Allianz agreed to buy two insurance businesses in the UK in deals valued at a combined $1 billion, transforming the firm into the second-biggest general insurer in the country.
The Munich-headquartered company agreed to acquire the general-insurance business of Legal & General for $305 million, and said it would buy the 51 per cent in LV General Insurance, according to statements from Allianz and L&G.
The two deals will take the German firm’s share of the market for general insurance in the UK to 9 per cent. Allianz chief executive Oliver Baete has been exploring deals to grow and potential targets have included Zurich Insurance, Aviva and RSA Insurance, Bloomberg reported last year.
L&G expects to complete the sale of its unit to Allianz in the second half, pending regulatory approval, it said in a statement on Friday. The LV transaction will likely complete at the end of the year, Allianz said in a separate statement.
L&G said the disposal would allow it to concentrate on its core businesses of asset management and life insurance. The firm, which is the UK’s biggest money manager, failed to make a profit from its general-insurance unit last year as a combination of flooding and a heat wave led to increased claims from people with home and contents policies.
“Last year we had the lot in terms of weather,” L&G’s corporate affairs director John Godfrey said in a telephone interview. “Heat waves are very bad for this business because you get subsidence as the ground dries up.”
The unit generated an average profit of $34m over the last three years. L&G may get further payments from Allianz over the next three years depending on the performance of the professional-indemnity book that the German insurer will run as part of the deal.
The head of Allianz’s UK business, Jon Dye, declined to say on a call with journalists on Friday how much money the company expects to save by combining L&G’s general-insurance division with its soon-to-be wholly owned LV division. Allianz will employ some 8,300 people in the UK once the deals complete, he said, without saying whether any jobs will be cut afterwards.
