After several years of making life insurance available to its retail and private banking customers under sales agreements, UBS AG is getting into the underwriting side of the business.

The Swiss banking company has announced it is setting up a life insurance subsidiary and will offer five product lines in Switzerland, four of which will be underwritten by the unit starting in the first quarter.

A UBS spokesman said the company's decision to form an insurance unit will enable it to "act more directly" to retain client assets. The insurer would extend the range of UBS products available to the company's banking customers in Switzerland and, eventually, the rest of Europe; increase the number of relationships with each client; and increase the client assets held and serviced, he said.

The four lines UBS' insurance unit plans to underwrite are fund-linked life insurance, which is similar to variable life and variable universal life; endowment insurance; annuities; and "classic cash-value" life and annuity products, which are like whole life and fixed annuities.

The fifth line, "risk insurance" products, which covers liabilities from auto and other accidents, is to be underwritten by the Swiss insurance company Providentia and sold under the UBS brand.

UBS' strategy stands in contrast to that of U.S. banks, which have shunned the underwriting business. In Europe, bank underwriting of insurance is not unusual.

The announcement came two months after UBS announced a deal to buy PaineWebber Group Inc. for $10.8 billion of cash and stock and merge it with UBS Warburg, its U.S. subsidiary.

PaineWebber, the fourth-biggest U.S. securities brokerage, is not a major insurance distributor, but its financial counselors sell variable annuities, variable life, and universal life products from several outside carriers, a PaineWebber spokesman said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.