Allianz SE’s CEO Michael Diekmann said tougher financial regulation will create takeover opportunities for Europe’s biggest insurer.
“If Solvency II and Basel III mean more capital, then it’s hard for mutuals to get that,” Diekmann, 58, said in an interview on Oct. 15 at Bloomberg headquarters in New York, referring to mutuals’ customer-owned structure, which makes it more difficult for them to raise funds. That’s why they may need to find a buyer should they require a larger capital buffer under Solvency II, the new risk-based rules for the industry scheduled to be implemented in 2016, he said.
“We have a situation in most countries where you have listed companies and mutual companies and there is a little bit of an unequal playing field,” Diekmann said. “That gets resolved through regulation.”
Provinzial Nordwest Holding AG, a German insurer owned by regional savings banks and municipalities, was the target of a takeover bid by Allianz last year, according to a report by Financial Times Deutschland.
In response, its owners started merger talks with counterpart Provinzial Rheinland Versicherung AG in December, which have since stalled after an owner of Provinzial Nordwest called for alternatives to be evaluated.
Allianz, based in Munich, acquired Turkish insurer Yapi Kredi Sigorta AS in March for €684 million ($932 million), displacing France’s AXA SA as Turkey’s largest insurer. The transaction was Allianz’s biggest takeover since it bought the remainder of its insurance unit in France for $9.8 billion in 2007, according to data compiled by Bloomberg.
External Growth
Diekmann told investors in a presentation last month that Allianz sets aside 20 percent of annual net income for external growth and 40 percent for dividend payments.
“All our operations are ready to be scaled up because we are good on the information-technology side, on the service side and on the brand side,” he said in New York. “Any additional scale would be welcome, but obviously then they need to come to us because we never make any interest public.”
Europe’s insurers are set to make “immense changes” to their business models under Solvency II, Werner Goerg, CEO of Gothaer Group and head of the German association of mutual insurers ARGE, said in an interview this month.
“Insurers will use the transitional period from Solvency I to Solvency II to change their products and to bolster capital by cutting payouts and reducing costs,” he said.
Solvency II
Solvency II, intended to harmonize the way insurers in Europe allocate capital against the risks they take, was originally scheduled to come into force in 2012. It has been delayed several times over issues such as the treatment of long – term guarantees and may now be implemented on Jan. 1, 2016 with a transitional period. Basel rules demanding banks to hold higher capital buffers will be introduced globally by 2019.
Germany has about 260 mutual insurers, with some focusing on insuring tax accountants, driving instructors or farmers in Northern Germany against hailstorms. That compares with some 300 insurers that operate as a joint-stock company.
Provinzial Nordwest, which is among firms with a joint- stock structure, employs about 3,000 people and had premium income of €3 billion [$4.09 billion] in 2012, according to its annual report. Westphalia-Lippe savings banks and Landschaftsverband Westfalen-Lippe each own 40 percent, while savings banks in the state of Schleswig-Holstein hold 18 percent, the website shows.
Dusseldorf-based Provinzial Rheinland, headed by former Allianz manager Walter Tesarczyk, had premium income of € 2.4 billion [$3.27billion] in 2012 and employed some 2,600 staff, according to its annual report. It has the legal form of an institution under public law. The Rhineland Savings Banks Association owns 34 percent and the Savings Banks Association of Rhineland- Palatinate controls about 33 percent.
At Allianz, Diekmann signaled that he doesn’t necessarily plan to step down when his contract expires in 2014.
“I’m turning 60 at the end of next year, I feel much younger,” he said. “At the middle of next year, the supervisory board will tell me if they want to continue working with me. All options are open.”
Editors: Simone Meier, Steve Bailey