Credit Suisse sells Churchill Insurance

Credit Suisse hopes that the sale will boost third-quarter results Keystone Archive

Winterthur insurance, a subsidiary of the Credit Suisse Group (CSG), is to sell off its British non-life division, Churchill, to Royal Bank of Scotland.

This content was published on June 11, 2003 - 12:41

The £1.1 billion (SFr2.4 billion) deal is expected to be finalised in the third quarter of this year.

In a statement, Switzerland's second-largest financial group said the deal was an important step in repositioning Winterthur's business portfolio.

"The transaction provides Winterthur with more financial flexibility for selective growth and strengthens the capital base of Winterthur group," said Oswald Grübel, Credit Suisse co-chief executive.

The bank said that Churchill had been a good business but no longer fitted in with Winterthur's strategy.

The group added that the sale of Churchill would lead to a "significant gain" in the banking giant's third quarter results.

David Hussey, pan-European banks analyst with Barclays in Britain, said the deal was a good one for Credit Suisse.

"[Churchill] is probably one of the jewels in the Winterthur portfolio and it makes obvious sense for Credit Suisse to sell it to Royal Bank of Scotland.

"For the group itself it's probably dilutive in terms of reducing earnings per share by roughly two to three per cent... but I think that the market will look through this and see this as a positive move for underlying capital," Hussey told swissinfo.


The deal is aimed at boosting Winterthur's capital strength after last year's heavy stockmarket losses.

CSG bought the insurer in 1997 as part of the expansion strategy of the then chairman and chief executive Lukas Mühlemann.

But instead of making the expected profits, the insurer proved to be a financial millstone around the banking giant's neck and was one of the main reasons for its record net loss of SFr2.1 billion in the third quarter of 2002.

Credit Suisse was forced to inject SFr3.7 billion into Winterthur last year to shore up its finances.

Job cuts

Under newly appointed chief executive Leonhard Fischer, Winterthur has been cutting jobs and trying to dispose of assets to improve its financial position.

CSG said that Winterthur was aiming for a full-year profit even through the market remained challenging.

Fischer has not ruled out further divestments for the group. Only last month, the insurer announced that it was selling United States regional insurer, Republic, to an investor group for $127 million.

Credit Suisse as a whole made a record SFr3.3 billion net loss in 2002 due to the downturn in the markets and pre-tax charges of around SFr1 billion to cover lawsuits in the United States.

The group has said it wants to return to profitability this year and returned into the black with a first-quarter net profit of SFr652 million.


The Royal Bank of Scotland, Britain's second largest bank, is buying Churchill with the aim of consolidating its position in the competitive British general insurance market.

When the sale goes through, RBS, which already owns Direct Line insurance, will become Britain's third largest insurer.

Hussey said RBS was prepared to offer "a very good price" for Churchill because it had a similar operation in Britain and could make synergies by combining the two.

News of the deal helped boost Credit Suisse shares on Wednesday, which were up 1.7 per cent in the first few minutes of trading. The shares have already gained more than eight per cent over the past five days.

swissinfo with agencies

Key facts

Winterthur is selling off Churchill, to Royal Bank of Scotland for £1.1 billion (SFr2.4 billion).
Credit Suisse was forced to inject SFr3.7 billion into Winterthur last year.
CS made a record SFr3.3 billion net loss in 2002.
CS returned into the black with a 2003 first-quarter net profit of SFr652 million.

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