Swiss Life seeks £514m rescue

One European insurer's shares rose yesterday while another's plunged as they both announced capital injection plans in the latest round of insurance industry refinancing.

Swiss Life's shares fell by 13 per cent to 157.50 Swiss francs (£68) after the insurer said it wanted investors to contribute Sfr1.2bn (£514m) to support its balance sheet. But shares in Aegon, the Dutch insurer, rose by 75 cents to €11.75 (£7.83) at one stage after it confirmed that its controlling shareholder, Vereniging Aegon, is to sell a 25 per cent stake in Aegon to raise cash.

"There are two types of rights issues going on," said Chris Hitchings, an insurance analyst at Commerzbank Securities. "Basically one is so the strong can get stronger, while the other are rescue rights issues from other companies."

Swiss Life was seen as being in the rescue category, especially as it has put some of its operations up for sale. It has hired the US investment bank Goldman Sachs to market its private banking subsidiary, Banca del Gottardo, and Deutsche Bank is seeking a buyer for Swiss Life's German business. These sales are intended to raise €1.4bn (£900m). In May it raised Sfr554m from selling holdings in RMF Investment Group, a hedge fund manager, and SGS Société Générale de Surveillance Holding, a goods inspector.

Details of the Swiss Life capital-raising exercise are to be announced tomorrow, with the company's first-half results, followed by a shareholder vote on 23 October. An extra Sfr1.2bn would add about 66 per cent to the company's current market value of Sfr1.8bn.

Swiss Life is shedding 800 jobs. Its revaluation reserves, the amount by which the market value of its investments exceeds the book value, fell 99 per cent to Sfr44m last year, while its capital dropped by a third. The shares have fallen 77 per cent this year.

But the Aegon cash-raising plan was received much more favourably, as it involves issuing no new shares and the money seems to be needed to finance growth rather than prevent failure.