Dependence on financial result of traditional business and the
high level of costs are impeding Swiss Life’s progress – these are
two key messages from Switzerland’s largest life insurer which has
just released a mixed set of half year results.
From a profit perspective Swiss Life turned in a disappointing
showing, reporting net profit excluding extraordinary items at
CHF172 million ($162 million) up 13 percent compared with the first
half of 2008 but still well off CHF425 million reported in the
first half of 2007.
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On an annualised basis the first half 2009 net profit represented a
5.1 percent return on average equity (CHF6.68 billion) and was well
short of a targeted 12 percent return.
“To remain competitive in the closely-fought life and pensions
market and to enhance our ability to compete, we must focus more
strongly on client needs and product profitability and further
reduce our cost base,” commented the insurer’s CEO Bruno
Pfister.
In pursuit of this objective he explained that Swiss Life has
introduced initiatives in all its markets to boost client
orientation, efficiency and profitability.
Efficiency increases which will run into 2012 are aimed at cutting
costs by between CHF350 and CHF400 million, compared to 2008 and
are in addition to a CHF90 million cost savings target announced in
November 2008. A large share of the cost savings – CHF188 million –
will be borne by the insurer’s Swiss division which will shed about
520 staff members by 2012.
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By GlobalDataAlso targeted for big cost cuts – CHF95 million – is German
financial advisory firm AWD Holdings in which Swiss Life acquired a
97 percent stake in 2008 for CHF1.7 billion.
AWD, which Swiss Life has viewed as a significant factor in its
growth strategy, turned in particularly poor results in the first
half of 2009, reporting a net loss of €10.3 million ($14.8
million). AWD’s revenue fell 20 percent compared with the first
half of 2008 to €258 million.
At the time of its acquisition AWD was tasked with increasing sales
revenues to €1 billion in 2012, up from the €762 million reported
in 2007. AWD’s earnings before interest and taxes were forecast to
reach €130 million in 2012, up from €84.5 million reported in
2007.
The inevitable restructuring is now underway at AWD. Moves in this
direction include downsizing the holding company structure,
reducing marketing and administration costs and a gradual shift of
back-office functions from Germany to Austria.
In 2008 AWD advised 429,100 customers and ended the year with 6,009
financial advisers and 513 representative offices. In addition to
Germany AWD operates in Austria, Switzerland the UK and six Central
and Eastern European countries.
Premium income picture brighter
From a premium income perspective Swiss Life’s first half 2009
results reflected a positive tone, particularly when viewed against
its ambitious strategic objective of becoming the “leading
international life and pensions specialist.”
Of particular note was a significant 80 percent increase to CHF1.43
billion in premium income derived from the insurer’s global private
placement life insurance business focused on high net worth
individuals. Private placement forms part of Swiss Life’s
non-traditional business and issues products under the jurisdiction
of either Liechtenstein or Luxembourg.
Success in the private placement segment enabled Swiss Life to
increase total gross written premium income in the first half of
2009 by 7 percent to CHF10.39 billion. In addition to the private
placement segment the other major contributors were Switzerland at
CHF4.58 billion, France at CHF2.52 billion and Germany at CHF971
million.
