Swiss Life Sees Challenging Market Conditions as Second-Half Profit Drops

Swiss Life Holding AG (SLHN), Switzerland’s biggest life insurer, expects market conditions to remain “challenging” after second-half profit declined by 30 percent.

Net income fell to 202 million Swiss francs ($226 million), from 289 million francs a year earlier, according to Bloomberg calculations that were confirmed by the Zurich-based company. That missed the 209 million-franc median estimate of three analysts surveyed by Bloomberg. The insurer proposed an unchanged dividend of 4.50 francs per share.

“The dividend is in our view a strong sign that economic solvency remains adequate despite low interest rates,” Stefan Schuermann, an analyst at Vontobel Holding AG (VONN), wrote in a note today. “The result appears a bit light on the profit side.”

Swiss Life plans to make more savings after reducing annual costs by 404 million francs since 2009 and cutting 520 jobs in Switzerland. The insurer is also trying to reduce its dependency on investment income and compensate for a decline in revenue from selling life policies, known as wrappers, to wealthy clients of Swiss private banks.

Swiss Life climbed 2.2 percent to 104.30 francs, the highest since Nov. 4, at the close of Zurich trading, bringing this year’s gain to 21 percent. That compares with the 14 percent increase in the 28-company Bloomberg Europe 500 Insurance Index.

Positive Investment Case

“At the current valuation, Swiss Life results only had to avoid being disastrous to reaffirm a positive investment case and, in our opinion, these figures have achieved that goal,” Tim Dawson, an analyst at Helvea SA, wrote in a report. “Profits will hold up far better than is implied by the share price and the capital position remains acceptable.”

Swiss Life, Zurich Financial Services AG (ZURN) and other insurers may post slower premium growth this year as the economy deteriorates, according to the Swiss Insurance Association. The company is targeting a return on equity of 10 percent to 12 percent by this year and a new business margin of 2.2 percent.

“Going forward, we do not expect much tailwind from the financial markets,” Chief Executive Officer Bruno Pfister said in the statement. “We can expect persistently low interest rates and an extremely challenging financial market environment.”

AWD Holding AG, the German financial services broker that Swiss Life bought in 2007, reported a 10 percent increase in operating profit to 54 million euros. That result was affected by 47 million euros in provisions for legal cases.

AWD founder Carsten Maschmeyer said on Dec. 7 that he will step down from Swiss Life’s board of directors and cut his stake in the insurer to less than 3 percent.

To contact the reporters on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net; Carolyn Bandel in Zurich at cbandel@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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