UPDATE 5-Swiss Life cuts outlook as writedowns hit H1 profit

(Adds analyst comment, background, latest share price)

By Andrew Thompson

ZURICH, Aug 28 (Reuters) - Swiss Life (SLHN.VX: Quote, Profile, Research, Stock Buzz), among Europe's top 10 life insurers, issued a profit warning after first-half earnings missed analysts' forecasts due to investment writedowns, sending its shares tumbling.

Swiss Life shares fell 9.4 percent to 203.00 Swiss francs by 1305 GMT on Thursday and have now lost almost a third of their value since the insurer bought roughly 25 percent of German pension sales specialist MLP (MLPG.DE: Quote, Profile, Research, Stock Buzz) two weeks ago.

Swiss Life said it would miss its targets for this year and its earnings per share (EPS) goal for next year without the support of the share buybacks it recently cancelled to finance the MLP buy.

"We are surprised by the magnitude of Swiss Life's problems and overwhelmed by the insignificant contribution of continuing operations after disposals," Landsbanki Kepler analyst Fabrizio Croce said.

"We could not understand that a company in this shape would seriously consider an unfriendly takeover," he added.

The global credit crisis has slashed profits at many of Europe's top insurers, with companies like AXA (AXAF.PA: Quote, Profile, Research, Stock Buzz) and Allianz (ALVG.DE: Quote, Profile, Research, Stock Buzz) reporting a weak first half. The European insurance sector was 2.6 percent higher.

Rainer Skierka, analyst at Bank Sarasin, was not suprised that Swiss Life had to admit that it will not achieve its 2008 financial targets.

Swiss Life said earlier this month it had built up a 26.75 percent stake in Germany's MLP, which responded last week by raising its capital by almost 10 percent in a bid to fend off a possibile hostile bid from the Swhhiss firm.

Swiss Life Chief Executive Bruno Pfister said he was in contact with MLP's management but that negotiations were tense and could take a long time.

While he declined to comment on the possibility of expanding Swiss Life's MLP stake, he said it has "no plans for a hostile takeover" as that would not be in the interest of either company.

"Swiss Life's action is difficult to comprehend for us," ZKB insurance analyst Georg Marti said.

On Thursday, MLP again rejected strategic talks with Swiss Life and said that the Swiss group's stake amounted to no more than a "financial investment".

BACK ON TRACK AFTER 2009?

Swiss Life reported a net capital loss of 1.2 billion Swiss francs ($1.10 billion) versus a gain of 516 million Swiss francs a year earlier, hit by rising interest rates on fixed-interest investments, widening credit spreads and falling stock prices.  Continued...