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Swiss Life gave a gloomy insight into the problems facing some of Europe’s weaker insurance companies, as tumbling asset values and turbulent markets forced the Zurich-based group to issue its second profits warning since August, reports Reuters. The company said it now expected a loss on continuing operations this year. The revision followed a first warning in late August, when Swiss Life said earnings before the SFr1.5bn ($1.27bn) proceeds from selling Banco del Gottardo and operations in Belgium and the Netherlands would reach only SFr300-400m, compared with the former SFr1bn goal. The latest revision was accompanied by the suspension of share buy-backs and a clear hint that the dividend was under threat. Swiss Life’s SFr2.5bn buyback programme had already been curtailed in August, when it decided to limit repurchases to the SFr1bn target for 2008. That has now been further revised, with buy-backs to be halted at the SFr686m repurchased by end October.
Swiss Life on Monday followed up recent big disposals with plans to buy AWD, the German financial advisory group, signalling a strategic change for the life and pensions company. Swiss Life recently raised SFr4.1bn ($3.63bn) from selling Banca del Gottardo and insurance subsidiaries in the Netherlands and Belgium and announced share buybacks worth SFr2.5bn. Analysts had expected more share buy-backs after the deals but instead, Swiss Life is offering €30 a share for AWD, valuing the German financial services group at €1.16bn ($1.7bn), or 15 times forecast 2008 earnings. The company had net profits of €56.8m last year. News of the offer, made at a 36% premium to AWD’s three-month average share price and backed by management, sent the stock up 28% to €29.38, while Swiss Life shares fell 7% to SFr22.75 on fears it was overpaying.
Swiss Life has sold Banca del Gottardo to a subsidiary of Italy’s Generali for SFr1.875bn in a long-awaited consolidation of Swiss private banks. Combining Gottardo and BSI, both based in the Italian-speaking Ticino region but focused on wealthy northern Italy, will create a dominant operator with assets of about SFr100bn. Analysts said the deal would relieve Swiss Life of a unit that had never lived up to expectations, but would also make Switzerland’s biggest life insurer itself more appealing to predators