Swiss Life to Buy AWD for $1.68 Billion

Swiss Life Shrugs off Credit Crisis, Boosts Targets

Published: Tuesday, 4 Dec 2007 | 4:13 AM ET

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By: Reuters

Insurer Swiss Life raised its targets on Tuesday, aiming to boost earnings per share by at least 12 percent annually, and said the credit crisis will not hit its results, lifting its shares.

Swiss Life, which has made a sweeping restructuring of its business in recent weeks and on Monday unveiled plans to buy German investment adviser AWD, raised its full-year outlook and said it would increase its dividend pay-out ratio.

"The attractive payout ratio combined with the share buyback sets the benchmark for the entire insurance sector," said Vontobel analyst Uwe Otten.

Swiss Life now expects to make a profit of 1.2 billion Swiss francs ($1.07 billion), compared to a previous forecast of 1 billion francs.

The company also targets an increase in earnings per share of at least 12 percent annually, a return on equity above 12 percent and to pay out 40 to 60 percent of its earnings to shareholders each year from 2009.

Swiss Life shares rose 1.3 percent to 299.00 francs, compared to a slightly lower DJ Stoxx European insurance sector, regaining some of Monday's 7 percent loss, when they were hit by the AWD takeover.

The company has made no decision on dividends yet, but assumes it will be allocating about 600 million francs, or about 17 francs a share, to its shareholders for 2007, Swiss Life said.

A recently announced 2.5-billion-franc share buyback should be completed in 2009, the company said.

"I guess what is really very good news is the dividend yield," said Sal Oppenheim analyst Rene Locher. "They target a 1 billion (franc) buyback in '08, 1.5 billion in '09, so that should also help the share price."

Credit Crisis No Issue

Swiss Life said its total exposure to collateralized debt obligations as of the end of 2007 is below 550 million Swiss francs ($488 million), more than 70 percent of which is rated AAA.

"The exposure to CDS (credit default swaps) is no issue for Swiss Life; we primarily bought protection against deteriorating markets," the company said in slides prepared for a presentation.

The company had been expected to unveil aggressive growth targets at its investor day on Tuesday, as it completes refocusing its business and speculation intensifies it could join a round of consolidation in the insurance sector.

In the past month, Swiss Life has announced a management reshuffle, sold its lackluster Banca Del Gottardo unit to Italian rival Generali and its Dutch and Belgian units to SNS Reaal and announced a 2.5 billion franc share buyback.

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Topics:Subprime Lending | Credit | Switzerland

Sectors:Insurance | Financial Services

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