Allianz buys Swiss operation in DM6bn deal: Concentration of insurance market in Europe gathers momentum

FURTHER concentration among insurers, prompted by this summer's deregulation of the European market, came yesterday as Allianz strengthened its position in Switzerland and Italy. In a deal estimated to be worth DM6bn ( pounds 2.45bn), the German group took over several of the direct insurance operations of Swiss Re.

'This is a clever move that will strengthen Allianz's market leadership in Europe, plugging important gaps in its coverage,' Jurgen Pollmann of Bayerische Vereinsbank in Munich said.

On Thursday, UAP of France announced the takeover of the UK company Provincial Insurance for nearly pounds 300m.

Last year UAP won control of Germany's Colonia. 'They are shaping up to be the big rivals in Europe. UAP has always envied Allianz's position,' Angus Runciman of BZW in London said.

Swiss Re also sold other direct investment units in Spain and Italy to the Winterthur group of Switzerland. With the liberalisation of the European insurance market, Swiss Re, the world's second-largest reinsurance group, judged the investment costs of building up its direct insurance operations were too great and so decided to focus on core activity.

The company said it would use the 'considerable funds' from the divestments to strengthen its capital base and expand its reinsurance activities worldwide, especially in the US and Asia.

'The deregulation is giving a big push to concentration, as the bigger companies try to strengthen their pan-European reach and smaller businesses seek security in numbers,' Mr Pollmann said. Analysts placed a question mark over the high price paid by Allianz for its Swiss Re acquisitions. The price of shares in the German group dropped more than 5 per cent to DM2,230 in post- bourse trading in Frankfurt on speculation the insurer was going to raise fresh capital.

'The problem for the market is this deal may have a negative earnings impact and we could see some 1994/95 earnings forecasts revised downwards,' Wolfgang Sawazki of Trinkhaus Capital Management in Dusseldorf said. 'Also, there might be fears of a capital raising and that would not be favourable at the moment.'

Allianz said it was taking over Swiss Re's 60 per cent stake in Elvia, its 63 per cent stake in Lloyd Adriatico and its 100 per cent stake in the German health insurer Vereinte/Magdeburger.