Munich A few days after the takeover of the Polish business from the British competitor Aviva, there is speculation at Allianz about a mega takeover. According to rumors, Europe’s largest insurer is currently exploring an offer for the US insurer Hartford at a very early stage.
At the moment, consultants were being discussed about the possibility of taking over the American property and casualty insurer, according to US circles. The Bloomberg agency reported on it first. Allianz did not want to comment on the rumors.
According to insiders, however, the purchase is unlikely. Hartford had already rejected a takeover offer from US insurer Chubb in the amount of 23 billion dollars (19.5 billion euros) last week.
For Allianz, a takeover would be tantamount to a shift in strategy. So far, the Munich insurer has generally considered acquisitions to be possible, but CEO Oliver Bäte has always focused on small and regional acquisitions.
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The takeover of Aviva’s Polish business, which only became known on Friday and for which Allianz is paying 2.5 billion euros, also fit into this scheme. So far, the group in Poland was only a small player in the local insurance market.
Hartford takeover would be a completely different order of magnitude
A possible takeover of the property and casualty insurer Hartford, however, would be a completely different order of magnitude and anything but easy for the financially well-funded Allianz to manage. A look at the annual reports of the past few years shows that.
On average, the three units of property / casualty insurance, life / health insurance and asset management generated a cash flow of 7.5 billion euros over the past three years. In the Corona year 2020, however, it remained below 7.3 billion euros. This amount actually earned and freely available will, however, be reduced by the announced dividend payment of a good four billion euros. Only the rest of around 3.5 billion euros would be available for acquisitions.
The major part of a possible purchase in the order of magnitude of 20 billion euros or more would therefore have to be raised in the context of a very complex financing through own funds and external financing. This in turn would have a negative impact on Allianz’s solvency ratio, depending on how it is structured. At the turn of the year it was 207 percent after 212 percent a year earlier. In a simulated extreme scenario, the alliance could raise more than double the necessary funds.
So far, the internal goal has been that the solvency ratio of Allianz should be over 180 percent. In order to be as solidly positioned as possible here, the group stopped a share buyback program that had already been initiated last April. Since 2017, the group had acquired own shares worth 8.2 billion euros in a total of five programs.
A possible takeover of the US insurer Hartford would also significantly shift Allianz’s operational focus. Europe and the USA would thus be the main regions, and the repeatedly announced shift in business towards the future markets in Asia would take a back seat.
Most recently, after initial difficulties, the group had achieved considerable success, especially in China. The number of life insurance policies concluded there rose by around 50 percent last year.
Oliver Bäte is skeptical of large takeovers
It was only in February that Allianz boss Bäte was critical of a possible large takeover. “We are not planning a 100 billion acquisition,” he replied to a relevant question. Even if Allianz were to take over the US insurer Hartford, it would be a long way off from such a dimension, but it is known that Bäte also views such dimensions with skepticism.
In recent years, takeovers at Allianz have ranged from several hundred million to the low single-digit billion range. The good half-dozen acquisitions that Allianz has made over the past few years in Great Britain, Brazil, Australia and most recently in Italy and Poland fit exactly into this pattern.
Accordingly, investors dealt with the rumors on Monday. Like the market as a whole, Allianz shares gained around half a percent in value.
More: Allianz takes over Aviva subsidiary – and buys into the growing Polish market.