(Photo: Michael Nagle/BB)
A $94 billion financial behemoth is keeping the market on tenterhooks about its next move.
Europe's largest insurer, Allianz SE, is in the early stages of evaluating a variety of potential acquisition targets as deal-hungry Chief Executive Officer Oliver Baete scans the market for growth, people with knowledge of the matter said. Companies on the list range from Switzerland's Zurich Insurance Group AG and the U.K.'s RSA Insurance Group PLC to Hartford Financial Services Group Inc. in the U.S. or, going further afield, assets in China, they said.
Allianz is working with a few advisers informally in exploring options, but deliberations are at an early stage and may not result in a deal, the people said, asking not to be identified as the discussions are confidential. A spokeswoman for the firm said Allianz would consider acquisitions where the target is a "fit" on strategy, culture and price, with its board jointly taking the decisions.
An abundance of capital and returns crimped by low interest rates have prompted rivals to turn to acquisitions, with France's AXA SA beating out Allianz to seal a $15.2 billion deal for XL Group Ltd. this year. That deal prompted speculation that the German giant, facing a lackluster stock performance this year, could target Zurich Insurance, worth about $46 billion, to bolster earnings, reap cost savings and be more competitive in key markets.
"The strategic rationale is compelling" as their businesses are complementary, James Shuck, an analyst at Citigroup Inc., said in a note to clients. "Any deal would be unprecedented in the industry, transforming global competitiveness."
Even if Allianz were to pay a 20% premium over Zurich's share price, the transaction could still boost the Munich-based firm's earnings by 10 percent, and offer an additional 10 billion euros in capital synergies, Shuck estimated.
Allianz, whose shares have dropped about 5% this year, hasn't made any formal approach to Zurich about a merger, the people said. Baete's focus is on implementing the "renewal agenda" that he put into place shortly after taking the helm in 2015, the firm's spokeswoman said.
The German insurer may need to look elsewhere for a willing partner, with Zurich executives including Chief Executive Officer Mario Greco publicly opposing big-ticket deals. Other targets Allianz has looked at include Australia's QBE Insurance Group Ltd., Bermuda firms Argo Group International Holdings Ltd. and Aspen Insurance Holdings Ltd., as well as London-based Aviva PLC and the asset-management arm of Sweden's Nordea Bank AB, the people said.
Representatives for Zurich, RSA, Hartford, Aviva, Aspen, Nordea Bank and QBE declined to comment, while spokesmen for Argo didn't respond to a call or email.
Baete is concerned about being left behind by both AXA and American International Group Inc. — which scooped up Validus Holdings Ltd. for $5.4 billion this year — and is keen to explore a transformative deal, according to the people. The 53-year-old, who'd also previously expressed his willingness to pursue takeovers, remains keen on bolstering his defenses in the property and casualty sector and the U.S. market, they said.
