Swiss Re comes to Zurich's rescue

Zurich Financial Services, the Swiss insurer that has been battling to bolster its balance sheet, yesterday sold one of its UK life insurance businesses, Zurich Life, to Swiss Re in a deal worth $460m (£286m).

Zurich Life has about 225,000 customers and is closed to new customers. It will be taken over by Admin Re, a division of the Swiss Re which specialises in running down closed insurance books.

Of the $460m, $240m will be paid in cash when the deal is completed and the balance paid in dividends. The price represents around a 10 per cent discount to Zurich Life's net asset value. It sold $118m of premiums in 2002, which represents 2 per cent of Zurich's sales from its other life insurance businesses in the UK.

"We are transforming our life businesses in the UK," Sandy Leitch, the chief executive of Zurich in the UK and Asia said adding: "This transaction contributes to all of those aims."

Zurich still owns Eagle Star, Allied Dunbar and Sterling in the UK and Eagle Star is thought to have one of the worst problems with endowment policies in the sector.

Its parent has been trying to sell off assets after reporting record losses and launching a $2.5bn rights issue. It recently completed a £340m deal with American Express for its UK fund management business, Threadneedle.

This is its first deal outside the US, but Admin Re has been circling the UK on the look out for a deal for some time. Swiss Re was known to be interested in the UK arm of Swiss Life, also up for sale and was closed to new business last month. Analysts yesterday said they thought a deal with Swiss Life could still be on the cards.