* Swiss Life Q3 premium income up 1 pct to 2.98 bln Sfr
* Poll was for premiums of 2.79 bln Sfr
* AWD sees sales fall 15 pct in Q3
* CFO says cannot rule out writedown
* Shares down 1.5 pct vs 0.7 pct sector loss (Adds CFO comment, analyst quote, shares)
By Catherine Bosley
ZURICH, Nov 13 Swiss Life's beleaguered financial advisory arm AWD suffered a decline in sales in the third quarter, highlighting the challenges the insurer faces in turning around the German unit.
Switzerland's biggest dedicated life insurer bought Hanover-based AWD for 1.2 billion euros ($1.5 billion) in 2008. But the division, whose main markets include Germany and Austria, has struggled in recent years.
Profits have slipped, client advisers left and it has been accused of improperly pushing products in Germany and Austria. AWD has denied those allegations.
In the third quarter, AWD's sales fell 15 percent to 108 million euros, Swiss Life said on Tuesday, taking the shine off higher than expected group premium income.
Swiss Life has already taken sizeable provisions for AWD and is thoroughly reviewing the unit. The group will hold an investor day on Nov. 28 when it may give further guidance on its plans for AWD.
"We obviously cannot be satisfied with this development," Finance Chief Thomas Buess said, referring to the unit's latest figures. "We cannot rule out a writedown."
Late last year, Swiss Life's then biggest individual shareholder Carsten Maschmeyer cut his stake and said he would leave the board because he was unhappy with how the probe into AWD's sales tactics was being managed by the company.
However Tuesday's statement also showed a 1 percent rise in third-quarter premium income for the group as a whole and a strong investment result.
Swiss Life's premium income of 2.98 billion Swiss francs topped an average forecast of 2.79 billion in a Reuters survey of analysts. [ID:nL5E8M9D54
Despite low bond yields due to central banks' policies of quantitative easing, Swiss Life recorded a non-annualised net investment return of 3.8 percent for the period between January and September, stronger than a year ago.
Shares in the firm, which have risen 35 percent so far this year, were down 1.5 percent at 114.9 francs by 1108 GMT, against a 0.7 percent fall in the European insurance sector.
"Due to the fact that Swiss Life is currently still able to generate a decent profit in this harsh environment, we believe the insurer deserves a higher valuation than the current level," said Sarasin analyst Martin Schwab.
The shares trade at around 6.3 times forecast 2013 earnings, compared with an average multiple of 8.1 times for the European sector as a whole, according to Thomson Reuters data.
($1 = 0.9482 Swiss francs) (Editing by Mark Potter and David Holmes)
Our top photos from the last 24 hours.