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Allianz CFO: Up to €3B available for acquisitions, but only until year-end


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Allianz CFO: Up to €3B available for acquisitions, but only until year-end

has a €2.5 billionto €3 billion budget to spend on acquisitions within the eurozone, but willreturn the cash to shareholders if it does not identify any suitable takeovertargets by the end of the year, CFO Dieter Wemmer told the Börsen-Zeitung.

Inan interview published July 16, Wemmer said that although the German insurerhas room for growth in most European markets, it is particularly keen onpurchases in France and Spain, where its market share leaves it short of the10% level needed to be well-positioned in the long term, especially in times ofcrisis. He noted that since 2013, Allianz has allocated €1.2 billion a year forpotential purchases, building up a war chest that it has struggled to find usesfor.

"It'snot like someone calls every week to sell a company," Wemmer said.

Wemmersaid acquisitions are the "only way forward" for Allianz to gainmarket share, given that the EU does not have a clear strategy to improve onits "marginal growth" and avoid a "Japan scenario" of lowinterest rates and zero growth. But the fact that European insurers choose toremain independent suggests they "don't feel under that much pressure,"he added.

Europe and the UK

Wemmersaid Allianz is unlikely to be affected by the or to suffergreatly from Brexit,as its U.K. subsidiary is a separate legal entity. He said that even though"there is no alternative to the EU," markets had exaggerated fearsover Brexit.

Negativenear-term consequences of the vote are likely to be limited to currency effectsand a possible impact on volumes in the event of slower GDP growth, Wemmersaid. Allianz's London-based asset management business may suffer once Brexithas been negotiated, he added, although the effect would "not bedramatic."

Wemmeralso said the volatility sparked by Brexit is "a good test" to seewhich companies are well-positioned in terms of risk management, and hesuggested that the EU may have to be reformed to, for example, convince thegeneral public to view the European Commission as more than a"bureaucratic juggernaut." And in a scathing aside, he said formerBritish Chancellor George Osborne's plan to turn the U.K. into "the mosttax-friendly and productive country in Europe" would work only "ifthe EU is willing to accept 25 million [British] people [from outside London]as economic migrants."

Combined ratio

Allianzhas set a 2018-end target of a combined ratio no higher than 94% in itsproperty and casualty business, a benchmark Wemmer said is already being met orexceeded by the divisions in Germany, Italy, Switzerland and Spain. But thecompany's Latin American businesses have work left to do, he added.

InArgentina, Allianz had been "too optimistic" about increasingprofitability through organic growth and now has to reduce its portfolio,Wemmer said. The company's Brazilian unit, meanwhile, "put [itself] in adifficult position due to some mismanaged projects," and the economicuncertainty in the country means that it will take two or three years torectify the issues.

Excludingthe positive effects of a recent decline in natural catastrophe-related claims, Allianzneeds to reduce its combined ratio by 1 percentage point on average across allbusinesses to meet the 94% target, Wemmer said. But the overall combined ratiois likely to remain flat in 2016, partly because of the negative impact of theLatin American units.

Allianzbooked a P&C combined ratio of 94.6% in 2015, up from 94.3% in 2014.

Allianz'sother targets include annual productivity gains of €1 billion from 2018 onwardand an ROE of at least 10% in the life and health insurance segment. Theproductivity gains will require job cuts, Wemmer said, adding that these willmainly be achieved through natural attrition. The life and health ROE targetwill not prompt the sale of any subsidiaries, he added.

Wemmer,who recently joinedthe supervisory board of UBSGroup AG, also told the newspaper that Allianz might stop reportingfirst- and third-quarter figures in future, as permitted under recentregulatory changes.