UPDATE 1-Talanx mulls winding down life insurance unit
* New business still falling at HDI Lebensversicherung
* Talanx eyes decision on unit by end of year -CEO
* Talanx share -0.5 pct, insurance index up 0.8 pct (Adds CEO quotes on business development, context)
FRANKFURT, Oct 1 (Reuters) - German insurer Talanx is considering winding down its life insurance arm HDI Lebensversicherung, where new business volumes are falling, the group's chief executive has told daily newspaper Sueddeutsche Zeitung.
Like many life insurers, HDI Lebensversicherung has seen investment returns hit by low interest rates. An industry survey last month showed that the business is becoming an unviable in Europe, with many companies forced to compensate for low rates with higher-risk investments or moves overseas.
Low interest rates will also force insurers to hold more capital to safeguard pledges to policy holders under new insurance rules, called Solvency II, set to take effect in 2016.
All this is taking a toll on life insurance business in Europe.
"We have to ask whether we can carry on as we have up to now," Talanx CEO Herbert Haas told the paper, adding that he hoped to take a decision on HDI Lebensversicherung by the end of the year.
Options include a freeze on new business and the phasing out of existing contracts, Haas said. Existing contracts could also be sold to a specialist company that would wind them down, he said.
For now, however, the focus is on cutting costs and improving capital investment returns at HDI Lebensversicherung, Haas was quoted as saying.
HDI Lebensversicherung had gross written premiums of 2.36 billion euros ($3.19 billion) in 2012, down from 2.41 billion in the previous year, representing less than 10 percent of Talanx group's gross premiums.
In contrast to HDI Lebenversicherung's declining new business, sales of the group's other life and retirement savings products through bank partners were doing well, Haas said.
The group was also satisfied with developments in other areas, despite heavy damage claims from floods and hail storms in Germany this year, Haas said.
Talanx expects good results from its business in Poland this year, Haas said. It is also looking at opportunities in Malaysia, Indonesia and the Arab peninsula, he added.
Talanx's share fell 0.5 percent to 24.78 percent by 0830 GMT, lagging a 0.8 percent gain in the STOXX Europe 600 insurance index.
($1 = 0.7387 euros)
(Reporting by Ludwig Burger and Jonathan Gould; Editing by David Goodman and Louise Heavens)
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