/raid1/www/Hosts/bankrupt/TCREUR_Public/021112.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
E U R O P E
Tuesday, November 12, 2002, Vol. 3, No. 224
Headlines
* F I N L A N D *
SONERA CORP: Receives Writ by Broadband's Bankruptcy Estate
* F R A N C E *
SCOR: Moody's Downgrades Financial Strength and Debt Ratings
* G E R M A N Y *
COMMERZBANK AG: To Trim Down Workforce at Investment Banking Unit
MOBILCOM AG: Regulator Launches Insider Trading Probe
* I T A L Y *
FIAT SPA: Moody's Places on Review Long-term Debt Ratings
TELECOM ITALIA: Board Adopts Results for First Nine Months
* N E T H E R L A N D S *
GETRONICS NV: To Trim Down Workforce, Near-Term Recovery Gloomy
ROYAL PHILIPS: Announces Plan to Close Semiconductor Facility
* P O L A N D *
BRE BANK: Moody's Downgrades Financial Strength Ratings to D-
BANK ZACHODNI: Moody's Assigns Stable Outlook for SFR
ELEKTRIM SA: Appoints Rymaszewski Management Board Member
ELEKTRIM SA: Board Announces Loan Agreement With Zespol
KREDYT BANK: Moody's Downgrades Financial Strength Ratings to D-
* S W E D E N *
LM ERICSSON: Technology Runs C&W Panama's GSM/GPRS Network
* S W I T Z E R L A N D *
ABB LTD.: Sets New Short- and Medium-Term Business Targets
CREDIT SUISSE: CSFB Names Barbara Yastine Chief Financial Officer
ZURICH FINANCIAL: Has New CEO for European, Worldwide Businesses
* U N I T E D K I N G D O M *
AMEY PLC: Bank of Scotland Likely to Acquire Interest in PFI
BRITISH ENERGY: OFGEM Approves Revisions of Nuclear Energy Deal
BRITISH ENERGY: Issues Summary of October Output Statement
CABLE & WIRELESS: Board May Decide Massive Job Cuts in C&W Global
EVANS & SUTHERLAND: Announces Workforce Reduction
ROYAL & SUN: Announces Nine-Month Results for 2002
ROYAL & SUN: Issues Operational and Financial Review
ROYAL & SUN: S&P Lowers Ratings on Synthetic Securities
ROYAL & SUN: Moody's Downgrades Rating, Assigns Stable Outlook
ROYAL & SUN: A.M. Best Affirms Rating of the Insurance Group
THE BIG FOOD: Baugus Group Announces Majority Shareholding
=============
F I N L A N D
=============
SONERA CORP: Receives Writ by Broadband's Bankruptcy Estate
-----------------------------------------------------------
Sonera Corporation (HEX:SRA, Nasdaq:SNRA) was served a writ by
Broadband Mobile AB's bankruptcy estate.
In the writ the bankruptcy estate claims NOK 332 million,
approximately EUR 45 million, primarily from the shareholders of
the company and alternatively from the board members and the CEO
of Broadband Mobile AB. The shareholders were Enitel ASA (50%)
and Sonera Corporation (50%).
The claim is based on the shareholder's commitment to provide
adequate financial recourses to the investment. This commitment
was given at the time of applying for the UMTS license.
Sonera shall answer in the given time within 3 weeks. The claim
was filed in Asker & Baerum district court in Norway.
CONTACT: Sonera Corporation
Mr Jari Jaakkola, EVP, Corporate Communications & IR
Phone: +358 2040 65170
E-mail: jari.jaakkola@sonera.com
===========
F R A N C E
===========
SCOR: Moody's Downgrades Financial Strength and Debt Ratings
------------------------------------------------------------
Moody's Investors Service downgraded SCOR's insurance financial
strength rating from A1 to Baa1, senior debt rating from A2 to
Baa3, and subordinated debt from A3 to Ba1.
The action reflects the Paris-based company's EUR277 million-loss
in 2001 and expected EUR250 million-loss for 2002.
According to Moody's the downgrade also showed: "deteriorating
level of fixed charge coverage, concerns raised by the company
regarding its level of internal controls, the quality of
underwriting and risk management, and the company's current
depressed stock price."
Moody's believes that at the company's current depressed stock,
the raising of new equity may pose problems.
The ratings remain on review with uncertain direction until the
amount and the timing of the prospective rights issue are
specified, and the success of the issue becomes apparent.
A successful rights issue that would raise at least EUR250
million in additional equity may result in the ratings being
upgraded as Moody's view the move a positive step to restore
investor confidence and profitability.
Moody's also affirmed SCOR's management changes, and the
company's recovery plans.
The following ratings have been downgraded and remain on review
with direction uncertain:
SCOR-insurance financial strength rating from A1 to Baa1;
SCOR Canada Reinsurance Company- insurance financial strength
rating from A1 to Baa1;
SCOR Deutschland Reinsurance - insurance financial strength
rating from A1 to Baa1;
SCOR Italia Riassicurazioni S.p.A.- insurance financial strength
rating from A1 to Baa1;
SCOR Reinsurance Company (U.S.)- insurance financial strength
rating from A1 to Baa1;
SCOR UK Company- insurance financial strength rating from A1 to
Baa1;
SCOR-Senior debt rating from A2 to Baa3; and
SCOR-Subordinated debt rating from A3 to Ba1.
=============
G E R M A N Y
=============
COMMERZBANK AG: To Trim Down Workforce at Investment Banking Unit
-----------------------------------------------------------------
Commerzbank, Germany's third biggest listed bank, plans to slash
around 350 positions out of its investment banking unit's 1,300
workforce, a company source person told Reuters.
The reduction in the Commerzbank Securities (ComSec) division
will affect more than 25% of the division's workforce, mostly
based in Frankfurt and London.
Commerzbank is among German banks under pressure from a number of
corporate failures. While loan loss charges for these blunders
are said to go higher, the bank's board member for risk
management, Wolfgang Hartmann, says runaway loan loss provisions
will not affect the bank.
The financial institution, which was previously the target of
liquidity crisis rumors, had warned of the possibility of a full-
year loss due to market volatility. Hartman, though, holds that
bad debt charges are unlikely to rise much above recent estimates
of EUR1.3 billion for the year.
MOBILCOM AG: Regulator Launches Insider Trading Probe
-----------------------------------------------------
BAFin, Germany's financial services regulator, is investigating
mobile phone reseller MobilCom on possible insider trading.
The probe concerns share trades before the release of the German
company's financial results showing an annual loss of EUR205
million, says the regulator.
Talks on rescuing the telecoms group went beyond the November 5
deadline last week. The parties were not able to agree on the
transfer of Schmid's around 50% stake in MobilCom to an outside
trustee to be nominated by the government.
Mr. Schmid's signature is needed on the rescue package that would
see France Telecom assuming MobilCom's debt and the government as
well as enlisted banks providing an emergency loan of up to
EUR100 million.
The former CEO refused to sign the agreement unless the
government retracts charges against his alleged abuse of a share
bonus plan.
The delays in the talks have ensued insolvency warnings from the
company.
=========
I T A L Y
=========
FIAT SPA: Moody's Places on Review Long-term Debt Ratings
---------------------------------------------------------
Moody's Investors Service says it is reviewing Fiat's Baa3 long-
term debt ratings and its Prime-3 short-term debt rating for
possible downgrade. The action affects approximately EUR 15
Billion of Debt Securities.
Ratings under review are:
Fiat Finance & Trade Ltd.: senior unsecured medium-term notes and
bonds Baa3 and short-term debt Prime-3 based on a Fiat guarantee.
Fiat Finance Canada Ltd.: senior unsecured medium-term notes and
bonds to Baa3 and short-term debt Prime-3 based on a Fiat
guarantee.
Fiat Finance Luxembourg S.A.: senior unsecured convertible notes
Baa3 based on a Fiat guarantee.
Fiat Finance North America Inc.: senior unsecured medium-term
notes and bonds Baa3 and short-term debt Prime-3 based on a Fiat
guarantee.
Fiat France S.A.: short-term debt Prime-3
New Holland Credit Company LLC: short-term debt Prime-3 based on
a Fiat guarantee.
According to the rating agency, the review was trigged by "the
company's continued weak operating performance primarily due to
Fiat Auto." The auto division has incurred enough losses to
require recapitalization under the Italian law.
The review will focus on the outlook for cash flow improvements
in its operating businesses and the execution risk related to
further asset disposals. Moody's noted that during the third
quarter of the year, operative cash consumption and the growth of
financing receivables in the group by far exceeded the EUR635
million proceeds from asset disposals.
The rating agency will conclude its rating on the firm basing on
timing, cash flows divested, and expected proceeds from the
planned asset disposals.
Moody's affirmed its belief that Fiat has EUR 5.1 billion in cash
and marketable securities and sufficient headroom under its
committed bank lines available to cover maturing debt.
TELECOM ITALIA: Board Adopts Results for First Nine Months
----------------------------------------------------------
TELECOM ITALIA GROUP
- Income results improved despite write-downs of investment
holdings
- Significant efficiency gains alongside major 1,328 million euro
cash cost reduction
- Profitability up, debt down
- Disposals plan completed ahead of target
- Adopted a Group Code of Ethics and a Company Code of Behavior
with regard to insider dealing
- Revenues: 22,440 million euros (+0.8% compared with the first
nine months of 2001;
+3% excluding exchange rate differences; +3.7% inclusive of
changes to the area of consolidation)
- Gross operating result: 10,414 million euros (+3.7% compared
with the first nine months of 2001;
+5% excluding exchange rate differences and changes to the area
of consolidation)
+4.6% gross operating result for the third quarter of 2002
compared with the third quarter of 2001
- Operating income: 5,706 million euros (+11.1% compared with the
first nine months of 2001;
+10.5% excluding exchange rate differences and changes to the
area of consolidation) +12.5% operating income for the third
quarter of 2002 compared with the third quarter of 2001
- Parent company net income: 1,246 million euros
(+1,574 million euros compared with the first nine months of
2001)
- Free cash flow from operations: 6,588 million euros
(+2,995 million euros)
- Net financial borrowings down 4,278 million euros compared with
year-end 2001 to 17,664 million euros, in line with target
- Debt composition further improved:
-83% of total debt (64% at year-end 2001) due beyond one year
TELECOM ITALIA SpA
- Revenues: 12,561 million euros
(-1.5% compared with the first nine months of 2001, principally
resulting from price cuts brought in by regulatory policy)
- Major growth in innovative and broadband services
- Gross operating result: 5,585 million euros
(+0.5% compared with the first nine months of 2001)
- Operating income: 3,101 million euros
(+3.2% compared with the first nine months of 2001)
- Net income: 94 million euros (for the first nine months of 2001
a loss of 308 million euros)
- Net financial borrowings down to 15,849 million euros
- Company Shareholders' Meeting called to decide upon the
proposal to distribute a portion of the 2002 dividend in advance,
through the withdrawal of a total amount of 1 billion euros from
reserves
- Dividend policy unchanged
At Thursday's meeting the Telecom Italia Board of Directors,
chaired by Marco Tronchetti Provera, examined and adopted the
Group and Parent company third-quarter accounts at September
2002[1].
Group earnings and margins during the first nine months of 2002
recorded a substantial improvement compared with the first nine
months of 2001.
Consolidated net income recorded a profit of 1,246 million euros,
an increase of 1,574 million euros compared with the 328 million
euro loss registered for the first nine months of 2001.
This increase may principally be ascribed to the following
factors:
- improved operating income (+568 million euros, +11.1%)
- improved balance of long-term and equity investment income and
charges (+299 million euros), plus an improved balance of
extraordinary income and charges (+975 million euros), inclusive
of capital gains from the disposal of equity interests (2,093
million euros), in addition to 1,799 million euros in equity
investment write-downs and goodwill regarding Is TIM Turkey,
Telekom Austria, Matrix, Corporacion Digitel and Netco Redes.
In the third quarter of 2002 the Group posted a consolidated net
profit of 476 million euros, a 1,287 million euro improvement
over the 811 million euro loss recorded for the third quarter of
2001.
Consolidated revenues for the first nine months of 2002 amounted
to 22,440 million euros, an increase of 0.8% compared with the
same period in 2001. Excluding the negative effect of exchange
rate differences, the growth rate corresponded to 3%; changes to
the area of consolidation[2] corresponded to 0.7%, which brings
growth up to 3.7%.
In the third quarter of 2002 revenues amounted to 7,451 million
euros, a fall of 0.9%; however, taking into account changes to
the area of consolidation, growth rises to 1.3%.
The Group's gross operating result corresponded to 10,414 million
euros, a rise of 375 million euros (+3.7%) compared with the
first three quarters of 2001, and amounting to 46.4% of revenues
(45.1% for the first nine months of 2001). Excluding the effects
of exchange rate differences and changes to the area of
consolidation the figures posted a 5% rise.
In the third quarter of 2002 the gross operating result amounted
to 3,606 million euros (3,448 million euros in the third quarter
of 2001), or 48.4% of revenues (45.9% in the third quarter of
2001).
Operating income of 5,706 million euros was up by 568 million
euros compared with the first three quarters of 2001 (+11.1%).
Excluding the effects of exchange rate differences and changes to
the area of consolidation, growth of 10.5% was registered,
accounting for 25.4% of revenues (23.1% for the first nine months
of 2001). The rise in the headline figure was influenced by
higher gross operating margins and lower depreciation.
Third quarter 2002 operating income amounted to 2,044 million
euros (1,817 million euros in the third quarter of 2001), or
27.4% of revenues (24.2% in the third quarter of 2001).
Free cash flow from operations for the first nine months of 2002
was equal to 6,588 million euros (+2,995 million euros). In the
third quarter of 2002 it corresponded to 2,438 million euros
(+1,487 million euros compared with the third quarter of 2001).
Consolidated net debt fell by 4,278 million euros compared with
the end of last year (21,942 million euros), meeting plan
targets, and corresponded to 17,664 million euros after dividend
payout (3,247 million euros).
Compared with 30 June 2002 this represented a 3,436 million euro
reduction.
The improved debt figure at 30 September reflected disposals
undertaken during the first nine months of the year, after taking
into account associated charges, worth an aggregate of 3,609
million euros. This included the disposals of Auna (1,998 million
euros), Bouygues Decaux Telecom (750 million euros), Mobilkom
Austria (756 million euros), Lottomatica (212 million euros),
Sogei (176 million euros), Telemaco Immobiliare (219 million
euros), 9Telecom (-529 million euros) and miscellaneous minor
disposals (27 million euros).
The proportion of debt reaching maturity beyond one year
registered a significant rise, up from 64% at 31 December 2001 to
83% at 30 September 2002, as a result of the Telecom Italia SpA
2,500 million euro bond issue on 1 February 2002. This issue was
part of the Global Note Program.
BUSINESS UNITS/OPERATIONS
Domestic Wireline
Please see the remarks below
Mobile (TIM Group)
Please see the press release issued yesterday.
Internet and Media (Seat Pagine Gialle Group)
Please see the press release issued yesterday.
Information Technology Market
The IT Market BU began operations in a reorganized form on 22
October 2002, divided into functions with responsibility for
planning, development, administration and commercialization of IT
products/solutions for the following target markets:
Government: central and local government market
Finance: banking and the insurance company market
Innovation, New Markets and Management Coordination
The following events had a bearing on the IT Market company area
of consolidation:
- Disposal in July 2002 of 100% of the equity in Sogei SpA to the
Italian Ministry of the Economy and Finance - the Department for
Fiscal Policies, transferred on 31 July 2002. In consequence,
Sogei is consolidated solely in regard of economic data referring
to the first half of 2002.
- Disposal in July 2002 by Consiel of an equity interest in
associated company Jmac Consiel SpA to Jmac-JMA Consultants Inc.
- Stipulation of a sales agreement on 2 August 2002 by Finsiel
for the disposal of 100% of the capital of Consiel SpA to World
Investment Partners S.A., with transferral of shares taking place
on 3 October 2002.
- Foundation of Agrisian - Agricultural Consulting and Services
S.c.p.a. on 2 August 2002.
Revenues for the first nine months of 2002 suffered a drop of 46
million euros compared with the same period during the preceding
year as a result of lower turnover generated principally by
Finsiel, Consiel and Banksiel, a consequence of reduced volumes
of business and price reductions for major clients; offsetting
this was growth registered by Intersiel, TeleSistemiFerroviari
and Webred, associated with invoices for current operations
undergoing testing during the period, and revenues generated by
Insiel, Centrosiel and Sogei regarding the acquisition of new
orders and new clients.
The gross operating result (71 million euros) and operating
income (47 million euros) fell as a result of the price cuts
mentioned above, and of the renewal of tenders on lower
contractual payment terms. This was only partially offset by
acquisition cost reductions and efficiency gains.
Compared with the corresponding quarter in 2001, the third
quarter of 2002 registered revenues that were 26 million euros
lower, continuing the trends of the first nine months of the
year.
Information Technology Group
During the third quarter of 2002 the IT Group operations area of
consolidation changed following the addition of the Webegg Group,
which was acquired at the end of June, and the exit of Teco Soft
Espa¤a, which was sold off on 31 July 2002. This company was
fully consolidated for the first half of 2002.
Lower revenues were posted following revised pricing terms with
the Domestic Wireline Business Unit.
South America
(Please see yesterday's press release for information on TIM
subsidiary operating units)
In May 2002 the International Operations unit was disbanded and
Telecom Italia-associated companies and company units were
transferred to Domestic Wireline and to the central International
Investments central management unit; South American region
companies are now overseen by Latin America Operations.
In the first nine months of 2002 the Entel Chile Group and the
Entel Bolivia Group, the Telecom Italia Latin America company and
the Telecom Italia South America unit recorded revenues of 1,036
million euros, an 11.5% reduction compared with the same period
in 2001, wholly resulting from currency fluctuations. Stripping
out these fluctuations, revenues would have registered growth of
1.5%, as a result of growth at Entel Chile (+8.3% in local
currency). This was offset by the effects of liberalization of
the Bolivian market, in addition to suspension of the Management
Fee contract with Telecom Argentina from 1 April 2002.
The gross operating result, corresponding to 346 million euros,
posted a 56.5 million euro fall (-14.1%) compared with the
corresponding period in 2001, of which around 50 million euros
may be attributed to the exchange rate fluctuations regarding
Chile and Bolivia. Excluding exchange rates, the reduction in
gross operating result would have been 2%, following the
withdrawal of the management fee paid by Telecom Argentina and
the loss of profitability in Bolivia; these elements were offset
by improved results in Chile, where higher profitability was
registered from wireless operations.
Operating income reflected the gross operating result
performance.
* * *
Events occurring after 30 September 2002
- On 1 October 2002 Telecom Italia entered into an agreement with
News Corporation to establish a sole single-platform Italian Pay-
TV company, to be formed through the merger of Stream and Tele+
operations. Under the agreement Telecom Italia will have a 19.9%
stake in the sole platform, and News Corporation shall control
the remaining 80.1%. There are provisions for Telecom Italia and
News Corporation to underwrite the contract for acquisition of
Tele+, alongside an exclusive agreement with News Corporation to
regulate relations between the two partners in the sole
television platform. On closure of the deal, Telecom Italia shall
pay a price corresponding to 31.84 million euros for its 19.9%
stake in Tele+. Telecom Italia is to write off 147 million euros
in trade receivables accrued by Group companies from Stream up to
the end of 2002 (a figure wholly covered by provisions allocated
in the 2001 accounts). At the same time News Corporation is to
write off receivables and loans to Stream for an equal sum. The
operation will result in overall gross charges of around 276
million euros for Telecom Italia, which are almost wholly covered
by provisions made at 30 September 2002. Execution of this
contract is conditional upon the receipt of approval from the
relevant authorities.
- On 7 October 2002 TIM finalized the preliminary contract,
signed on 7 August 2002, with the shareholders of Blu SpA for
acquisition a 100% equity stake in Italy's number four GSM
carrier. The purchased company shall subsequently be amalgamated
into TIM SpA. Authorization for this move has already been issued
by the Italian Competition and Markets Regulatory Authority,
after a favourable opinion was expressed by the Communications
Regulatory Authority. The provisional price for these shares, as
paid by TIM to Blu SpA shareholders, is 18 million euros; the
final price, and in consequence settlement of the balance, shall
be undertaken at a later date on the basis of the certified
balance sheet situation at the date that the contract becomes
effective.
- Progetto Tiglio. The Telecom Italia Group transferred assets
worth around 1,360 million euros to Tiglio I and to Tiglio II (of
which approximately 50 million euros worth belonging to Seat
Pagine Gialle; the Group also transferred around 840 million
euros in real estate assets to Emsa following the split of the
Im.Ser company, as well as transferring around 470 million euros
in additional real estate assets). During the 2002 financial year
the operation will have a positive pre-tax impact on earnings
(gross capital gains plus extraordinary dividends) of 221.6
million euros for Telecom Italia SpA, and of 4.6 million euros
for Seat Pagine Gialle. The financial impact on the net
consolidated financial position in 2002, prior to tax,
corresponds to 326.9 million euros, of which 39.8 million euros
regarding Seat.
- As part of Telecom Italia's share buyback operation, authorized
by the 7 November 2001 Telecom Italia Shareholders' Meeting in
ordinary session, in the period between 1 October and 7 November
a total of 4,448,000 savings shares were purchased at an average
price of 5.10 euros per share for an investment corresponding to
23 million euros, as were 301,000 ordinary shares at an average
price of 7.32 euros per share for an investment of 2 million
euros. The aggregate number of shares bought back by the company
since 1 January 2002 amounted to 27,488,000 savings shares at an
average price of 5.47 euros per share, for a total of 150 million
euros, and 4,748,000 ordinary shares at an average price of 8.24
euros per share for a countervalue of 40 million euros. The
aggregate investment since the start of the year amounts to 190
million euros.
- Telecom Italia has completed an agreement with Pagine Italia
SpA to acquire the directories assets of Pagine Utili, the
company unit principally responsible for the so-called pocket
pages, which have around 60,000 advertisers. The deal calls for
payment of Pagine Italia by way of 214 million Seat ordinary
shares held by the Telecom Italia Group, corresponding to 1.9% of
ordinary share capital. The company unit, which is expected to
record 2002 revenues of 57 million euros and post a gross
operating result of approximately 9 million euros, is being
transferred debt-free and with working capital set at zero, with
its staff of around 150 people. Completion of the deal is
conditional upon receipt of approval from the Italian competition
authorities. Following completion of the operation, decisions
shall be taken on the terms and conditions for integrating this
company unit into Seat Pagine Gialle.
- On 2 October 2002 Telecom Italia launched Alice Time, an
innovative ADSL offering that enables residential customers to
surf the Net for less than the cost of a local call, drastically
reducing Internet access costs. Telecom Italia has also rounded
off its Alice range of offerings with the launch of two new
solutions for advanced Web users, Alice 640 and Alice Mega. Alice
640 provides the full benefits of an always on broadband
connection at a fixed price; Alice Mega includes real time high
quality multimedia content capabilities, making it ideal for
video conferencing and video on demand connections.
On 18 October TIM launched its commercial offerings for GSM
service in Brazil. One thousand points of sale are now open in
over 80 cities. Launch of this service will make it possible to
realize the first Pan-South American GSM network.
- Telekom Austria On 4 November 2002 Telecom Italia International
N.V. completed the private placement of 65 million Telecom
Austria AG shares (corresponding to 13% of company capital) on
the very day that the offer opened. A further 10 million shares
were placed on 5 November by way of a fully exercised greenshoe
option (corresponding to a further 2% of the company). The
placement price was fixed at 7.45 euros per share, which was the
upper limit of the range announced to investors. Aggregate pre-
tax earnings from the sale of these 75 million shares amounted to
559 million euros. After this move, the Telecom Italia Group's
holding in Telekom Austria has been reduced from 29.78% to
14.78%.
* * *
Operating income growth in 2002 is expected to match or exceed
the figure for 2001, in confirmation of the announcement made to
the market on 14 February 2002.
* * *
Telecom Italia SpA
Parent company Telecom Italia SpA registered net income of 94
million euros during the first nine months of 2002. During the
same period in 2001 the company made a net loss of 380 million
euros. Contributing to this improved result was better
operational performance compared with the first nine months of
2001 (+95 million euros; +3.2%) and the balances of long-term
investment and equity holdings income and charges (+99 million
euros) and of extraordinary income and charges (+797 million
euros), which were offset by higher taxes on income (+589 million
euros).
In the third quarter of 2002 the company registered a 294 million
euro loss. The figure for the third quarter of 2001 was a 962
million euro loss.
Parent company revenues corresponded to 12,561 million euros,
down 194 million euros (-1.5%) compared with the first three
quarters of 2001. The majority of this reduction, the result of
regulatory policy, may be ascribed to traffic, which generated 6%
lower revenues, despite a 4.3% increase in minutes carried, as a
result of a 9.9% drop in average traffic yield (from 4.3 to 3.8
eurocents). This reduction was contained by strong growth in
innovative services. Price cuts brought in by the price cap
mechanism were partially offset by price redistribution
operations, higher fees for interconnection with other operators,
and a greater number of subscribers to the company's range of
discount packages.
In the third quarter of 2002 revenues corresponded to 4,131
million euros (4,202 million euros in the third quarter of 2001),
down by 1.7%, once again predominantly owing to the effects of
regulatory policy.
The gross operating result, corresponding to 5,585 million euros,
registered a 30 million euro increase compared with the first
three quarters of 2001 (+0.5%), and amounted to 44.5% of revenues
(43.6% compared with the same period during the preceding
financial year). The improved result was achieved through reduced
consumption and containment of labour costs, which offset lower
revenues.
In the third quarter of 2002 the gross operating result was 1,840
million euros, a fall of 0.6%. This figure amounted to 44.5% of
revenues (44.1% in the third quarter of 2001).
Telecom Italia SpA operating income for the first nine months of
2002 was 3,101 million euros, up 95 million euros (+3.2%) and
corresponding to 24.7% of revenues (23.6% for the first nine
months of 2001).
In the third quarter of 2002 operating income was 1,013 million
euros, after registering a rise of 2.5% compared with the third
quarter of 2001. This was equal to 24.5% of revenues (23.5% in
the third quarter of 2001).
Net income for the first nine months of the year, at 94 million
euros, reflected extraordinary provisions for the equity stake in
Telecom Italia International (1,052 million euros), associated
principally with charges arising from the sale to LDCom of the
equity stake in 9Telecom (440 million euros), the write-down of
holdings in Telekom Austria (298 million euros) and in Netco
Redes (88 million euros), and cancellation of the balance sheet
value of the investment in Nortel Inversora (37 million euros).
Headcount at 30 September 2002 totalled 57,951, down 3,130 on the
year-end 2001 figure. This was principally the result of
redundancy inducements, disposals arising from mobility
operations pursuant to law no. 223/1991, and the transfer of
personnel following disposal of the Company's "Vehicle
Management" unit.
Net financial borrowings of 15,849 million euros were down by
1,064 million euros compared with year-end 2001 (16,913 million
euros), and down by 967 million euros compared with 30 June 2002
(16,816 million euros). The improvement on the end of last year
was generated by money supply from operations (5,264 million
euros), which more than compensated for investment requirements
(1,921 million euros) and for the 2001 dividend payout (2,306
million euros). Net financial borrowings are inclusive of
accounts payable to JP Morgan Chase (497 million euros) in the
wake of the reduction of the exercise price for the options on
Seat Pagine Gialle shares from 4.2 euros to 3.4 euros per share.
The borrowings figure also showed an improvement following the
securitization of an amount corresponding to 845 million euros at
30 September 2002. The breakdown of gross financial borrowings
underwent a change following the issue of the Telecom Italia Bond
launched on 1 February 2002 under the Global Note Program: the
proportion of medium and long-term debt has risen from 58% at
year-end 2001 to 76% at 30 September 2002.
* * *
In line with a similar operation announced yesterday to the
market by the TIM subsidiary, Telecom Italia has also decided to
undertake a distribution of reserves up to a maximum 1 billion
euros, which will enable an anticipated distribution of part of
the 2002 dividend. Taken together, these operations shall, among
other things, enable Telecom Italia to enter the dividends
distributed by its subsidiary onto this year's accounts,
increasing its own share of profits and therefore creating
conditions suited to ensuring continuity of its dividend
distribution policy. This serves the interests of shareholders in
general, investors, the Group and group companies, and responds
to market expectations. The distributed dividend will allow the
shareholders a full tax credit which may be used without
limitation for up to 56.25%.
The Board of Directors of the company has given mandate to the
Chairman to call a shareholders meeting of the company to
deliberate upon such distribution
The ex-dividend date is foreseen for 16 December 2002, with
payment on 19 December 2002.
* * *
The Group Code of Ethics and the Company Code of Behavior with
regard to insider dealing is adopted.
The Board of Directors has also adopted a Group Code of Ethics
and a Company Code of Behavior with regard to insider dealing.
The Code of Ethics underpins the entire corporate governance
edifice. As such, it serves as a cornerstone for the whole
system, providing a corpus of principles for an ethically-correct
approach to business. This streamlined document contains a clear
statement of the objectives and values underlying company
operations, and refers to the principal stakeholders with whom
the Group interacts on a daily basis: shareholders, the financial
markets, customers, the community and personnel.
The Code of Behavior has been prepared in compliance with
regulations introduced recently by the Italian Stock Exchange,
which, as is commonly known, include the obligation for listed
companies to make periodical disclosure regarding operations
undertaken on listed securities belonging to the issuer and to
its subsidiaries by parties who may have access to price
sensitive information, with effect from 1 January 2003.
The document responds to the framework regulations published by
the Italian Stock Exchange in the following ways:
- A flexible approach to identifying the pool of persons who are
subject to disclosure obligations, in order to be able to take
into account contingent situations requiring access to
confidential information.
- Extension of the obligation to provide notification to include
operations carried out on listed financial instruments issued by
parent companies (in addition to subsidiary companies).
- A significant reduction in the quantitative threshold regarding
the size of operations subject to market notification on a
quarterly basis (from 50,000 to 30,000 euros) or immediately at
the time of execution (from 250,000 to 80,000 euros).
- Extension of the obligation for transparency to include
dealings regarding the exercise of stock options or pre-emption
rights, in addition to all operations regarding financial
instruments issued by Group companies, even when realized within
the framework of management relations on an individual basis
regarding investment portfolios for which the client has foregone
the right to issue instructions.
- "Black-out periods", that is to say predetermined periods
during which persons who are subject to the provisions of the
Code may not undertake dealings.
The Code of Behavior also provides for a system of strict
sanctions which, for Directors and Auditors, includes the option
of seeking removal from office from the Shareholders' Meeting.
The Code is being brought into effect in advance of the
compulsory date set out in the Stock Market Regulations (1
December 2002 as opposed to 1 January 2003). For notification
purposes, dealings undertaken in the month of December 2002 shall
be presented together with those undertaken during the first
quarter of 2003.
On Friday 8 November at 3:30pm the Group and Parent company shall
be illustrating the third-quarter 2002 results to the financial
community during a conference call.
To see third quarter results of Telecom Italia Domestic Wireline:
http://bankrupt.com/misc/TelecomItalia.htm
To see Telecom Italia S.p.A. economic-financial data:
http://bankrupt.com/misc/TelecomItalia.pdf
=====================
N E T H E R L A N D S
=====================
GETRONICS NV: To Trim Down Workforce, Near-Term Recovery Gloomy
---------------------------------------------------------------
Dutch information-technology services company, Getronics NV,
plans to cut 1,400 jobs from its 28,000 workforce as it predicts
gloomy outlook for recovery until 2004.
The job slash is in addition to the 1,450 cuts announced at the
end of the year. The workforce reduction will be done on the
company's operations in Italy, Netherlands, Spain, France and
Mexico.
The move is expected to provide the Amsterdam-based company an
annual savings of EUR85 million (US$85.8 million).
Getronics recently cut its outlook for the year. It expects
earnings before interest, taxes and amortization of EUR110
million for the full year, excluding a ?45 million charge for the
cost cuts. The figure is down from the EUR125 million it earlier
forecasted.
The debt-laden company is currently focused on improving its
balance sheet by restructuring outstanding convertible debt and
lengthening maturity of the debt. In September, Getronics
announced plans of selling its U.S. desktop and network-
management unit to cut debt and ease market worries over its
financial stability.
ROYAL PHILIPS: Announces Plan to Close Semiconductor Facility
-------------------------------------------------------------
Royal Philips Electronics (NYSE:PHG)(AEX:PHI) announced plans for
the phased closure of its semiconductor fabrication operation
(fab) in Albuquerque, New Mexico, U.S.A. at the end of 2003.
The announcement follows Philips' stated intention in September
to reduce manufacturing capacity at Philips Semiconductors, and
will be part of earlier announced restructuring plans for the
fourth quarter of this year. The closure will lower excess
capacity and fixed costs, in order to reduce the structural
break-even level, and better adjust capacity in line with demand.
The core production team will remain in place into the third
quarter of 2003, at which time manufacturing will be relocated to
other Philips sites in North America, Asia and Europe. Meanwhile,
the fab's highly skilled workforce of approximately 600 will
continue to manufacture advanced semiconductors for Philips
customers worldwide.
"This decision to close the Albuquerque fab was made to reduce
the semiconductor division's overall wafer capacity. We are very
sensitive to the impact of this decision on our employees in
Albuquerque, and to the local community. Over the coming months,
we will work closely with our employees and local leaders to
minimize the negative impact of this decision locally," said
Steve Kelley, senior vice president, North America Manufacturing,
Philips Semiconductors. "Philips has been part of Albuquerque
since the early 1980's, and has enjoyed its association with the
local community. We have provided early notice in an effort to
help people identify their next career step, and to be sure that
the team knows that we will continue operations for the next
several quarters."
The semiconductor fab in Albuquerque was constructed in 1980-81.
The first chips came off the line in 1982. The fab was built by
Philips, and operated under the Signetics brand name until 1992.
About Philips
Royal Philips Electronics of the Netherlands is one of the
world's biggest electronics companies and Europe's largest, with
sales of EUR 32.3 billion in 2001. It is a global leader in color
television sets, lighting, electric shavers, medical diagnostic
imaging and patient monitoring, and one-chip TV products. Its
184,000 employees in more than 60 countries are active in the
areas of lighting, consumer electronics, domestic appliances,
components, semiconductors, and medical systems. Philips is
quoted on the NYSE (symbol: PHG), London, Frankfurt, Amsterdam
and other stock exchanges. News from Philips is located at
www.philips.com/newscenter.
CONTACT: Philips Corporate Communications
Jeremy Cohen
Phone: +31 20 5977213
E-mail: Jeremy.cohen@philips.com
or
Philips Semiconductors
Paul Morrison
Phone: 408/474-5065
E-mail: Paul.Morrison@philips.com
===========
P O L A N D
===========
BRE BANK: Moody's Downgrades Financial Strength Ratings to D-
-------------------------------------------------------------
Moody's Investors Service downgraded the financial strength
ratings of BRE Bank (Baa1/P-2) from D to D-, and assigned a
stable outlook for the ratings. The bank's deposit and debt
ratings are maintained.
The action is taken in the context of ongoing difficulties
affecting the Polish banking system, which see some banks
performing better than others.
According to the rating agency, BRE Bank's earnings generation
capacity and corporate loan portfolio has suffered. Its loan
growth, though, continued to be strong and its cost to income
ration increased. Moody's characterized the bank's profile more
volatile compared to other banks, and its presence in the retail
banking still very small.
The Warsaw-based bank has consolidated assets of PLN 23 billion
(EUR6.5 billion), and net profit of PLN 221 million (EUR62.8
million) in 2001. During the first half of 2002, the bank had
consolidated loss of PLN 100 million (EUR26.9 million).
BANK ZACHODNI: Moody's Assigns Stable Outlook for SFR
-----------------------------------------------------
Moody's Investors Service changed to stable from negative the
outlook for the D+ Financial Strength Rating of Bank Zachodni WBK
(Baa1/P-2). The bank's deposit and debt ratings are maintained.
The action is taken in the context of ongoing difficulties
affecting the Polish banking system, which see some banks
performing better than others.
Moody's changed the Poznan-based bank's outlook to stable to
reflect its opinion that the bank has been successfully balancing
risk and growth.
In 2001, the bank reported consolidated assets of PLN 25 billion
(EUR7.1 billion) and net profit of PLN162 million (EUR46
million). During the first half of 2002, the bank reported net
profits of PLN144 million (EUR39 million).
ELEKTRIM SA: Appoints Rymaszewski Management Board Member
---------------------------------------------------------
Elektrim S.A. announces that at the meeting held on 7 November
2002, Elektrim's Supervisory Board, at the request of Management
Board President Mr Wojciech Janczyk, appointed Mr Piotr
Rymaszewski as member of Elektrim's Management Board for the
position of Vice President of the Management Board.
The appointment of Mr Rymaszewski on terms agreed in the new
Restructuring Agreement executed on 3 October 2002 comes into
force on the day of the Restructuring Agreement's coming into
force.
The resolution has been passed unanimously in secret ballot.
Mr Rymaszewski will be delegated to work for Elektrim S.A. by KP
Konsorcjum Sp. z o.o. where he is managing director. Elektrim
S.A. will execute a relevant agreement with KP Konsorcjum Sp. z
o.o. which will provide for Mr. Rymaszewskki rendering services
for the Company.
Piotr Rymaszewski (38) - Vice President of the Management Board
Mr Rymaszewski graduated from the University of Pennsylvania
(1987, Bachelor of Arts in Physics). He also holds the degree of
Juris Doctor (Cornell Law School).
His professional career includes, among others, the work as
analyst at Tandem Accelerator Laboratory at the University of
Pennsylvania (1984-1988), advisor in the Ministry of Finance,
Warsaw (1992-1994), managing director (since 1997, formerly,1995-
1997 - Vice President) of KP Konsorcjum Sp. z o.o. (fund manager
of National Investment Fund Octava S.A. and National Investment
Fund Piast S.A.). He is chairman of the supervisory board of
Medycyna Rodzinna Sp. z o.o., supervisory board member at W. Kruk
S.A., Vice President of National Investment Fund Piast S.A.
Mr P. Rymaszewski specialises in operations and strategy
formulation, strategic and operational restructuring of portfolio
companies, legal, organisational and financial analysis of
business enterprises.
ELEKTRIM SA: Board Announces Loan Agreement With Zespol
-------------------------------------------------------
The Management Board of Elektrim S.A. announces that on 6
November 2002 Elektrim S.A. signed a loan agreement with Zespol
Elektrowni "PatnOw -Adamow - Konin" S.A. pursuant to which
Elektrim S.A. will transfer to PAK the PLN equivalent of EUR
32,000,000. The first tranche of the loan in the amount of the
PLN equivalent of EUR 19,400,000 was transferred to PAK on 7
November 2002.
The loan repayment date has been set for 15 June 2003. The loan
will be used to continue the investment project of Patn˘w II
power unit.
The above loan has been granted by Elektrim S.A. to PAK pursuant
to the agreement executed on 4 October 2002 with a significant
number of bondholders and following its repayment will be
earmarked for the repayment of the second instalment of the
principal.
KREDYT BANK: Moody's Downgrades Financial Strength Ratings to D-
----------------------------------------------------------------
Moody's Investors Service downgraded the financial strength
ratings of Kredyt Bank (Baa1/P-2) from D to D-, and assigned a
stable outlook for the ratings. The bank's deposit and debt
ratings are maintained.
The action is taken in the context of ongoing difficulties
affecting the Polish banking system, which see some banks
performing better than others.
According to Moody's, while Kredyt Bank's earnings generation
continues to progress, its credit and market risk problems
continue to be a burden.
The rating agency noted that the Warsaw-based bank suffered from
high costs and is less advanced than other rated peers in its
restructuring process. It also characterized Kredyt Bank as more
dependent than some of its peers on financial support from its
parent.
In 2001, Kredyt Bank reported consolidated assets of PLN23
billion (EUR6.5 billion), and a loss of PLN 9 million (EUR2.5
million). In the first half of 2002, the bank reported net
profits of PLN1.1 million (EUR0.3 million).
===========
S W E D E N
===========
LM ERICSSON: Technology Runs C&W Panama's GSM/GPRS Network
----------------------------------------------------------
Cable & Wireless Panama, one of the leading mobile operators in
Panama, announced the commercial launch of the world's first
GSM/GPRS 850 MHz network.
Ericsson (NASDAQ:ERICY) is the sole supplier of equipment and
services for the deployment of this network, which uses existing
spectrum to provide operators a smooth transfer from TDMA to
GSM/GPRS technology.
By upgrading its network in the 850 MHz frequency, Cable &
Wireless Panama will be able to offer its customers the latest,
most advanced wireless services, including multimedia messaging
services (MMS), location based services, and browsing and
software downloading capabilities. Furthermore, the upgrade gives
Cable & Wireless Panama a roadmap for providing advanced mobile
voice and data services in the future.
"GSM/GPRS is the dominant wireless telecommunications technology
available today, and we are proud to bring it to market in
Panama," said Bert Nordberg, Vice President and General Manager,
Ericsson Systems. "We are pleased to be Cable & Wireless'
strategic partner and sole wireless supplier in Panama, and to
support them with our experience and leadership in
telecommunications."
"Panama is now among the 180 countries around the world with
GSM/GPRS, the world's dominant mobile standard," said Jose Miguel
Garcia, President of Cable & Wireless Panama. "Ericsson's global
experience deploying GSM/GPRS networks, as well as its
applications and support, will help us serve the Panamanian
market."
Among the applications Ericsson will provide are Mobile Internet
Enabling Proxy (MIEP), an Intelligent Network (IN) with Mobile
Virtual Private Network (MVPN) and Flexible Number Register
(FNR), which enables the subscriber to use the old TDMA phone
number in the new GSM network.
To facilitate the network launch, Ericsson has supplied a range
of services, including business consulting, initial network
design and installation, engineering, testing, and RF design and
optimization. Ericsson also has provided consulting services to
support Cable & Wireless in developing, deploying and marketing
the most appropriate and attractive voice and data services for
the Panamanian market.
Ericsson GSM/GPRS radio access equipment is fully integrated for
the 850 MHz band. That distinction makes it easier and quicker to
perform simple network maintenance and troubleshooting functions,
thus reducing the cost of network operation. Ericsson's GSM macro
base stations, which are easily upgraded to EDGE, represent more
than 30 percent of all GSM base stations installed globally.
Ericsson is shaping the future of Mobile and Broadband Internet
communications through its continuous technology leadership.
Providing innovative solutions in more than 140 countries,
Ericsson is helping to create the most powerful communication
companies in the world.
Read more at http://www.ericsson.com/press
About Cable & Wireless
Cable & Wireless is one of the main global telecommunications
companies. During 130 years it has renewed itself to adopt the
latest technological developments to satisfy its customer's
needs. Cable & Wireless operates in more than 30 countries,
through two well-financed divisions: Cable & Wireless Global and
Cable & Wireless Regional.
CONTACT: Ericsson Inc.
Glenn Sapadin
Phone: 212/685-4030
E-mail: investor.relations@ericsson.com
or
Cable & Wireless Panama
Erich Rodriguez
Phone: +507 265-5618
E-mail: erich.rodriguez@cwpanama.com
=====================
S W I T Z E R L A N D
=====================
ABB LTD.: Sets New Short- and Medium-Term Business Targets
----------------------------------------------------------
ABB, the leading power and automation technology group, said
Friday it expects earnings before interest and taxes in 2002 to
reach a margin of 1.5 percent, with revenues flat or slightly
down.
ABB also gave further details of future targets, as well as the
structural changes and restructuring program designed to cut its
cost base and improve operational performance.
The key points, being announced today at a briefing for financial
analysts and investors in Zurich, include:
- EBIT margin expected to be 1.5 percent for 2002; target of 4
percent in 2003 and 8 percent for 2005
- Group revenues expected to be flat or slightly down in 2002;
annual revenue growth of about 4 percent from 2002 through 2005
- Automation Technologies and Power Technologies divisions set
EBIT targets of 10.7 and 10 percent respectively for 2005
- Management of Automation Technologies and Power Technologies
streamlined; Business Areas cut from 18 to 12; key country and
region managers integrated into divisional management teams to
increase management efficiency
- New program to lower cost base by 4 percent of revenues,
announced on October 24, to start on January 1, 2003, and be
completed in 18 months.
- Two-thirds of cost reductions to come from job cuts, one-third
from other actions, but not possible yet to give job reduction
figures
Current US$ 500 million cost reduction program to be completed by
mid-2003
- Oil, Gas and Petrochemicals division, as well as Building
Systems, to be divested in 2003
- The new EBIT margin targets follow the announcement on October
21, 2002 that ABB was revising its earnings outlook because of
lingering market weakness and slower than expected benefits from
its cost reduction program.
"The streamlining of our structure and the program to lower the
cost base by four percent of revenues demonstrate our commitment
to restoring profitability," said chairman and CEO Jrgen
Dormann. "We are taking forceful action to improve operational
performance and cash flow."
"We need a rapid and radical change. We are taking the measures
needed to optimize the business, build on our strong product and
customer base, and technological leadership positions. Over time,
the aim is real expansion with increased market share and
profitable growth," said Dormann.
"The underlying strengths in our core businesses of automation
and power technologies are reflected by the EBIT margins set for
2005," he added.
Revised structure and cost reductions
Actions are being taken to cut Corporate/Other costs. They
include cutting headquarter costs by about US$ 20 million to an
estimated US$ 130 million in 2005, and eliminating losses from
noncore activities by 2005.
The head of the Automation Technologies division, Dinesh Paliwal,
set an annual revenue growth target of 3.3 percent from 2002
through 2005, and an EBIT target margin of 10.7 percent for 2005.
For 2003, divisional revenues are expected to grow by 3 percent
with an EBIT margin of 7.1 percent.
For the full year 2002, Automation Technologies' divisional
revenues are expected to decline 3 percent, and EBIT margin is
expected at 6.5 percent.
The head of the Power Technologies division, Peter Smits, set an
annual revenue growth target of 5.3 percent from 2002 through
2005, and an EBIT margin of 10 percent for 2005. For 2003,
divisional revenues are expected to also grow by 5.3 percent,
with an EBIT margin of 7 percent.
For the full year 2002, Power Technologies' divisional revenues
are expected to increase 2.2 percent, and EBIT margin is expected
at 6 percent.
Managements in both divisions have been simplified to increase
efficiency, and more cohesive management teams now include
Country Managers, Region Managers and Local Division Managers
from key countries.
Automation Technologies has about 63,000 employees and revenues
of around US$ 8.4 billion.
The divisional management team:
Dinesh Paliwal Division Head and member of the ABB Group
Executive Committee
Herbert Parker CFO
Don Aiken Country Manager, U.S.
China Local Division Manager
Martinus Brandal Paper, Metals, Minerals & Marine
Frank Duggan Petroleum, Chemicals & Consumer
Bo Elisson Robotics, Automotive & Manufacturing
Germany Local Division Manager
Sten Jakobsson Country Manager, Sweden
Bernhard Jucker Drives, Motors & Turbochargers
Tom Sjokvist Low Voltage Products & Instruments
Teemu Tunkelo Control Platform Products
Power Technologies has about 43,000 employees and annual revenues
of around US$ 7.5 billion.
The division management team:
Peter Smits Division Head and member of the ABB Group Executive
Committee
Victor Bolt CFO
Max Abitbol Region Manager, Middle East and Africa
Jens Birgersson High-Voltage Products
Josef A. Drr Power Systems
Michael Hirth Utility Automation Systems
Brice Koch Distribution Transformers
Peter Leupp Country Manager, China
Benny Olsson Region Manager, Latin America
Joakim Olsson Power Transformers
John Sullivan Local Division Manager, U.S.
Guido Traversa Medium-Voltage Products
Further balance sheet improvements
ABB remains on track to reduce net debt by at least US$ 1.5
billion in 2002, from US$ 4.1 at the end of December 2001.
Going forward, ABB will communicate its target for total debt
instead of net debt (net debt is defined as total debt minus
marketable securities). This is more appropriate to ABB's
industrial core businesses.
The Group expects to reduce total debt to approximately US$ 6.5
billion in 2003, with a gearing (total debt as a percentage of
total capitalization) of about 70 percent.
The target for 2005 is to reduce total debt to about US$ 4
billion with a gearing of about 50 percent.
Debt reductions will be achieved using proceeds from the
divestment of non-core activities and higher operational cash-
effective earnings.
ABB (www.abb.com) is a leader in power and automation
technologies that enable utility and industry customers to
improve performance while lowering environmental impacts. The ABB
Group of companies operates in more than 100 countries and
employs about 146,000 people.
CREDIT SUISSE: CSFB Names Barbara Yastine Chief Financial Officer
-----------------------------------------------------------------
Credit Suisse First Boston (CSFB) announces that Barbara A.
Yastine has been named the Firm's new Chief Financial Officer.
She succeeds Richard Thornburgh, who in August was promoted to
Chief Risk Officer for Credit Suisse Group, CSFB's parent
company. Ms. Yastine, who will report to CEO John J. Mack, will
also become a member of the Firm's Operating Committee and
Executive Board. Ms. Yastine joins CSFB after 15 years with
Citigroup, serving since 2000 as Chief Financial Officer of that
company's Global Corporate and Investment Bank. In that role, she
also oversaw 1,500 employees in support of Salomon Smith Barney
and Citibank's corporate lending and transaction services
businesses worldwide.
Commenting on the announcement, Mr. Mack noted, "Barbara is a
tremendous leader whose deep experience and expertise in global
financial management will be a key asset in our effort to
position CSFB for long-term growth and profitability. She has a
proven record in overseeing complex business and financial
operations and in building market leading organizations. I am
extremely pleased to have her joining the Firm."
Ms. Yastine previously served as Citigroup's Chief Auditor, Chief
Administrative Officer for its Global Consumer Group, Executive
Vice President for Finance and Insurance of CitiFinancial and as
Vice President of Investor Relations and Financial Planning &
Analysis for Travelers Group. She joined Citigroup in 1987 as
Director of Investor Relations at Primerica. Earlier in her
career, Ms. Yastine held various communications and investor-
relations positions with W.R. Grace & Co. She holds a B.A. in
journalism from New York University and an M.B.A. in finance from
New York University.
Ms. Yastine said, "I am excited to be coming to CSFB to join an
exceptionally talented senior management team. While this is a
tough time for the industry, CSFB has in place the leadership and
global platform to be an even more effective competitor when the
markets recover. My challenge is to continue the significant
progress the Firm has made toward improving profitability, while
ensuring that we maximize our world-class capabilities to benefit
our clients, shareholders and employees."
Credit Suisse First Boston (CSFB) is a leading global investment
bank serving institutional, corporate, government and individual
clients. CSFB's businesses include securities underwriting, sales
and trading, investment banking, private equity, financial
advisory services, investment research, venture capital,
correspondent brokerage services and asset management. CSFB
operates in 77 locations in 36 countries across six continents.
The Firm is a business unit of the Zurich-based Credit Suisse
Group, a leading global financial services company.
ZURICH FINANCIAL: Has New CEO for European, Worldwide Businesses
-----------------------------------------------------------------
Zurich Financial Services has today announced the appointment of
Lawrence Churchill as Chief Executive of its U.K., Irish and
International Life Businesses.
Lawrence joins from Unum Provident, the world leader in
disability insurance, where he was Chairman and Managing Director
of its U.K. division. Lawrence has significant experience of the
U.K. Life market, having previously been Managing Director of
NatWest Life and Investments, as well as a member of the Board of
Directors of Allied Dunbar. He has also served on the boards of
the Personal Investment Authority, the PIA Ombudsman Council and
The Association of British Insurers.
Lawrence will report to Sandy Leitch, member of the Group
Executive Committee and Chief Executive of the U.K., Ireland,
Southern Africa (UKISA) and Asia/Pacific Business Division.
Commenting on the appointment, Sandy Leitch said, "Zurich is very
well placed in the U.K Life market, with a powerful multi-channel
distribution strategy and a clear commitment to face-to-face
advice. I know Lawrence will provide the strong leadership
required to take full advantage of the excellent opportunities,
both in the U.K. and in the Irish and International markets."
Lawrence Churchill added, "The U.K. financial services industry
is undergoing massive change and this in itself presents exciting
opportunities. I'm delighted to be joining Zurich to lead their
U.K., Irish and International Life businesses through these
significant changes."
This appointment is subject to formal regulatory approval.
CV Lawrence Churchill
Personal
Born: Birkenhead, England 5th August 1946
Married: Karen, 7th September 1991
Educated: Birkenhead School
St John's College, Oxford
Degree: Master of Arts ("Greats" - a course in classics and
philosophy)
Career
1969 - 1973 Procter & Gamble
Systems Analyst
1973 - 1991 Hambro Life Assurance (Later changed to Allied Dunbar
Assurance) Career through the systems field.
Appointed to Group Main Board in 1985.
1991 - 1998 National Westminster Bank
Initially Chief Executive of NatWest Life and Chairman of NatWest
Unit Trusts.
Responsibility expanded to include Portfolio Managers, Regulated
Sales, and Stockbrokers (Chairman 1995-1998)
1998 - 2002 Unum Limited
Chairman and Managing Director
Industry, Public Service and Affiliations
Association of British Insurers
Life Insurance Council 1993 - 1996 and 2000-; Board Member 1996 -
1998
Chairman, Industry Standards Group 2000 - 2002
Financial Ombudsman Service
Non Executive Director 2002 -
Personal Investment Authority
Board Member 1994 - 1997; Audit Committee 1995 - 1997;
Effectiveness Committee 1994 - 1997
PIA Ombudsman Bureau
Director 1994 - 1997; Council Member 1994 - 1995;
Royal Society of Arts
Fellow 1996; Chairman of RSA Bristol 1997-; Fellowship and
External Affairs Committee 1998
Board of Trustees 2000 - 2002; Chairman, Programme Committee 2000
- 2002
Business in the Community
Leadership Team - Employee Volunteering 1996 - 1998; Chairman RfO
South West 1996 - 1998; National Leadership Team; Cares
Incorporated 2000-; Chairman of Surrey Cares 2000-
University of West of England
Bristol Business School - Advisory Committee 1994 - 2000
Employers' Forum on Disability
Board Member 2000-
Other Affiliations
Fellow of Institute of Directors; Member of Institute of
Management, Member of British Computer Society
Zurich Financial Services is an insurance-based financial
services provider with an international network that focuses its
activities on its key markets of North America, the United
Kingdom and Continental Europe. Founded in 1872, Zurich is
headquartered in Zurich, Switzerland. It has offices in
approximately 60 countries and employs well over 70,000 people.
CONTACT: Zurich Financial Services, Media and Public Relations
Phone: +41 (0)1 625 21 00
Fax: +41 (0)1 625 26 41
Home Page: http://www.zurich.com
SWX Swiss Exchange/virt-x: ZURN
Andrea Minton Beddoes, (UKISA),
Phone: +44 (0)207 495 5608
Fax: +44 (0)207 495 0832
Mobile: +44 (0)7785 516 146
===========================
U N I T E D K I N G D O M
===========================
AMEY PLC: Bank of Scotland Likely to Acquire Interest in PFI
------------------------------------------------------------
Bank of Scotland is seen as one of the front-runners to acquire
the interest of contracting group Amey in a private finance
initiative project to maintain Edinburgh schools, says the
Scotsman. Bank of Scotland is part of HBOS, Amey's major
creditors.
A spokesman for Amey confirmed the group is looking for partners,
although he declined to give names of the candidates.
Amey is selling the interest to raise GBP 70 million as funding.
The company is having financial difficulties, which the City
blames on the company's chief executive, Brian Staples. In 2001,
the firm posted a GBP18.3-million loss.
Mr. Staples is currently facing pressure to step down. Insiders
say he is bound to go before Christmas but may remain until
acting finance director, Eric Tracey, can handle the job himself.
Last week, Transport for London accused the London Transport of
granting state aid to the services company. The amount refers to
the GBP11.4-million working capital raised by Amey from the Bank
of Scotland with alleged guarantees from the London Transport.
BRITISH ENERGY: OFGEM Approves Revisions of Nuclear Energy Deal
---------------------------------------------------------------
Further to the announcements made on 16 July 2002, by
ScottishPower, Scottish and Southern Energy and British Energy
(the Parties) regarding revised terms of the Nuclear Energy
Agreement (NEA), the Parties welcome [Thurs]day's decision by
Ofgem to approve the revised terms.
The revised terms have also been notified to the European
Commission with respect to the existing exemption of the NEA
under Article 81(3) of the EC Treaty and a response from the
Commission is expected shortly. A further announcement by the
Parties will be made then.
CONTACT: ScottishPower
Andrew Jamieson Head of Investor Relations
Phone: 0141 636 4527
Scottish and Southern Energy
Alan Young Director Of Corporate Communications
Phone: 0870 900 0410
Denis Kerby Investor Relations Manager
Phone: 0870 900 0410
British Energy
Paul Heward Director of Investor Relations
Phone: 01355 262201
BRITISH ENERGY: Issues Summary of October Output Statement
----------------------------------------------------------
A summary of net output from all of British Energy's power
stations in October is given in the tables below,
together with comparative data for the previous financial year:-
2001/02 2002/03
October Year to Date October Year to Date
Output Load Output Load Output Load Output Load
(TWh) Factor (TWh) Factor (ThW) Factor (TWh) Factor
(%) (%) (%) (%)
UK Nuclear 5.71 80 38.41 78 4.72 66 35.05 71
UK Other 0.78 54 4.35 44 0.78 54 2.15 22
Bruce Power
(82.4% owned)
1.77 75 11.94* 92* 1.76 75 12.38 76
Amergen
(50% owned)
1.29 73 10.88 89 ** 1.47 80 11.14 88**
* The figures for the year to date in 2001 for Bruce Power cover
a shorter period from Financial Close on 12th May 2001.
** The capacity for Clinton was up-graded in spring of this year
to 1017 MWe and the capacity of TMI increased to 840 Mwe
following a turbine replacement last autumn.
OVERVIEW
The U.K. nuclear plant remain on track to achieve the revised
target of 63 TWh (plus or minus 1TWh) by 31st March 2003 announced
in August.
One reactor at Torness returned to service following gas
circulator inspections and replacement of one unit.
The output figures for both AmerGen and Bruce Power remain in
line with the plan after allowing for the higher number of
planned outages in the current year.
PLANNED OUTAGES
UK Nuclear
A statutory outage was completed at Hinkley Point B, another
continued at Dungeness B and another started at Heysham 2. Each
of these outages were on one unit at the respective station.
Low load refuelling was carried out on one reactor at Hinkley B
and an outage for refuelling and routine work on plant systems
was completed on one unit at Dungeness B.
UK Other
All four Eggborough units were operational after planned summer
outages.
AmerGen
Oyster Creek completed a refuelling outage.
Bruce Power
The planned outage on unit 7 continues
UNPLANNED OUTAGES
UK Nuclear
One unit at Torness remains on outage as previously reported.
CONTACTS: Paul Heward
Phone: 01355 262201 (Investor Relations)
CABLE & WIRELESS: Board May Decide Massive Job Cuts in C&W Global
-----------------------------------------------------------------
About 3,000 job cuts from C&W Global are likely to be announced
after the board of Cable & Wireless meets on Tuesday to approve a
wide-ranging restructuring of its troubled international data
services division. The board of the telecommunications group is
scheduled to meet to approve C&W's first half results.
The board has hired consultants from Deloitte & Touche and Mercer
to analyze Global, identify those businesses furthest from break-
even, and the likely cost of exiting them.
The board is scheduled to decide on the fate of Global on the
board meeting, and many analysts predict that C&W will be forced
to close down most, if not all of its Global operations in the
U.S.
According to the Financial Times, Investec Securities believes
that Global's U.S. operations, including its recently acquired
web-hosting businesses, are losing close to GBP 300m a year.
The board may regard the retreat from C&W Global as an
opportunity for the group's chief executive, Graham Wallace, to
prove he can bring the business back to health, says the report.
Mr. Wallace had earlier committed to achieve free cash flow
break-even as soon as March 2004. He claimed to be able to reach
his goal even on the back of very limited revenue growth.
Fraser McLeish, analyst at Investec Securities, says: "But the
big unknown is what are the costs of exiting these
businesses...They might uncover the costs and find that it is too
costly to shut them down."
Mr. Wallace had indicated the company will only shut down
operations if cash can be recovered in 12 to 18 months.
C&W issued its fourth profits warning in 18 months as the
telecoms market continued to decline due to tough competition at
the web-hosting and data services markets.
EVANS & SUTHERLAND: Announces Workforce Reduction
-------------------------------------------------
Evans & Sutherland Computer Corp. (E&S(R)) (NASDAQ: ESCC)
announced Friday that it is reducing employment as part of an
overall reduction in expenses.
The reductions will affect approximately 140 employees at the
company's Salt Lake City headquarters as well as its locations in
Orlando, Fla., and Horsham, United Kingdom. As previously
announced, E&S is completing several large military programs that
have incurred excess costs. In addition, these reductions will
help bring the company's total staffing in line with projected
business for 2003.
E&S provides all affected employees with a severance package,
outplacement services, and other benefits. Remaining E&S
employees will continue to focus on the company's key ongoing
business operations, which will be largely unaffected by the
reductions.
Evans & Sutherland produces high-quality visual systems for
simulation, training, and visualization in defense and commercial
applications; digital theaters; and related applications
throughout the world. Visit the E&S Web site at
http://www.es.com.
E&S is a registered trademark of Evans & Sutherland Computer
Corp.
Note: Evans & Sutherland lost millions in the last quarter and
has not been profitable since early 1999.
CONTACT: Evans & Sutherland, Salt Lake City
Joan Mitchell
Phone: 801/588-1453 (Public Relations)
E-mail: jmitchel@es.com
ROYAL & SUN: Announces Nine-Month Results for 2002
--------------------------------------------------
The Group announces today a series of important actions that will
set it on a path to better performance, stronger results and
improved returns for shareholders. These are dealt with in a
separate press release.
Restated
9 Months 9 Months
2002 2001
Revenue
General business net premiums written
(after impact of quota
share - see page 10)
GBP6,184m GBP 6,665m
Group operating result
(based on longer
term investment return (LTIR))* GBP 471m GBP 307m
Balance sheet at
30 September 2002 / 31 December 2001
(restated)
Shareholders' funds GBP3,899m GBP 4,691m
Net asset value per share
(adding back equalisation
provisions net of tax) 279p 333p
To see Royal & Sun's Full Nine-month results:
http://bankrupt.com/misc/Royal&Sun.pdf
ROYAL & SUN: Issues Operational and Financial Review
----------------------------------------------------
Royal & SunAlliance has undertaken a major operational and
financial review. Key findings are: -
- Merits of strategy of concentrating on general insurance
confirmed
- Shareholder value target remains at 10% net real across the
cycle, despite lower investment returns
- Equates to 102% cross cycle combined ratio
- 'hard' years in cycle will produce higher returns than overall
target
- A leaner, better managed general insurance business
- Slim NWP by GBP 3.5bn by exiting underperforming/more
volatile/ higher risk lines
- Realise latent value of quality assets
- IPO majority of Asia Pacific
- Sale of RSUI
- Revamped business requires GBP 3.6bn of capital for life and
general operations
- Capital needs will be met by
- Existing resources
- Capital released from discontinued lines/disposals
- Group projections show prospective capital surplus of GBP 750m
- After taking account of
- Solvency requirements of U.K. with profits life fund
- Group pension schemes
- Anticipated Q4 reserve strengthening on general business
claims of GBP 250m net of discount and tax
- No need for external capital raising
- Focus is on deliverability
- Better risk control
- Tighter management
- Even more rigorous capital management
Commenting on the announcement, Sir Patrick Gillam, Chairman,
said
"We are today announcing the reshaping of the Royal & SunAlliance
Group. This is the outcome of the top to bottom operational and
financial review that we have undertaken. It will deliver a
leaner, more focussed business, able to deliver attractive
returns to investors consistently across the insurance cycle.
The Group's results in recent years have been disappointing. We
have not executed our strategy as effectively and as quickly as
we should have done. And we have not produced the results a
group like Royal & SunAlliance should be producing. We recognise
that we must deliver an improved performance and, as evidenced by
the scale and boldness of the decisions we have taken, we will.
"The action plans we are announcing follow from our work to
identify the right shape for the business going forward. This
was a business led exercise upon which we based critical capital
decisions. The approach leaves the Group well positioned. Our
focus must and will be on profit, if this is at the expense of
volume or market share then so be it.
"Our work to appoint a new Chief Executive continues and we
expect to make a decision in the near term. We are also putting
succession plans in place for the role of Chairman and for the
existing non executive vacancies."
Bob Gunn, Chief Operating Officer acting in the role of Group
Chief Executive, commented,
"This review has had a dual purpose - refining the business
strategy for the Group going forward, in the light of a
disappointing performance over the last few years, and resolving
the question of capital adequacy. The programme of actions that
we are outlining today is radical but achievable with a sharp
focus on profit.
"The outcome of the review is threefold. Firstly, we can confirm
the strengthening of our capital position. Secondly, we can
confirm our strategy of focussing on general insurance and our
target of a 10% net real return on capital. Finally, we will
significantly change the overall shape of the Group and we will
aggressively target those areas of general insurance where we
believe we have competitive advantage and will be able to deliver
consistent returns."
Key Outcomes of the Reviews
Today is a significant one for the Group. We have completed a
comprehensive strategic, operational and financial review which
will, we believe, deliver a leaner, more focussed business able
to deliver attractive returns to investors consistently across
the insurance cycle.
Rationale for Changes to the Group
The Group has initiated a programme of actions designed to reduce
net written premium by GBP 3.5bn and ensure capital adequacy. We
will sell or exit businesses
- Where we are not sustaining target levels of performance and
return over time
- Where the risk profile of business is unacceptable from a
Group perspective due to the level of risk aggregation
- Where we do not have a strategic competitive advantage in a
particular sector
- Where there is an opportunity to unlock significant value for
shareholders
The restructuring will not complete until the end of 2004 but
many of the actions are already underway and will have an
immediate effect.
To facilitate these wide ranging changes there have been changes
to the senior management both at Group and Regional level; Duncan
Boyle was appointed U.K. Chief Executive in April of this year
and Steve Mulready took over the position of U.S. Chief Executive
in May. Since then they have both been very active in
strengthening their own regional management teams. Six of the
ten strong senior team in the U.K., and five of the eight in the
U.S., are new appointments. Like the Board, the management team
is committed to ensuring that we execute our plans effectively
and on a timely basis. They accept responsibility, individually
and jointly, for the implementation of Group strategy, the
delivery of targets and the improvement of our financial results.
All of our actions have one aim; to produce a Group that is
disciplined, focussed and well positioned to deliver consistent
returns to shareholders. This is underpinned by six core
principles.
- We will focus on business that has a sustainable competitive
advantage
- We will ensure capital prioritisation
- We will enforce the strictest underwriting principles
- We will put a strong emphasis on performance
-We will ensure rigour and control across all disciplines and
procedures
- We will focus on adding shareholder value
Financial Targets
We remain committed to generating a 10% net real return on
capital. We will adjust down our investment return assumptions
with effect from 2003 in light of the continued stockmarket
volatility and lower levels of long term inflation. As a result
our target combined ratio has moved to 102% across the cycle and
we will be driving for higher returns in the current strong
market conditions.
Worldwide we will exit or dispose of
- GBP 1.5bn of premium in businesses where we can unlock value
for shareholders
- GBP 0.3bn of premium where the risk aggregation is
unacceptable to the Group
- GBP 0.7bn of premium where there is a lack of strategic
competitive advantage
- GBP 1bn of premium from unprofitable business
We will continue to make use of a quota share arrangement at a
similar level to 2002, i.e. around GBP 800m of premium.
Regional Reviews - Programme of Actions
UK
The U.K. business will focus on commercial lines, MORE TH>N and
selected intermediated personal lines. We are targeting cost
reductions of GBP 95m and claims and underwriting improvements of
o105m by the end of 2004.
UK commercial lines business is performing strongly - it
significantly exceeds the 10% net real return on capital target
already. Over the last 3 years there has been a strong
turnaround in operating results. Commercial lines growth will
continue to be rate driven with significant increases expected to
continue until the end of 2004. We will continue to actively
participate in the corporate, small business and specialist
business areas. Capital will not restrict our ability grow this
business where we can write good quality business at the right
price.
MORE TH>N has had a successful launch and is well placed to
become a leading player in the personal direct market. Over the
next 2 years we intend to grow the business organically by 20%
while reducing the cost ratio. The cost ratio reduction will
occur as a result of the substantial economies of scale in
administration and marketing that will be available as the
customer base grows. We believe that this business will achieve
a 10% net real return on capital by the end of 2004.
Intermediated business will be rationalised and a segmented
approach adopted. We will focus on profitable lines and
relationships to create a smaller but more robust business. Non
core and unprofitable lines will be exited and capital
restricted. In particular, we will withdraw from or not renew
unprofitable deals with corporate partners and brokers. Parts of
our corporate partnership and broker business are sustainable and
profitable and will be maintained. There will be significant
cost savings.
We will reduce headcount across the U.K. operations. The closed
life business has already announced 1,200 job losses. We are
looking at opportunities to outsource the administration of this
business and this could result in the TUPE transfer of around
1,600 staff. On the general business side 500 job losses have
already been announced and around 900 more are planned. We are
also reviewing outsourcing opportunities for property and
facilities management and some information systems roles. This
would lead to the transfer of around 600 more jobs. We continue
to consult fully with Union representatives on these changes.
A significant reshaping of the U.K. business, including the
reduction in corporate partnership and broker personal lines,
will reduce net written premiums for the U.K. as a whole by
o500m.
USA
The U.S. business will focus on mid market speciality commercial
and personal lines business. Costs will be reduced by $100m and
headcount by 800 by the end of 2004. We anticipate that a
further 700 jobs will transfer as businesses are sold.
US commercial has seen a significant underlying improvement,
which, in both 2000 and 2001, has unfortunately been offset by
the effect of the World Trade Center. Future growth will be rate
driven. The cumulative rating increases achieved over 2000, 2001
and 2002 to date, exceed 80% and this cumulative upward trend
looks set to continue.
US personal has consistently outperformed the industry. Already
during 2002, strong actions have been taken to improve
performance. 11.5% rate increases were achieved over the 12
months to September; auto agencies have been reduced by 2,500; 3
unprofitable states for non-standard business have been exited
and headcount has been reduced by 6%. Future growth will be rate
driven and headcount and expenses will be further reduced.
The sale of RSUI, our wholesale surplus lines business, in the
USA is scheduled to complete by the first quarter of 2003 and
preliminary bids will be sought later this month. A good gain on
disposal is anticipated for what is a very high quality business.
Other wholesale businesses and specialised commercial businesses
in the USA will be sold or exited as soon as possible*.
Rest of the World
In addition to the radical plans for the U.K. and U.S., other
parts of the Group are also undertaking underwriting improvement
and disposal activity. This will include in Canada a particular
focus on moving to speciality and aggressively realigning our
unprofitable personal lines auto business, in specific markets.
The value of the Asia Pacific operation, while recognised
locally, is not reflected at a Group level and there are limited
synergies between it and the rest of the Group. This significant
intrinsic value will be released through an IPO of the majority
of the business; completion of the process is anticipated in the
first half of 2003. This will reduce net written premiums by
around o1bn as well as generating a surplus on disposal.
Actions to Improve Performance
Some of the actions that come out of the review are continuations
of long term programmes for improvement; claims and underwriting
actions will produce savings of o190m by the end of 2004; expense
savings will focus on headcount and premises reduction,
outsourcing and process simplification; we will implement a more
proactive approach to capital management. This will redirect
capital to those areas that offer the best prospects of
profitable growth and away from those that are unprofitable or
which involve excessive risk.
The new corporate centre will focus on three areas in particular:
change management; risk management and capital management. A
change director has already been appointed to lead this team as
it co-ordinates the restructuring around the Group and drives
forward performance improvement. The newly organised risk
management function will be
*Sale : RSUI; Artis; REMi; Affinity Programs; Financial Services.
Exit : World Assurance
responsible for controlling the overall risk profile of the
Group's business and a risk management director has been
appointed. The capital management team's role will include
decision making regarding the dynamic allocation of capital to
the most profitable lines of business around the Group and away
from underperforming areas. There will be significant cost
reductions in the corporate centre.
Capital Position - Summary
The Group has undertaken a wide ranging review of its capital
position and has obtained independent actuarial and accounting
advice and assistance in a number of areas. In addition to being
wide ranging in scope, the review has also sought to project
forward the Group capital position through 2003 into 2004. The
review has brought into account the actions that are announced
today, including the various disposals and reductions in exposure
that are planned over the next 18 months to 2 years.
This review has taken into account both the statutory
requirements and the Group's risk based capital (RBC) approach.
From a statutory perspective the Group continues to maintain a
significant surplus over the required solvency margin. The
projection analysis uses the Group's RBC requirements which are
more onerous than the statutory levels. The RBC approach shows
that the capital position will improve over the projection period
as the actions that have been announced come into effect. At the
completion of the plan it is projected that the available capital
will exceed the capital requirement, calculated using risk based
capital techniques, by around o750m.
In outline the improvement is as follows:
Current Projected
Position Position
GBPbn GBPbn
Available capital 4.4 4.3
Less life capital (1.6) (1.4)
Available for general business 2.8 2.9
General business requirement 3.4 2.2
(Shortfall)/surplus (0.6) 0.7
As can be seen, the major change is the reduction in the general
business requirement which results from the Group focussing on
the profitable growth areas and disposing of other operations.
The apparent small changes in the life position mask a number of
major changes. The planned IPO of the majority of the Asia
Pacific operations will release life capital as will the release
of capital from the Phoenix and Unit Linked funds in the UK.
These are masked by GBP 300m earmarked to support the future
capital of the two U.K. with profit funds. This is contingent
capital that is being allocated as a possible requirement that
arises primarily as a result of anticipated regulatory changes.
This is dealt with in more detail later in this release.
Inevitably the overall capital projection is subject to
uncertainty, which arises as a consequence of both extraneous
factors such as investment markets and regulatory change, and
internal risks such as execution risk in respect of the planned
actions. We anticipate that regulatory changes, including the EU
Group's Directive and the recent publication of CP143 and 144 by
the FSA will impact statutory solvency requirements in the
future. These factors are addressed in the following sections of
this release. Overall the targeting of the significant risk
based capital surplus provides a margin for adverse developments,
however the Group will continue to actively monitor the position
and take appropriate additional actions if the need arises.
The next sections deal with each of the main components of the
capital projection - available capital and the general and life
capital requirements.
Available Capital
The available capital is projected to reduce slightly from GBP
4.4bn to GBP 4.3bn.
The development of the position from the published net assets can
be summarised as follows:
GBP m
Capital as reported at 30 September 5,040
Less:
Goodwill (850)
Claims equalisation 250
Initial available capital 4,440
The movement in the available capital from o4.4bn to o4.3bn is
comprised as follows:
GBP m
Costs of achieving plans (120)
Gains on certain disposals 300
Additional general business claims provisions (250)
Other movements (30)
(100)
All of the above are stated net of tax.
The projected gains on disposal arise primarily from the planned
IPO of the majority of the Asia Pacific operation and the planned
disposal of RSUI in the USA. In both cases the Group has
commenced the process and they are expected to complete in the
first half of 2003. Conservative assumptions have been made as
to the gain on disposal and the tax charge that would arise.
The general business claims provision increase of around GBP 250m
(net of tax and discount) is anticipated to be made in the fourth
quarter 2002. The estimate is based on a number of actuarial
reviews that have been carried out on behalf of the Group. These
confirmed that the Group's existing provisions were within the
range of reasonable estimates. They were however towards the
lower end of that range.
Against the background of the other actions which are being
announced today, the Group is likely, subject to confirmation and
audit, to set up in the fourth quarter 2002, additional general
business claims provisions of o250m net of tax and discount. The
expected composition of this is as follows:
GBP m
US 300
UK 60
Rest of World 80
Gross 440
Less: discount (60)
tax (130)
250
The U.S. strengthening includes GBP 225m in respect of asbestos
and environmental provisions. The majority of the U.K. and rest
of world provision relates to strengthening in respect of motor
liability claims.
As is set out in the nine months 2002 results press release, the
2002 results have suffered from significant prior year claims
development, which masks the underlying results of the current
year. Making the additional provision will reduce the impact of
potential future claims strengthening.
Clearly as a projection of the Group capital position, there are
a number of assumptions that need to be made, notably the level
of investment markets and interest rates. A cautious approach
has been adopted, with investment capital values assumed to
remain at the level of 30 June 2002 over the plan period. This
is regarded as an appropriate long term level of the market.
The significant reductions in equity investment exposures that
the Group has made over the last few years have continued in 2002
in respect of both the life and general operations. The total
reduction in equities is now GBP 11.7bn since 1998. The general
funds, with equities of around GBP 1.4bn and with additional
derivative protection, are now at the target level for the
Group's stated investment policy. The actions in respect of
the life portfolio have been particularly significant in 2002 and
are detailed in the following section addressing the life capital
requirement.
Capital Requirements
The life, general and other capital requirements are considered
separately.
1. Life
With the planned IPO of the majority of the Asia Pacific
operations, there will be a significant reduction in the ongoing
life operations. The U.K. operations are in run-off, having
closed to new business in 2001 for the with profit funds and 2002
for the remaining Phoenix and Unit Linked funds.
The life capital represents the total of shareholders' funds held
by life companies in the Group together with the present value of
the profits expected to arise on the in force policies (PVIF).
The projection, in addition to reflecting the various planned
disposals of life operations, also takes into account the
consequences of a review of aspects of the U.K. life operations
that has been undertaken by consulting actuaries on the Group's
behalf.
The review covered a wide range of aspects of the U.K. life
operations. The overall headings of the review were as follows:
- Asset / liability risk
- Valuation / insurance risk
- Regulatory risk
- Sales practices risk
It is important to emphasize that, although each set of risks
were reviewed individually, an overall impact analysis was also
undertaken. This is important because of the inter-relationship
between the various aspects and it is not therefore appropriate
to estimate the financial impact of individual risks separately.
As a result of the evaluation the Group has earmarked o300m of
contingent capital to cover possible future capital requirements.
It should be emphasized that the U.K. life funds do not currently
require additional finance and are not currently utilising any
part of the contingent loan arrangements that were put in place
in 2001. It is possible that the o300m of contingent capital, if
it arises, will be provided by way of the contingent loan
arrangements although this will in part depend on regulatory and
tax considerations at the time.
In respect of each of the four categories of risk that were
reviewed, the findings were as follows:
a) Asset / liability
The asset / liability risk represents the risk of asset changes,
as a consequence of equity market and interest rate movements,
not being matched by equivalent movements in the value of
liabilities. This risk relates primarily to mismatched
investment portfolios and the impact of guarantees.
Over the course of the last few years, the Group's U.K. with
profit life funds have been actively managed so as to reduce this
risk. In 2002 there have been significant further disposals of
equities. In 2002 GBP 1.6bn of equities have been disposed of
and a derivative protection in respect of a further GBP 900m has
been taken out which provides protection below a FTSE 100 level
of 3500.
In respect of guaranteed annuity option exposures, the Group
remains fully reserved on the statutory basis. This requires an
assumption to be made that the take-up rate of guaranteed
annuities on maturity will be 95%. The current experience is
significantly less than this, implying a considerable margin of
prudence in the reserves. Stochastic modelling of the projected
outcome on guaranteed annuities has shown that there is no
significant exposure in excess of the provisions already
established.
b) Valuation / Insurance Risk
This risk relates to both changes in valuation principles and
changes in insurance experience. Examples include the risk of
improvements in mortality, which would have an adverse impact on
annuities and the reinvestment assumption for future premiums and
investment income. The review indicates that the Group's
assumptions for annuitant mortality were reasonable in the light
of current market practice, although mortality could develop
adversely in the future. In respect of the reinvestment risk,
the Group faces an improving position following its closure to
new business.
c) Regulatory
Regulatory risk refers to the risk of changes in regulation
increasing the solvency requirement of the funds. Generally this
represents a risk of additional solvency capital being required
for a period as a margin but this should not represent a
permanent loss to shareholders. These risks also are generic to
the industry and are not specific to the Group.
The regulatory position is developing and changing and longer
term projections are inevitably less certain. The recent
publication of CP 143 and 144 by the FSA, followed by further
guidance, has helped clarify the likely requirements although
there remains considerable uncertainty.
Following the actuarial review, the Group has adopted a best
estimate of the likely requirements in its capital projections.
The timing of introduction of these changes is also uncertain
although it seems reasonable to assume that there will be little
change until the end of 2003.
d) Sales Practices
There are a number of potential sales practices risks that face
the life insurance industry. The Group has already made a
provision for sales practices risks identified to date.
Inevitably any projection for future sales practices exposure is
going to be subject to uncertainty since in part it will be
dependent on regulatory action and customer response. In respect
of the sales practices risks identified by the Group, the
actuarial review has sought to model the various outcomes, taking
into account the wide range of factors that impinge on the final
position. The review has also considered the overall financial
position of the funds concerned and, in particular, the value of
their realistic estates.
As indicated above, as a result of the evaluation of the risks
facing the U.K. Life operation there is a wide range of possible
outcomes, for which the Group has earmarked o300m of contingent
capital to allow for possible future capital requirements.
2. General Business
The general business capital requirement is calculated using the
Group's 40% risk based capital measure, applied to the projected
net written premiums
As is shown by the radical plans, the Group's NWP is projected to
decline from GBP 8.5bn to GBP 5.5bn. This causes the general
business capital requirement to decrease from GBP 3.4bn to GBP
2.2bn.
It should be noted that within the projections of NWP are
assumptions concerning growth. Almost all the GBP 900m of NWP
growth that is assumed is driven by rate improvements rather than
increases in exposure. The convention of basing capital
requirements on the overall NWP, rather than an alternative
exposure measure, does mean that the additional capital
requirement can be viewed as prudent.
3. Other
The overall review of the Group's capital position has included
consideration of other exposures in addition to those of life and
general insurance. One of these areas is the position of the
U.K. staff pension funds.
Based on the 30 June position, which as indicated earlier is
regarded as a reasonable long term level of the investment
market, the overall U.K. staff pension fund position showed a
close balance of assets and liabilities. This position is very
dependent on the choice of discount rate for the liabilities
which, under FRS 17 principles, are then compared with market
values of investments. A discount rate of 6.1% was used, which
is less (and therefore more prudent) than the expected investment
return of the fund (given its balance of equities and fixed
interest).
The position of the staff pension fund will be further improved
by the actions being taken by the Group. The closure of the
funds to new members, which occurred earlier in the year, will
gradually improve the position as existing members leave. As an
indication of the pace of this change, the new defined
contribution scheme already has 1,000 members after 6 months.
This process is likely to be accelerated by the planned
operational changes in the UK.
As a consequence of this analysis and the actions that are being
taken, no one-off additional funding of the U.K. staff pension
funds is forecast. The Group's financial projections do assume
that ongoing contributions to the pension funds will continue at
a significant level.
CONTACT: Malcolm Gilbert, DL, Director Communications
Phone: +44 (0)20 7569 6138
ROYAL & SUN: S&P Lowers Ratings on Synthetic Securities
-------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on various
synthetic securities related to Royal & Sun Alliance Insurance
Group PLC and its related entities. At the same time, the ratings
are removed from CreditWatch with negative implications, where
they were placed on Oct. 24, 2002.
The lowered ratings and CreditWatch removals reflect the reliance
of the NS Repack Ltd., FSL Funding 3 Ltd., and FSL Funding Ltd.
transactions on Royal Indemnity Co. and Royal & Sun Alliance
Insurance PLC, which serve as reinsurance providers, providing
additional credit enhancement.
Royal & Sun Alliance Insurance Group PLC's subordinated
guaranteed bonds are the underlying collateral held by the
Corporate Backed Trust Certificates transactions.
These lowered ratings and CreditWatch removals follow the
lowering of the ratings on Royal Indemnity Co. and Royal & Sun
Alliance Insurance PLC and their removal from CreditWatch
negative.
RATINGS LOWERED AND REMOVED FROM CREDITWATCH NS Repack Ltd. $94
million notes
Rating
Class To From
Notes A- A/Watch Neg
FSL Funding 3 Ltd.
$40 million floating-rate secured notes
Rating
Class To From
Series 1 A- A/Watch Neg
FSL Funding 3 Ltd.
$60.5 million floating-rate secured notes
Rating
Class To From
Series 2 A- A/Watch Neg
FSL Funding Ltd.
$74 million notes
Rating
Class To From
Notes A- A/Watch Neg
Corporate Backed Trust Certificates Series 2001-12 Trust $48
million corporate-backed certs
Rating
Class To From
A-1 BBB BBB+/Watch Neg
Corporate Backed Trust Certificates Royal & Sun Alliance Bond
Backed Series 2002-2 Trust $49.5 million corporate-backed certs
Rating
Class To From
A-1 BBB BBB+/Watch Neg
Corporate Backed Trust Certificates Royal & Sun Alliance Bond
Backed Series 2002-11 Trust $66.816 million corporate-backed
certs
Rating
Class To From
A-1 BBB BBB+/Watch Neg
CONTACT: Standard & Poor's, New York
Mark Risi, 212/438-2588
Mary Ryan, 212/438-2090
ROYAL & SUN: Moody's Downgrades Rating, Assigns Stable Outlook
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of Royal & Sun
Alliance Insurance Group and subsidiaries, and assigned a stable
outlook on all RSA group ratings.
The ratings affected are:
Financial Strength Rating from A3 to Baa1
Commercial Paper from P-2 to P-3
Suborinated debt rating of Royal Insurance Holdings Plc from Baa3
to Ba2
Subordinated Debt Rating from Baa2 to Ba1.
The downgrade concludes the review initiated October 10, 2002,
and was prompted by the group's announcement of its future plans.
The rating agency noted considerable execution risk and potential
difficulties awaiting the plan.
The plans include an IPO of its Asia Pacific businesses and
Moody's warned execution risks in selling assets in a difficult
market, timing risk, and franchise and reputation risk.
According to Moody's "there is a threat to certain types of
future new business if consumers and brokers perceive RSA as a
reduced player and thus direct business elsewhere."
The rating agency deems it more favorable if RSA is placed in its
domestic U.K. market than in its overseas operations.
Moody's at the same time affirms the company's plan not to launch
a rights issue given the current market condition and the costs
it would take.
A potential for a rating upgrade lies on the company's ability to
achieve its entire plan, says Moody's.
The following ratings were downgraded:
- Royal & Sun Alliance Insurance Plc: IFSR to Baa1 from A3 and
Commercial Paper to P-3 from P-2.
- Royal & Sun Alliance Insurance Group Plc: Subordinated debt to
Ba1 from Baa2.
- Royal Insurance Holdings Plc: Subordinated debt to Ba2 from
Baa3.
- Royal & Sun Alliance Life & Pensions Ltd: IFSR to Baa3 from
Baa1.
- Sun Alliance & London Assurance Company Ltd: IFSR to Baa3 from
Baa1.
- Codan Insurance Company Ltd: IFSR to Baa2 from A3.
- American & Foreign Insurance Co: IFSR to Baa2 from A3.
- Globe Indemnity Co: IFSR to Baa2 from A3.
- Royal Indemnity Co: IFSR to Baa2 from A3.
- Royal Insurance Co. of America: IFSR to Baa2 from A3.
- Safeguard Insurance Co: IFSR to Baa2 from A3.
- Atlantic Indemnity Co: IFSR to Baa3 from Baa1.
- Atlantic Security Insurance Co: IFSR to Baa3 from Baa1.
- Connecticut Indemnity Co: IFRS to Baa2 from A3
- Design Professionals Insurance Co: IFSR to Baa2 from A3
- EBI Indemnity Co: IFSR to Baa2 from A3
- Employee Benefits Insurance Co: IFSR to Baa2 from A3
- Fire & Casualty Insurance Co. of Connecticut: IFSR to Baa2 from
A3
- Guaranty National Insurance Co. of Connecticut: IFSR to Baa3
from Baa1
- Guaranty National Insurance Co: IFSR to Baa2 from A3
- Landmark American Insurance Co: IFSR to Baa3 from Baa1.
- Orion Insurance Co: IFSR to Baa3 from Baa1.
- Peak Property & Casualty Insurance Corp: IFSR to Baa3 from
Baa1.
- Security Insurance Co. of Hartford: IFSR to Baa2 from A3
- Unisun Insurance Co: IFSR to Baa3 from Baa1.
Royal & Sun Alliance Insurance Group Plc, headquartered in
London, England, had total assets of GBP66.7 billion at the end
of June 2002.
ROYAL & SUN: A.M. Best Affirms Rating of the Insurance Group
------------------------------------------------------------
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) of The Royal & Sun Alliance Insurance Group plc
(R&SA), United Kingdom.
At the same time, it has affirmed the "bbb" and "bbb-" ratings of
its subordinated debt and preferred stock. The outlook has been
changed to stable from negative.
The ratings reflect the current and prospective maintenance of a
very good consolidated risk-adjusted capital base supported by
the planned divestment of several operations. The ratings also
reflect improving operating performance in ongoing businesses and
the group's excellent business position in its key markets.
Offsetting factors include the challenges associated with
executing the proposed reduction of risk exposure through further
disposals and the ongoing potential for further asbestos and
environmental (A&E) reserve deterioration in the United States.
The latter is somewhat mitigated by the recently announced
addition of USD 225 million (GBP 150 million) in U.S. A&E
reserves, supported by a capital infusion of USD 250 million (GBP
167 million) from the U.K. parent.
A.M. Best believes that R&SA's revised strategy -- with a
potential GBP 2 to 3 billion (USD 3 to 4.5 billion) net premium
reduction -- will enable it to focus its existing capital
resources on continuing to grow in its priority lines in its key
geographic markets, the United Kingdom and the United States. The
impact of reduced prospective business volumes will be to reduce
the overall capital required for the ongoing operations and,
hence, fund both increased U.S. and U.K. non-life reserves and
the run-off of the U.K. life business without raising additional
capital.
The financial strength rating applies to the companies within the
R&SA group that A.M. Best considers to be core to R&SA. A.M. Best
now regards the U.S. operations as strategically important to the
group, but not core. Accordingly, they are now assigned financial
strength ratings reflecting their stand-alone financial strength,
enhanced by their strategic importance to the group. (See
separate rating news release regarding Royal & SunAlliance USA
Insurance Pool.)
The following companies' financial strength rating of A-
(Excellent) has been affirmed with a stable outlook:
-- London Assurance
-- Sun Alliance & London Ins plc
-- Royal & Sun Alliance Ins JPB
-- Royal & Sun Alliance Reins Ltd
-- London Assurance JPB
-- Globe Insurance Company Ltd
-- Royal & Sun Alliance Ins plc
-- Sun Insurance Office Limited
A.M. Best Co., established in 1899, is the world's oldest and
most authoritative insurance rating and information source. For
more information, visit A.M. Best's Web site at www.ambest.com.
CONTACT: A.M. Best Co., Oldwick
Jim Peavy, 908/439-2200 (ext. 5644) (public relations)
E-mail: james.peavy@ambest.com
or
Rachelle Striegel
Phone: 908/439-2200 (ext. 5378)
public relations)
E-mail: rachelle.striegel@ambest.com
or
Annie Tay
Phone: +(44)-20-7626-6264 (analysts)
E-mail: annie.tay@ambest.com
or
Jose Sanchez-Crespo
Phone: +(44)-20-7626-6264 (analysts)
E-mail: jose.sanchez-crespo@ambest.com
THE BIG FOOD: Baugus Group Announces Majority Shareholding
----------------------------------------------------------
Section 198 Companies Act 1985
We hereby give notice pursuant to Section 198 of the Companies
Act 1985 that:
This notification relates to the ordinary share capital of The
Big Food Group plc.
Baugur Group hf is the majority shareholder of A Holding SA.
We hold an interest in 52,026,945 ordinary shares in The Big Food
Group Plc. So far as we know the current registered holder of
24,750,000 of these shares is A Holding SA and the registered
holder of the remaining 27,276,945 shares is Kaupthing Bank hf.
***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter -- Europe is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Trenton, NJ
USA, and Beard Group, Inc., Washington, DC USA. Kimberly MacAdam,
Larri-Nil Veloso and Ma. Cristina Canson, Editors.
Copyright 2002. All rights reserved. ISSN 1529-2754.
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