Fortis, the Belgo-Dutch financial group, on Tuesday blamed 'persistently weak economic conditions and depressed stock markets' as it reported a fall in first-quarter operating profit. Net operating profit fell to Ã¢âÂ¬ 763 mln, compared with Ã¢âÂ¬ 831 mln in the same period last year.
The group said net losses for the period were Ã¢âÂ¬ 453 mln compared with a net profit of Ã¢âÂ¬ 850 mln in 2002, as falling stock markets caused the insurer to take a Ã¢âÂ¬ 1.2 bn unrealised charge against its falling equity portfolio.
'The financial sector started the year on a bad note,' said Anton van Rossum, chief executive. 'The first quarter was dominated by a weakening economy and a further decline in the stock markets. Fortis once again had to revalue its equity portfolio in the first quarter. Apart from this setback, Fortis performed reasonably well,' he added. However, he also said economic uncertainty made it 'impossible' to give a full-year outlook.
Fortis shares, which rallied in March after the group reported better-than-expected results for 2002 and maintained its dividend, fell 2.8 % to Ã¢âÂ¬ 14.18 in morning trade on the news.
The group, like other European insurers, has been hit by growing concerns over solvency ratios and falling markets. Last year it posted a fall in net profit to Ã¢âÂ¬ 532 mln. from Ã¢âÂ¬ 2.6 bn. in 2001.
Fortis - which has increasingly been viewed as a takeover target - said solvency remained strong despite sagging equity markets, with net core capital at Ã¢âÂ¬ 17 bn at the end of March, 77 % above the legally required amount. This figure was slightly lower than its solvency level at the end of 2002 when it was 81 % above the legally required amount.
Net operating profit after realised capital gains in the insurance business rose to Ã¢âÂ¬ 363 mln from Ã¢âÂ¬ 302 mln last time, although the equity portfolio adjustment led to a loss of Ã¢âÂ¬ 706 mln, against at gain of Ã¢âÂ¬ 302 mln last year.
The banking business saw its net operating profit fall 39 per cent to Ã¢âÂ¬ 359 mln from Ã¢âÂ¬ 586 mln in the same period last year on the bank of a sharp rise in provisions - up to Ã¢âÂ¬ 187 mln, against a extremely low first quarter in 2002.