Helvetia May Sell to Rich Clients After Raiffeisen Buys Wegelin

Helvetia Holding AG (HELN) may start selling life insurance policies to super-rich clients of Raiffeisen Group after its distribution partner acquired Swiss private bank Wegelin & Co. in January.

“There could be a long-term potential to tap into the high net-worth individual market via Raiffeisen,” Stefan Loacker, chief executive officer of Helvetia, said in an interview in St. Gallen, Switzerland. “In the context of the Wegelin purchase, we have both decided to look into this potential.”

Raiffeisen bought Wegelin after the 270-year-old Swiss wealth manager came under investigation in the U.S. for allegedly helping Americans evade taxes. While Wegelin became the first Swiss bank to be indicted in a U.S. crackdown on tax evasion, the risks and responsibility for the U.S. business remain with former partners and not Raiffeisen.

Helvetia, Switzerland’s fourth-biggest insurer, focuses on middle-income groups and doesn’t sell life products known as wrappers to wealthy private banking clients. Swiss regulators in 2010 probed whether wrappers were being used to hide undeclared assets as sales of the policies boosted premiums at Swiss Life Holding AG (SLHN) and Baloise Holding AG. (BALN)

When a client buys a wrapper, the beneficial ownership of the assets is transferred to the insurer while the funds often remain on the balance sheet of private banks. Insurers invest the premiums through advisers and clients receive benefits tied to the performance of the underlying investment. Taxes are minimized or deferred because life insurance policies are classified as non-income producing assets.

Wrapper Sales

Helvetia has no “concrete plans” to sell policies to wealthy clients, said Loacker.

Swiss insurers, which sell wrappers through units in Luxembourg, Liechtenstein and Singapore, may open themselves to lawsuits when they provide such products to French and German citizens seeking to evade taxes, the Swiss Financial Market Supervisory Authority said two years ago. Swiss Life said last year that a tax accord between Switzerland and Germany will curb wrapper sales as some German clients repatriate assets.

The Wegelin purchase added about 21 billion Swiss francs ($22 billion) to the 146 billion francs of assets that Raiffeisen had under management at the end of last year. The cooperation with Raiffeisen made up almost 20 percent of Helvetia’s Swiss single life insurance new business in 2011 and this contribution is growing, said Loacker.

Helvetia offers mainly risk life insurance, which Raiffeisen often sells to customers in combination with a mortgage. That covers a family should the breadwinner become disabled or dies.

Distribution Agreement

Helvetia extended its Swiss distribution agreement with St. Gallen-based Raiffeisen for another five years in 2009. Raiffeisen, which holds a 4 percent stake in the insurer, has Switzerland’s third-biggest banking network.

Helvetia may use part of the $3.65 billion in equity it held at the end of last year for “bolt-on acquisitions” in countries, including Germany, Italy and Spain, where the insurer already has a presence, Loacker said.

“We want to continue strengthening our position in the markets where we are already present,” he said. “Acquisitions are a possible catalyst to develop our positions.”

Helvetia dropped 3 percent to 279.25 francs as of 12:13 p.m. in Zurich trading, bringing this year’s decline to 2.9 percent.

Loacker reiterated the insurer’s mid-term financial targets, including a return on equity of 10 percent to 12 percent. Helvetia had an ROE of 8.7 percent in 2011.

To contact the reporter on this story: 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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