ZURICH (Dow Jones)
Swiss insurer Zurich Financial Services AG (ZURN.VX) said Friday its solvency ratio improved in May due to a recent capital increase and a recovery in financial markets.
The solvency ratio, which gauges a company's balance sheet strength, climbed to more than 180% as of May from 157% in March and 160% at the end of 2008.
Around nine basis points of the increase in the solvency I ratio since March was from Zurich Financial's recent capital increase, spokeswoman Sylvia Gaeumann said. In April, the insurer placed 4.8 million new shares and 1.9 million existing treasury shares to part finance its $2 billion takeover of American International Group Inc.'s (AIG) car insurance business.
Zurich Financial doesn't have a solvency target but the current level of more than 180% is strong, Gaeumann said. Analysts welcomed the news, noting a recent improvement in capital markets was also a driver.
"It's definitely good news, although much of it is due to external factors such as the recovery of equity markets and the tightening of spreads," said Kepler analyst Fabrizio Croce. "A level above 150% in the solvency I ratio is fine. It's a psychological threshold," he said. Kepler has a buy rating and CHF273 price target on Zurich Financial.
A critical low point for the solvency ratio is 150%. "Should the solvency fall below 150%, an insurer must report to Swiss regulator Finma," Gaeumann said.
At 0715 GMT, Zurich Financial shares were down CHF0.90, or 0.5%, at CHF192.60 in a slightly higher general market. This could be partly because of the expiry of futures and options on Swiss blue chips later Friday which will lead to high volatility in early trade, an observer said.
Company Web site: http://www.zurich.com
The solvency ratio, which gauges a company's balance sheet strength, climbed to more than 180% as of May from 157% in March and 160% at the end of 2008.
Around nine basis points of the increase in the solvency I ratio since March was from Zurich Financial's recent capital increase, spokeswoman Sylvia Gaeumann said. In April, the insurer placed 4.8 million new shares and 1.9 million existing treasury shares to part finance its $2 billion takeover of American International Group Inc.'s (AIG) car insurance business.
Zurich Financial doesn't have a solvency target but the current level of more than 180% is strong, Gaeumann said. Analysts welcomed the news, noting a recent improvement in capital markets was also a driver.
"It's definitely good news, although much of it is due to external factors such as the recovery of equity markets and the tightening of spreads," said Kepler analyst Fabrizio Croce. "A level above 150% in the solvency I ratio is fine. It's a psychological threshold," he said. Kepler has a buy rating and CHF273 price target on Zurich Financial.
A critical low point for the solvency ratio is 150%. "Should the solvency fall below 150%, an insurer must report to Swiss regulator Finma," Gaeumann said.
At 0715 GMT, Zurich Financial shares were down CHF0.90, or 0.5%, at CHF192.60 in a slightly higher general market. This could be partly because of the expiry of futures and options on Swiss blue chips later Friday which will lead to high volatility in early trade, an observer said.
Company Web site: http://www.zurich.com
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