Fortis, the Belgian-Dutch financial services group, acknowledged that 2002 had been a difficult year with net profits dropping from 2.6 billion Euros ($2.86 billion) in 2001 to 532 million ($585 million) last year. CEO Anton van Rossum, nevertheless pledged to maintain current dividend payments, and said the company had sufficient solvency to do so.
The news helped spark a rally in banking and insurance stocks on European exchanges yesterday with Fortis shares rising 22 percent to close at 9.35 Euros ($10.28). Shares in many companies in the sector have sunk to their lowest levels in the last five years.
Fortis operates both banking and insurance services, and van Rossum observed that it helps to be a bank and an insurance company. He noted that two years ago 60 percent of the company’s returns came from the insurance sector, while today the ratio is reversed.
As with many financial services companies, Fortis’ earnings have been negatively impacted by the global decline in the equity markets, which has occurred at the same time as insurers have had to increase their reserves. Declining interest rates have also led to downturns in earnings.
Despite the good news, the company is currently the subject of rumors concerning a possible hostile takeover, stemming largely from the impending sale by the French company Suez of its 9.9 percent stake in Fortis. Suez is facing a liquidity crisis, and has said that it would like to sell the stake. Van Rossum discounted the possibility, noting that European financial institutions are rarely, if ever, interested in pursuing hostile takeovers.
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