Swiss Life Insists It Will Buy Fortis France

by Ulrika Lomas, Tax-News.com, Brussels

13 February 2002

Swiss Life, Switzerland's biggest life insurer, yesterday said it would go ahead with plans to to acquire life assurance operation Fortis France in spite of concerns expressed by ratings agencies over its financial strength and recent weakness in its share price, which has fallen 20% since the company issued a profit warning last week and said it would pass its dividend.

Swiss Life said that it would acquire Fortis France for between Euros 150m and Euros 200m. The business generated about SFr700m ($ 416m) of premium income in 2001. It had been thought that the company would abandon the planned acquisition of Fortis's French operations because of the additional strain it would impose on its balance sheet.

Analysts say that the acquisition of Fortis makes more sense than some of Swiss Life's other recent deals, such as its move into private banking, but Standard & Poor's has warned Swiss Life to take steps to ensure the Fortis deal was structured so as to have no detrimental effect on Swiss Life's risk-based capitalisation.

Swiss Life's performance has relied heavily in the past on investment gains on large equity holdings. Analysts had expected the company to report sharply lower 2001 profits, but the company's warning two weeks ago that its profits would be noticeably below consensus estimates led to sharp falls in its share price. Under domestic Swiss rules it has to guarantee a 4% investment return to its policy-holders, something that is very difficult when interest rates are low and equity markets have performed badly.

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