Swiss Life, Switzerland's biggest life assurer, yesterday suffered a fresh setback in its effort to raise 1.2 billion Swiss francs (€816 million) of urgently needed capital, after revealing a first-half loss of SFr578 million - some 50 per cent higher than it reported one month ago.

The group, which was forced to restate its first-half 2001 profits of SFr253 million to show a SFr1 million loss after misinterpreting the equity values in its portfolio, announced its first-half 2002 net loss had been increased from the SFr386 million reported on September 18th to SFr578 million, after its statutory auditors found an error in its half-year accounts.

The mistake related to incorrectly valuing losses on bonds as unrealised when they had actually been realised.

Traders said the news would force the firm to drastically discount the pricing for its capital increase, which Swiss Life is hoping could raise up to SFr1.2 billion if shareholders give approval at a meeting tomorrow.

The mistake, spotted by PricewaterhouseCoopers in the course of a review of the accounts for the planned capital increase, is a severe embarrassment for Swiss Life. The insurer has been struggling to rebuild investor confidence after expensive acquisitions and an over-reliance on profits on its equity portfolio left it with a severely stretched balance sheet.

Mr Manfred Zobl, chief executive, and Mr Dominique Morax, chief financial and chief investment officer, have been replaced. The new management team, led by Mr Roland Chlapowski, has had difficulty winning the confidence of investors in the run-up to the planned capital increase.

Swiss Life, for long the epitome of a conservative Swiss financial sector, saw its shares tumble as much as 13 per cent in Zurich yesterday before recovering slightly to close 8.4 per cent lower at SFr155.25.

Mr Chlapowski said the new reporting error was "very regrettable".

Steps were being taken to strengthen Swiss Life's accounting team "qualitatively and quantitatively". - (Financial Times Service)