Allianz lines up bid for Equitable Life to strengthen UK base

Allianz, Europe's biggest insurer, is preparing to enter the bidding for Equitable Life, the long-term savings group which was forced to seek a buyer after losing a landmark ruling in the House of Lords over pension rights earlier this year.

Allianz, Europe's biggest insurer, is preparing to enter the bidding for Equitable Life, the long-term savings group which was forced to seek a buyer after losing a landmark ruling in the House of Lords over pension rights earlier this year.

Analysts said that Allianz may seek to finance the £1.5bn annuities "black hole" left in Equitable's books by the ruling through a reinsurance deal enabling it to match the £3bn-£4bn Equitable Life's advisers Schroder Salomon Smith Barney are believed to be seeking for the group.

The Prudential and CGNU, Britain's two biggest life insurance players, are both understood to be looking closely at Equitable and are likely to table bids for the group.

Bankers said that Allianz would find it harder to finance a bid than an established UK life player which could subsidise the purchase from the surplus assets on its life fund.

However, Allianz is understood to be increasingly concerned at the weak competitive position in the UK of Cornhill, its existing UK operation which has been left behind by the wave of consolidation that has swept through the UK life and general insurance industry. This may make it more ready to pay up than it has in previous situations. The group is expected to switch its attention more fully to the UK when it completes a series of deals to expand its fund management presence in the US.

Allianz is in early takeover talks with Franklin, which runs the Templeton fund management group and three other US asset management groups. The talks follow the acquisition by Allianz earlier this year of Pimco, one of America's biggest fixed income managers for $3.3bn. This has left a gap in the management of equities in the US. Franklin has $236bn of assets and could be worth up to $10bn based on analysts expectations that it could fetch some 5 per cent of assets. Allianz is also understood to be talking to Waddell & Reed Gabelli Asset Management and Nicholas-Applegate. Waddell has $40bn under management. Gabelli has about $23bn. Nicholas-Applegate has $45bn.

Bankers said that Allianz is keen to acquire equity asset management expertise. But has realised that it is unlikely to find one single fund manager big enough on its own to fulfil its ambitions.