Allianz seeks buyers for South Korean insurance unit-sources

TONGYANG Life Insurance

24/02/2016 07:01

By Denny Thomas 
    HONG KONG, Feb 24 (Reuters) - Europe's largest insurer 
Allianz  ALVG.DE  has put its South Korean life insurance 
business on the block as part of a global overhaul in a tough 
low-interest rate environment, sources with direct knowledge of 
the matter said. 
    The South Korean asset is attracting interest from Chinese 
names such as Anbang Insurance Group and Fosun International 
 0656.HK  who are considering bidding, said the sources. One of 
the people said the asset is valued at $500 million. 
    U.S. insurer Prudential Financial  PRU.N  and domestic South 
Korean financial institutions are also examining making a bid, 
one of the sources said. The sources declined to be named 
because the talks are confidential. 
    An Allianz spokesman declined to comment on whether the 
Korean operations are up for sale. Fosun and Anbang declined to 
comment. Prudential Financial did not offer an immediate 
comment. 
    Allianz's planned sale, which comes as a number of European 
financial players are cutting back in Asia, is one of the steps 
with which CEO Oliver Baete is preparing the German insurer for 
a "perfect storm" caused by low interest rates, tighter 
regulation, weak economic growth and geopolitical risks. 
    Last week, Allianz missed analysts' forecasts with a 6.6 
billion euro ($7.3 billion) net profit for 2015, which Baete 
partly blamed on a 171 million euro goodwill writedown the 
company took in the fourth quarter on its Asian life operations, 
the majority of which is in Korea.  urn:newsml:reuters.com:*:nL8N15Y0JC 
     
    CHALLENGING MARKET 
    South Korea has proved to be a challenge for several foreign 
financial institutions, with marquee global names, including ING 
 ING.AS , HSBC  HSBA.L  and Standard Chartered  STAN.L , cutting 
their exposure to the market in recent years. 
    Zurich Insurance Group  ZURN.VX  is also reviewing its Asia 
strategy and exploring the sale of its Hong Kong and Singapore 
businesses, Reuters reported this week.  urn:newsml:reuters.com:*:nL8N162497 
    Allianz has a large operation in South Korea. It reported 
1.6 billion euros in statutory premiums and an operating loss of 
51 million euros in South Korea in 2014, according to the 
group's 2014 annual report. 
    Allianz operates in 14 Asian markets, providing property and 
casualty insurance. But the bulk of the company's life and 
health insurance policies are underwritten by its South Korean 
unit. 
    Besides the South Korean unit, some analysts have identified 
Allianz's Taiwanese life business as underperforming. 
    CEO Baete pointed out in the annual results press conference 
last week that Korea and Taiwan were markets where high interest 
rate guarantees were given in the past that were no longer 
economically serviceable. 
    "And it's not only about profitability, this is often 
misunderstood," Baete told the news conference, adding that 
Europe's new Solvency II rules required insurers to set aside 
more capital as a buffer to cover interest guarantees, prompting 
Allianz to take a harder look at long-term revenues versus costs 
for those products. 
 
 (Reporting by Denny Thomas; Additional reporting by Jonathan 
Gould and Carolyn Cohn; Editing by Lisa Jucca and Muralikumar 
Anantharaman) 
 ((denny.thomas@thomsonreuters.com; +852 2843 6358; Reuters 
Messaging: denny.thomas.thomsonreuters.com@reuters.net)) 
 
Keywords: ALLIANZ SALE/