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ZURICH, Switzerland -- The combination of Swiss financial services giants Union Bank of Switzerland and Swiss Bank Corp. is likely to also be felt in the Swiss insurance market.

Both banks are involved in allfinanz ventures to distribute insurance products via their branch offices in Switzerland and Europe, and both also have insurance company executives on their boards of directors.

Although some analysts speculated that the banks may be involved in risk securitization projects, they were not aware of specific deals, and the banks declined to comment.

United Bank of Switzerland, as the new combined entity will be called, will be a leading force in private banking, institutional asset management and investment banking, with 1.32 trillion Swiss francs ($926.64 billion) of assets under management.

In a joint statement, the two banks said that globalization and deregulation of international financial markets had provided the impetus for the deal, while consolidation in the financial services industry had helped make size "an increasingly critical factor."

Under the proposed terms, SBC shareholders will hold 40% of the new bank, with the majority balance held by UBS shareholders. SBC Chairman Mathis Cabiallavetta will head up the newly combined company.

UBS has more of a presence than SBC in the insurance sector, holding stakes in two Swiss insurers as well as full ownership of another insurer.

SBC's insurance involvement is limited to an "allfinanz" arrangement with Zurich Insurance Group, in which SBC distributes life and non-life personal lines insurance products through its branch banking network. Although it is a cooperative arrangement, rather than a formal joint venture, Zurich separately owns more than 5% of SBC's shares.

In 1996, SBC wrote 384 million Swiss francs ($269.6 million) in life premiums through this arrangement. In late 1996, SBC began distributing non-life products, as well.

SBC has stated it has no plans to directly enter the insurance business, because "the costs required. . .directly outweigh the potential benefits," the bank's 1996 annual report says.

Despite that stated intention, though, insurance influences are found on the company's board of directors, which includes Rolf Hueppi, chairman of Zurich, and Rolf Schauble, chairman of Baloise-Holding, parent of several insurers.

In contrast with SBC's stance, UBS has been more eager to enter the insurance sector. In 1996, UBS launched a joint venture with Swiss life insurer Rentenanstalt A.G. The venture, called UBS Swiss Life A.G., was created as an "allfinanz" venture, selling life products via the bank. On Jan. 1, 1997, it was expanded to offer pension funds.

Capitalized at 40 million Swiss francs ($28.1 million), UBS Swiss Life recently has been expanding to sell insurance via bank branches in the Netherlands and Germany.

UBS also has a 30.4% holding in National Versicherung A.G. in Basel, a small insurer capitalized at 35 million Swiss francs ($24.6 million), and fully owns U.K. pension fund asset manager PDFM Ltd., whose holdings include a 26.1% stake in London broker Sedgwick Group P.L.C. and 22% of Willis Corroon P.L.C.

In addition, Manfred Zobl, chairman of Rentenanstalt, is a member of the UBS board of directors, and UBS is expected to complete its acquisition of 25% of the insurer by the beginning of next year.

Of the three insurance representatives sitting on the boards of the two banks, only Mr. Zobl had been proposed as a member of the board of the combined entity as of last week. This has been interpreted by some analysts as an indicator that the Zurich link with SBC may be severed if the banks' merger is approved.

Zurich representatives declined to comment last week.

Some analysts speculated that the two banks, like many other financial institutions, also are exploring insurance via capital markets risk financing and securitization projects.

Swiss banks historically have been secretive about their operations, however, and the banks would neither confirm nor deny this.

"I don't know of anything, but I imagine SBC would have (been involved)," said Roderick Strutt, a consultant in the property/casualty risk management practice at consulting firm Tillinghast-Towers Perrin in London.

If the combined bank wanted to get into the risk securitization area, "it will be a stronger and major player," said Mr. Strutt.

Trevor Petch, an insurance analyst with London-based Robert Fleming Securities, agreed it is "quite likely" that SBC has been involved in alternative risk transfer products. In particular, he suggested that its link with Zurich Insurance Group may have served as an entree to this market.

Although the new organization will have sufficient capital, "it is really a question of whether they can get the teams of people together" to be active in the alternative risk financing market, said Oscar Tymon, a director of Centre Reinsurance Representatives Ltd. in London, a unit of Zurich Insurance Group.

Rival Swiss bank Credit Suisse, which earlier this year acquired Winterthur Swiss Insurance Co., has been a leader in the Swiss market for capital markets transactions.

Credit Suisse has not shown any concern about competition in this area from the combined company, said Willy Hersberger, head of corporate marketing at Swiss Re New Markets, the alternative risk transfer division of Swiss Reinsurance Co., based in Zurich. He predicted that the new UBS organization's priorities will be combining the two banks' retail networks, rather than focusing on new capital market products.

Meanwhile, the consolidation in the Swiss financial services industry last week added fuel to rumors that Credit Suisse will merge with Swiss Re.

The possibility was raised at the time Credit Suisse acquired Winterthur and now "has the ring of truth," according to Nick Bunker, insurance analyst with HSBC James Capel in London. Such a move would assure Credit Suisse remains in the forefront of capital markets deals in the insurance industry, in light of potential new competitors, he explained.

Swiss Re and Credit Suisse, however, issued a joint statement late last week saying the merger rumors were "entirely without foundation."