Swiss Life boss upbeat about insurers’ prospects
Switzerland’s largest life insurer, Swiss Life, has taken another key step towards refocusing on its core markets.
Swiss Life said on Friday that it had sold the majority of its private equity portfolio, worth SFr400 million ($321 million), to Britain-based Pantheon Ventures.
The announcement comes one day after Swiss Life CEO Rolf Dörig outlined the challenges facing the life insurance sector in a speech in Zurich.
Dörig said European life insurance companies had largely digested the lessons of the 2002 financial crisis, and stressed that the outlook for the sector was now generally positive.
He told swissinfo that Swiss companies were well positioned for the upturn, thanks to their “very strong home base” and the generally high quality of their products and services.
Speaking to the British-Swiss Chamber in Commerce on Thursday, Dörig said: “Like Queen Elizabeth in 1992, the life assurance industry had its ‘annus horribilis’ in 2002.
“Our worst year made just as many headlines, even if the photos were less spectacular. Instead of three divorces in the family, we had three capital increases totalling SFr9 billion in Switzerland alone.
“However, like the queen 12 years ago, the question we all had to ask ourselves was: how have things come this far?”
Financial parachutes
Dörig said the sector had made five cardinal errors: allowing reckless growth, promising unrealistic financial returns, being over-exposed to stock markets, ignoring rising costs and having inadequate control procedures.
“It was only in 2002, when the industry went into freefall, that parachutes were opened, in the form of expensive capital increases.”
On the strategic front, most companies had since taken the necessary measures – focusing on core businesses, reducing risks, restoring financial strength and cutting costs.
However, life assurance firms still faced three challenges: the after-effects of a “prolonged” period of low interest rates, growing competition and the “ongoing regulatory burden”.
Dörig said that the Swiss habit of determining the minimum rate of return on occupational pensions “by annual political horse trading makes it impossible to develop a sensible long-term investment policy”.
Planning the future
However, he expressed optimism about future prospects for the sector, citing four trends.
First, people are both growing older and retiring earlier, creating a growing need for adequate financial provisions.
Second, state social security systems across Europe desperately need reform, and political reform will be forced to focus on alternative systems of provision.
Third, life insurers are “experts” when it comes to long-term risk cover and can offer customers “financial planning reliability”.
Fourth, recent changes to laws in both France and Germany show that governments will favour tax incentives for private savings schemes in years to come.
swissinfo, Chris Lewis in Zurich
Swiss Life moved back into the financial “comfort zone” last month, with a large increase in half-year profits.
It was forced to sell assets and cut costs following the financial crisis of recent years.
Analysts say life insurance firms have benefited from the government decision to lower the minimum rate of return guaranteed to pensioners.
Swiss Life has sold the majority of its private equity portfolio to Britain-based Pantheon Ventures.
Underlining the need to refocus on core business, CEO Rolf Dörig said the life insurance sector had largely weathered the financial crisis of recent years.
It still faced several key challenges, but could now face the future with confidence.
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