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Swiss Life creates provisions on its American portfolio

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Swiss Life is making progress in asset management and is suffering a slowdown in life insurance, according to the group’s annual results published on Tuesday.

Group net profit fell 13% to 1.051 billion francs in 2020 and operating profit fell 5% to 1.572 billion francs, according to the press release. Patrick Frost, Chairman of the Group, notes at the outset, in his commentary, that “the ambitious work in asset management and financial advice has enabled us to considerably develop activities based on the payment of fees and of commissions ”.

Net profit is slightly lower than analysts’ expectations, who forecast a profit of 1.095 billion, but operating profit is slightly higher. The company is proposing an increase in the dividend from 20 to 21 francs, which was only anticipated by a few analysts.

Two exceptional factors

The net profit decreases due to two exceptional factors unrelated to the pandemic. The first consists of a provision of 70 million francs for the upcoming agreement with the US Department of Justice (DOJ). In September 2017, Swiss Life announced that it was in discussions with the DOJ about an old insurance portfolio with American clients. Discussions “are at a well advanced stage” according to the press release. The final amount could be “a little higher,” the company adds. Swiss Life expects that an agreement can be signed soon.

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The second element results from a positive tax effect of 49 million francs in 2019, linked to the reform of corporate taxation.

The result related to fees and commissions mentioned above by Patrick Frost increased by 11% in 2020 to reach 601 million francs. “Swiss Life Asset Managers and the independent consultancy organizations in Germany were the main contributors to this result,” says the management.

Progress in management business

Fee and commission income rose 11% to CHF 1.96 billion. According to the statement, in total, independent advisory channels increased their contributions by 12%, Swiss Life Asset Managers by 8% and contributions from third-party and company-specific products and services increased by 7%.

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The Swiss Life Asset Managers management entity recorded a 12% increase in its profit, to 345 million francs. This unit recorded an inflow of new capital of 7.5 billion francs, bringing the total to 91.6 billion francs. Asset management for third parties, that is to say for clients not insured with the group, contributed 137 million francs, which corresponds to an increase of 60%.

On the other hand, the life insurance business faces a headwind. Premium income fell 12% to CHF 20.0 billion. The insurer confides that this drop is due to a base effect. The previous year, the company had greatly benefited from Axa’s withdrawal from the full insurance model, which provides for full coverage of the investment risk of 2nd pillar policyholders. In the Swiss market, the fall in premium income even amounts to 18%.

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