OFT steps in to block Swiss Life sale
The Office of Fair Trading has broken up the proposed purchase of the Swiss Life (UK) employee benefit business by UnumProvident in a move that could affect the Swiss firm's attempt to crawl back to profitability.
The Swiss Group had been one of Europe's worst-hit insurance companies after three years of falling stock markets hammered the sector. This led to a £700m loss last year and a frantic bid to offload parts of the group to boost its capital and asset base. The group had hoped to make SFr515m in cost savings by 2005, and to raise capital, by selling its UK and Spanish businesses, and other "non-core" divisions.
There are no clear valuations for the UK arm of Swiss Life but, given that it has a market share of around a 14 per cent, it could raise more than £100m based on its £80m a year premium income.
Under the deal announced in August, Unum would have bought Swiss Life (UK)'s group income protection business and renewal rights to its group life and critical illness businesses.
Unum has 42 per cent of the income protection market. The Swiss Life market share would have increased this to more than 50 per cent; industry experts say this prospect triggered the OFT investigation.
The OFT decision in October to refer to the Competition Commission Unum's proposed acquisition of Swiss Life (UK) has led to the firms calling off the sale in the last few days, although rescue talks continue.
Discussions - including the proposal that Unum becomes a partner in the Swiss Life Network for the international pooling of business - are due to be completed in a few weeks, a spokesman for Swiss Life said.
Bupa and Norwich Union, other groups suggested by an industry expert as potentially interested in buying Swiss Life (UK), are believed not to be holding talks at the moment.
The policies of existing Swiss Life (UK) customers due for rate review will be extended on existing terms on a temporary basis.
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