they've] had to get more and more efficient as they don’t benefit from economies of scale," Marc Effgen, an analyst at Swiss broker, Helvea.
In June, Zurich Financial Services announced plans to cut up to 700 jobs in its British general insurance division, while earlier this month Swiss Life had announced plans to trim its workforce by up to 400.
Though the insurance sector across Europe has been suffering amid the global financial crisis, as plunging equity markets hurt their investments, Swiss Life (other-otc: ZFSVY - news - people ) has been among the hardest hit. "Typically even in a downturn you have to ensure cars or business, but you might not increase your life insurance policy, especially given that life insurance products are getting more and more like savings products and sensitive to the movement in equity markets," says Effgen.
Earlier this month, Swiss Life was forced to abandon a plan to return 3.7 billion Swiss francs ($3.1 billion) to shareholders, having bought back just 690.0 million Swiss francs ($577.8 million), and also issued a warning on its dividend.
The market has been unreceptive to the firm's growth strategy. Last year, its decision to pay top dollar for AWD, a German financial adviser working in emerging markets in Eastern Europe, sent its shares plunging, while in July its decision to buy a stake in MLP, a German pension specialist, garnered a similar reaction
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