ZURICH: Swiss Life on Wednesday posted a larger-than-expected rise in half-year profit as growing real estate holdings helped increase income at Switzerland’s biggest life insurer. “We are ahead of schedule in implementing our group-wide programme ‘Swiss Life 2018’ and the sustained and consistent orientation of our business towards profitability and capital efficiency enabled us to again improve our profit sources,” Chief Executive Patrick Frost said. He told journalists that progress on its targets would positively impact the group’s future dividend payout ratio. Net profit rose 5 percent to 524 million Swiss francs ($538.8 million), ahead of the average estimate in a Reuters poll. Swiss Life has focused on trimming costs and raising third-party asset management and investment income to offset sluggishness in its core life insurance business.
Swiss Life — whose main markets include Switzerland, France and Germany — has like other insurers been squeezed by low and negative interest rates. These have helped its real estate portfolio, however, which now comprises 17.2 percent – or 26.69 billion francs – of its investments and contributed over a third of its half-year direct investment income. “Real estate has been an important contributor to our results. We continue to buy real estate, because we’re not concerned about a real estate bubble as long as interest rates are as low as they are,” said Frost, who has returned from a sabbatical after successful treatment for cancer. “The net yield pickup we get from real estate in Switzerland is very attractive.” Managed real estate assets also helped increase its fee and commission income, a focus Frost has said the company wants to expand. The group is on the lookout for real estate deals across Europe, Frost said, but he declined to comment on a statement by Spanish real estate investment trust Hispania it was in talks with the Swiss insurer to sell office assets.
“Swiss Life benefits from a continuous improvement in profitability given the focus on higher return-on-equity businesses, such as the risk/unit-linked business, Swiss Life Asset Managers and own independent financial advisors, which should drive a further re-rating,” Baader Helvea analyst Daniel Bischof said in a note, reiterating a “buy” rating on the stock. “The company’s strong cash generation bodes well for a steady increase in the dividend in the next couple of years.” The stock gave up early gains to trade down 1.2 percent by 0736 GMT on what traders called profit-taking.