Delta Lloyd Quits Private Equity Management on Capital Demands

Delta Lloyd NV, the biggest Dutch provider of group life insurance, will stop managing private-equity investments as stricter regulatory capital demands attached to the holdings outweigh their returns.

Delta Lloyd’s investment company, Cyrte Investments BV, will be split in two units, the Amsterdam-based company said today in a statement. The insurer will become the full owner of publicly traded equity funds investing in technology, media and telecommunications stocks. F.J. Botman Holding BV, which held 15 percent of Cyrte, will become owner of Dasym Investment Strategies BV, managing private-equity investments, according to the statement.

Under a new pan-European regulatory regime known as Solvency II, insurers have to match capital reserves with the perceived riskiness of the assets they own. The capital charges on private equity are “very hefty,” Delta Lloyd Chief Executive Officer Niek Hoek told analysts today.

“That makes it more difficult to invest in private equity for us,” he said. “You have to be dead certain that you get a very high return to justify the additional capital charge.”

Delta Lloyd agreed to buy Botman’s 15 percent stake in Cyrte, taking into account the valuation of each of the funds, Martijn Donders, a spokesman for the insurer, said. He declined to comment on the deal’s value. Delta Lloyd and Dasym will continue to cooperate on a case-by-case basis, the company said.

Solvency II has been in the making since 2001. No implementation date has been set as lobbying by German, British and French insurers over the rules’ impact on long-term savings products has delayed its introduction. The Dutch central bank is pushing insurers in the Netherlands to continue preparations for the framework anyway and will take steps toward more risk-based supervision this year, it has said.