SWITZERLAND – The Credit Suisse Group today announced it has agreed to sell its entire Winterthur insurance business to AXA in a CHF12.3bn (€7.9bn) cash deal.
The move follows Credit Suisse’s decision in 2004 to focus its growth strategy on an integrated global banking business model.
“For the past two years, CSG has been managing Winterthur as a financial investment and preparing it for a capital market transaction,” said the group in a statement.
According to the bank’s chief executive Oswald Grübel, there are plans to invest the proceeds from the sale in the development of its banking business.
The sale of the Swiss insurance giant will consolidate AXA’s position in Germany, Belgium, the Netherlands, Spain and the UK.
Winterthur will also increase AXA’s presence in Asia, and provide a life and pensions operating platform in Central and Eastern Europe where it is among the top five pensions players in Poland, the Czech Republic, Hungary and Slovakia.
Furthermore, the sale of Winterthur – with roughly €100bn in assets under management – will put AXA among the top worldwide for assets under management, according to a release.
“The acquisition of Winterthur fits well with AXA’s strategic focus on organic growth complemented by bolt-on acquisitions,” said AXA.
According to AXA CEO Henri de Castries: “This transaction is a unique opportunity to reinforce our leading position in our core European market and to increase our presence in high growth markets, notably in Central and Eastern Europe and in Asia.”
According to Winterthur chief executive Leonard Fischer, the move is a “significant step” for clients and employees of the firm.
“Having reviewed several strategic options for the future of Winterthur, the management team of Winterthur is convinced that by joining AXA, Winterthur’s business will be best positioned for future growth,” he said.
As part of the sale, AXA will also pay CHF1.6bn to refinance part of Winterthur’s outstanding debt, including CHF1.1bn in outstanding loans from Credit Suisse. The deal will be financed with a balanced combination of equity and debt.
According to AXA, the restructure is expected to cost around CHF800m pre-tax to be fully phased in next year. These charges should impact mostly net income, said AXA.
The transaction, subject to regulatory approvals, is expected to close around year-end 2006.
Today, rating agency Standard and Poor’s raised its long-term counterparty credit rating on Credit Suisse Group to 'A+' from 'A'. The outlook is stable, said S&P.
“The stable outlook on CSG reflects its major and sustained improvement in profitability, which has led to a material increase in capitalization, which Standard & Poor's expects will improve further on the sale of Winterthur.
“The outlook also reflects some potential for franchise development through the integration of its banking businesses, which should lead to greater coordination and cross selling over the medium term,” according to a statement.
Meanwhile, Moody’s affirmed the Aa3 long-term deposit and senior debt ratings of CSG and Credit Suisse, with a stable outlook, on agreement to sell Winterthur to AXA.