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Cost deterring Swiss Life from entering nonlife market

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Cost deterring Swiss Life from entering nonlife market

The high cost of entry has deterred Swiss Life Holding AG from making a push into the Swiss nonlife insurance market, CEO Patrick Frost said Feb. 27. But he added that the trend toward digitization in insurance may eventually bring the cost down.

Responding to an analyst's question on a conference call for Swiss Life's 2017 results, Frost said: "We were attracted by the margins in that business. Switzerland has very interesting nonlife margins and has for a very long time. Market entry can be done quite quickly, but to really have a substantial profit contribution you have to incur quite a lot of cost."

He added: "That might change when we are further advanced in the digitization age, but our most recent view on this just didn't make those investments worthwhile in Switzerland."

Frost also confirmed that Swiss Life would continue its search for smaller bolt-on acquisitions, mainly to feed into its fee business. This could include asset management, as with the company's 2014 purchase of real estate asset manager Corpus Sireo, he said, adding: "That continues to be our main focus in terms of M&A strategy."

Swiss Life made a net profit of CHF1.01 billion in 2017, up 9.5% on the CHF922 million it made in 2016. The life insurer proposed boosting its dividend to CHF13.50 per share from the CHF11.00 per share paid in 2016.

The company targets a dividend payout ratio of between 30% and 50% of profits. But Swiss Life CFO Thomas Buess said there could be a change announced at the company's 2018 investor day Nov. 29, when it will also set new financial targets.

He said: "We will reconsider the entire payout ratio for our investor day and in November and we will give more detail on our future payout policy then."

Swiss Life also faced questions about its Sept. 14, 2017, announcement that it was in discussions with the U.S. Department of Justice about the cross-border business it does with U.S. clients. The insurer said at the time that the portfolio of U.S. clients served by its Liechtenstein and Singapore units amounted to CHF250 million.

"We are at the very early stages in the dialogue with the DoJ and we are prepared for this to take a long time," Frost said. "The process is being led by the DoJ so there is no new information here."