stake in German financial advisory firm MLP Group for €307 million
($400 million) in August this year was intended to play a key role
in strengthening its position in Germany’s retirement market.
Unfortunately for Switzerland’s largest life insurer, things have
not gone according to plan.
MLP opposed Swiss Life’s move from the start, and in no
uncertain terms expressed the view that it saw its independence and
business model threatened. MLP has now put that view into action by
suspending its active distribution of Swiss Life’s products in
late-November.
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“In order to avoid any conflict of interest we are suspending
our product partnership with Swiss Life for new business until
further notice,” said MLP’s CEO Uwe Schroeder-Wildberg in a
statement. MLP reiterated that independence from product providers
is a crucial component of its business model.
In August, MLP took steps to reduce what would have been Swiss
Life’s 26.75 percent stake by placing new shares with the German
units of insurers Allianz and Axa. This move has left Swiss Life
with a 24.2 percent stake in MLP.
With MLP’s withdrawal of support, Swiss Life’s primary thrust
into the German market is through AWD Holdings in which it acquired
a 97 percent stake during the course of 2008 for CHF1.7 billion
($1.4 billion). The primary vendor was AWD’s founder Carsten
Maschmeyer who was also the vendor of the stake in MLP and now
holds a 5.21 percent stake in Swiss Life.
MLP’s announcement followed what was a torrid third quarter for
Swiss Life, which reported total premium income down 11 percent
compared with the third quarter of 2007 to CHF3.075 billion.
Significant damage was caused by Liechtenstein operations where
premium income plunged 45 percent to CHF338 million.
In the first nine months of 2008, German premium income also
disappointed – falling 7 percent to CHF1.34 billion while total
group premium income edged up 1 percent to CHF14 billion.
Regrettably, Swiss Life provides no third-quarter profit
figures. However, it made it clear that continuing operations would
produce a loss for the full year. In the first half of 2008
continuing operations generated a net profit of CHF152 million.
Market reaction to Swiss Life’s performance has been extremely
negative, its share price down 77 percent since April 2008 to its
lowest level since early-2003, a time when its share price was
reeling from a net loss of CHF1.7 billion in 2002. Since April
2008, the Dow Jones Euro Stoxx Insurance Index has fallen by some
50 percent.
The insurer has responded by announcing a restructuring aimed at
achieving annual cost savings of about CHF45 million in 2009 and
CHF90 million in 2012. In particular technology projects will be
scaled back “considerably” while staff numbers will be cut by 200.
The latter is anticipated to generate one-third of cost
savings.
