Swiss Life changes tack with surprise acquisition
Switzerland's largest insurance company Swiss Life unveiled plans to buy German investment advisor AWD weeks after selling its private bank and other unwanted units.
The €1.16 billion (SFr1.92 billion) proposed deal, due to be launched next month, caught the market unawares. Swiss Life said it marks the beginning of a period of international expansion.
AWD’s controlling Maschmeyer family has agreed to hand over a 20 per cent stake now with the option to buy its remaining ten per cent at a later date. Along with the five per cent stake it already owns, Swiss Life is guaranteed a holding of over a third of the German firm.
The insurer will offer €30 per share to the remaining shareholders.
The German company employs 6,000 advisors selling a variety of financial products including insurance and has a strong position is several European markets.
“Swiss Life and AWD complement one another ideally. The strategic partnership with AWD enables us to access the growth markets in central and eastern Europe, as well as the Austria market,” said chief executive Rolf Dörig.
“This is the first step towards accelerated international growth,” he added.
The deal has left some observers perplexed by Swiss Life’s strategy, but analyst René Locher at private bank Sal. Oppenheim believes it makes sense to get access to AWD’s distribution network.
“If you are going for distribution you need clients, and AWD has 1.9 million clients which is outstanding,” he told swissinfo.
Transparency rules
Locher added that the acquisition would help Swiss Life cope with increasingly tighter regulations that will next year oblige insurers to make commission charges more transparent, allowing customers to compare which products offer the best value for money.
As a result, it will make sense for Swiss Life to also offer products from competitors through its new subsidiary, AWD, Locher argued.
“The new transparency rules might cause some problems for insurance companies, making it harder for them to just sell their own products,” he told swissinfo.
“So it is good news if you can also pick and choose the best products from your competitors and still get profitability.”
Swiss Life said the deal would generate SFr50 million annually until 2012 from cost savings and increased revenue.
Swiss Life has been swift to use some of the SFr4.4 billion it will gain from the recently announced sale of its Banca del Gottardo private banking business and its Dutch and Belgium units.
The insurer also announced a share buy-back programme of up to SFr2.5 billion last month.
Swiss Life will ask shareholders next May to agree to a management reshuffle that would see Dörig move to group chairman to be replaced as chief executive by Bruno Pfister, currently CEO of Swiss Life International.
swissinfo, Matthew Allen with agencies
2006 financial figures:
Gross written premiums: SFr22.06 billion (up 9% compared with 2005)
Profit from operations: SFr1.26 billion (+23%)
Net profit: SFr954 million (+9%)
Employees at the end of 2006: 8,693
Founded in 1857 under the name Rentenanstalt, the Swiss Life Group is one of the leading European insurers in the life and pensions sectors. It celebrates its 150th anniversary this year.
The group, which has its headquarters in Zurich, is active in 60 countries and employs some 8,700 people, half of them in Switzerland.
Following a crisis in the financial markets and a series of uncertain acquisitions, Swiss Life found itself at an all-time low with losses of SFr1.7 billion in 2002.
But the country’s largest insurer made a rapid recovery. Last year it posted net profits of SFr954 million.
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