Deals will push Allianz to No 2 spot in UK general insurance
Purchases come as tougher capital rules prompt companies to sell assets and focus on growth areas
Frankfurt/London — Germany’s Allianz is buying businesses from insurer LV= and Legal & General that will make it Britain’s second-biggest general insurer behind Aviva in deals that could top £800m.
The deals will boost Allianz’s UK premium income to more than £4bn and its market share to 9% and come as tougher capital rules prompt companies to sell assets and focus on growth areas.
Allianz said on Friday that its UK unit would pay up to £578m for the remaining 51% stake in its LV GIG joint venture with Liverpool Victoria Friendly Society.
It said it would pay an initial £242m for the general insurance business of Legal & General. A spokesperson said this could rise to closer to £300m.
Expected to be completed by the end of 2019, the deals will place Allianz among the top four home insurers and give it 12-million UK general insurance customers, it said.
“With these two transactions, we are pleased to demonstrate our further commitment to the UK market,” said Allianz management board member Niran Peiris.
Allianz shares were down 1.2% on Friday morning, in line with the broader insurance sector, before ending 1.24% weaker on the day. Shares in L&G lost 1.31% on Friday.
“Both deals seem to us financially and strategically sensible. They show that Allianz is still deploying capital but perhaps without the grand ambitions that some were fearing last year,” KBW analyst William Hawkins said in a note to clients.
L&G’s decision to shed the “G” part of its name marks the end of a series of disposals for Britain’s third-biggest insurer.
“This appears to largely complete L&G’s disposal programme of the last few years, leaving the company primarily focused on annuity, life protection and asset management. We see this as a positive,” KBW analyst Greig Paterson said in a note to clients.
The bulk of the business being bought concerns home insurance, with a small book of pet insurance. L&G said it would retain the profit from a separate book of business including professional indemnity insurance, which Allianz is not acquiring.
The deal is expected to increase L&G’s solvency II ratio, a key measure of its capital strength, by two percentage points, it said in a statement.
“Selling the General Insurance business is the right decision for our customers and shareholders,” L&G CE Nigel Wilson said.
“We continue to focus on delivering against our strategy, allocating shareholders’ capital rigorously. We are market leaders in 10 UK markets and have a growing presence in the USA and an emerging presence in Asia. Deploying capital in these businesses will deliver better outcomes for all our stakeholders.”
LV=, which also said it wants to use the money to help expand its life insurance business, said it would disclose the impact on its capital position later in the year.
“We have successfully grown the value of our general insurance business to in excess of £1bn and this deal enables us to realise that value for the long-term benefit of our members as well as strengthening our overall capital position,” group CEO Richard Rowney said.