Allianz Boosts Spanish Presence With Banco Popular Joint-Venture
25 March 2011 - 4:14AM
Dow Jones News
Allianz SE's (ALV.XE) newly formed joint venture with Banco
Popular Espanol SA (POP.MC), Spain's third-largest bank by total
assets, puts the German insurer's Iberian operations on a stronger
footing, with a more efficient structure and better growth
potential, analysts said Thursday.
"Both companies stepped up their commitment by agreeing on a
long-term sales cooperation, and they are adding asset management
to the cooperation, which makes the sales platform bigger and makes
a better sales momentum more likely," said Commerzbank analyst
Roland Pfaender.
Allianz, Europe's largest primary insurer by gross premium
income and total assets, said Thursday it will form a new joint
venture with Banco Popular, managing around EUR11 billion in assets
on a newly-created platform known as Allianz Popular, gaining
access to 6.3 million customers and Banco Popular's network of
2,224 retail branches.
The venture, which bundles three existing joint ventures under
one roof, offers long-term exclusive distribution of Allianz's life
insurance, pension plans and asset management as well as property
and casualty insurance in Spain for an initial term of 15 years. It
also includes Banco Popular's banking products.
Allianz will hold 60% of the new venture. Both companies will
combine interests in various units, and the total value of the
businesses involved is EUR1.06 billion.
Allianz paid EUR185 million in the deal, in which it increased
stakes in some existing joint ventures and added the asset
management joint venture. The price is equivalent to around nine
times the business's 2010 price-to-earnings ratio, which analyst
Pfaender was "reasonable."
He said that "positive consolidation effects could trigger a
one-time consolidation profit of EUR100 million for Allianz," and
that the deal would improve the capital allocation for both
partners--an important factor considering that regulatory capital
requirements are becoming tougher for both industries.
JP Morgan analyst Michael Huttner said both companies are
benefiting from the deal, which will be slightly lift Allianz's
earnings, and should boost Banco Popular's Tier 1 capital
substantially.
In 2010, Allianz's Spanish operations contributed EUR2.94
billion, or 2.8%, to the group's overall revenue of EUR106.5
billion. They also contributed EUR395.3 million, or 4.8%, of the
group's 2010 total operating profit of EUR8.2 billion.
Of the revenue figure, EUR405 million came through Banco
Popular. The rest was through 11,000 insurance agents, brokers and
on-line.
Analyst Pfaender said the Spanish business was "relatively
profitable, although Spain is a difficult market." Allianz said in
a recent analyst presentation that contract renewal rates in its
Spanish property and casualty insurance business are expected to
remain flat this year. Still, the business reported a combined
ratio of 90.3% for 2010, the best in a sample of 11 countries.
JP Morgan's Huttner said Allianz's Spanish life business is
substantially more profitable than the rest of the group's life
operations, and that life and pension products are mainly sold
through banks in Spain.
Allianz in Barcelona and Munich said the joint venture is only
for the Spanish market. Although it could at some point be expanded
to other countries where both partners operate, such as Portugal
and Brazil, that's "currently not in the pipeline," a spokeswoman
said.
In Spain, growing through the joint venture and organically are
Allianz's priorities, said a spokeswoman.
A Spanish newspaper reported earlier this week that Banco
Santander SA (STD) wants to sell a 51% stake in its Spanish
insurance and pensions unit worth EUR3 billion to a large foreign
insurer, citing unnamed sources.
An acquisition of that size would be feasible for Allianz, but
the company would probably rather buy a property and casualty
insurer, which quickly generates cost and revenue synergies, than
make an acquisition in life and pensions insurance, Pfaender said.
He said that Allianz recently issued EUR2 billion in hybrid debt,
which could help finance an acquisition.
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com