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Swiss Life aims to raise SFr1.1 billion

Swiss Life is facing financial difficulties

The troubled Swiss Life insurance company has announced plans to raise SFr1.1 billion ($760 million) to shore up its capital base, eroded by falling stock markets.

The company said on Monday it would issue 10,839,704 shares in a rights offering expected to raise SFr856 million.

The new shares have been priced at SFr79 – a discount of more than 50 per cent on Friday’s close of SFr160.

A convertible offering is set to raise a further SFr200-SFr250 million.

Switzerland’s largest life insurance company is currently under investigation for allegedly running a fund for senior management improperly.

A series of management departures and recent accounting errors have also damaged the firm’s reputation.

Strengthen capital base

The company said that the new equity would be used to strengthen its capital base and regulatory solvency, and support implementation of the company’s new strategy.

A statement said it would lay the groundwork for successfully focusing the company on its core business in the marketplace and restoring Swiss Life to a position among the “leading life insurers with a European reputation”.

“The pricing is in line with investors’ expectations,” commented Swiss Life chief financial officer Bruno Pfister in a telephone conference call with journalists.

“There’s no deviation from market-typical conditions,” he added.

Secret investment fund

Swiss Life, based in Zurich, had delayed pricing the new offering by five days after its former chief, Roland Chlapowski, resigned amid investigations into a secret investment fund – Long Term Strategy – that made SFr12 million for the CEO and five other executives.

The company, which made its first-ever loss of SFr115 million last year, is now being run by its third CEO this year, Rolf Dörig, the former head of Swiss consumer banking at the Credit Suisse Group. CS has an 8.3 per cent stake in Swiss Life.

CS investment bank Credit Suisse First Boston and a consortium of other banks have fully underwritten the share offering.

One for one

Shareholders can buy one new share for every share owned, the company said.

In the statement, Dörig said he had spoken to many of the main shareholders since his appointment.

“They have confirmed their intention to participate in the rights offering to an amount representing more than 35 per cent of the rights issue,” he said, adding that this was a “good start”.

Under a three-year restructuring programme initiated by Chlapowski, steps were taken to cut 1,500 jobs and reverse the expansion into banking and foreign markets under his predecessor Manfred Zobl.

swissinfo with agencies

The new shares are being sold at SFr79 – a discount of more than 50 per cent on the current market price.
The rights issue is expected to raise SFr1.1 billion ($760 million).
The offer has been underwritten by a consortium of banks including Credit Suisse First Boston.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR