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CS pumps $1.3bn into insurer
ZURICH, Switzerland -- Credit Suisse Group threw another 2 billion Swiss francs ($1.35 billion) at its ailing Winter insurance business to enable it to meet claims. Switzerland's second-largest bank said its third quarter 2002 results will be "impacted" by a "significant net loss'' at its insurance business. The bank also said investment bank Credit Suisse First Boston would report an operating loss, while its private banking division will report a net profit below the results achieved in the second quarter. The Zurich-based bank warned that it may make more funds available for the insurance business as stocks markets continue to stumble. Insurers, which hold vast amount of money in stocks to meet claims, have seen the value of their reserves devastated as stock markets fall for the third straight year. Rival insurers have been forced to ask shareholders for additional funds to prop up their struggling reserves and balance sheets. In June, Credit Suisse pumped 1.75 billion into its Winterthur insurance unit. Lukas Muehlemann stepped down as the chief executive and chairman of Credit Suisse last month amid growing pressure to turn around the Swiss bank. Muhlemann was under intense pressure from investors and analysts to go after he spent billions of Swiss francs expanding operations by buying insurance and investment banking businesses. The company's stock has fallen by about 60 percent over the course of this year as stock markets continue to tumble. Credit Suisse bought Winterthur in 1997 as a potential cash cow to smooth out the groups earnings but it has now become a drag on the banking giant. In August, Credit Suisse suffered a bigger-than-expected loss of 579 million Swiss francs ($386.8 million) in the three months to June 30. Credit Suisse blamed the decline in profit on the falling value of investments held by its insurance businesses. Credit Suisse has said it wants to stick with Winterthur for now, but analysts expect it to offload the business once it has been adequately recapitalised and markets have improved. The bank said Winterthur had already drastically cut down its exposure to equities to reduce the impact of volatile market swings on its solvency capital, which is required by regulators to guarantee insurers have the financial strength to meet all their obligations. "However, related hedging costs and further realised losses again impacted Winterthur's capital base in the third quarter,'' the bank said.
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