Allianz forced into €5bn issue

The German insurer Allianz showed the strain of the impact of the global market downturn and its worst-ever losses yesterday, launching a deeply discounted rights issue to fortify its battered cash reserves.

Allianz's move to raise €5bn (£3.53bn) in new capital signals the dire financial state of the giant insurer. The group also indicated a willingness to sell parts of its ailing investment bank, Dresdner Kleinwort Wasserstein, as its incoming chief said there were "no taboos" for the business.

Analysts said the rights issue, which is underwritten at a minimum issue price of €30 a share, was a risky move in the current market. One said: "I wouldn't want to be asking shareholders for cash at the moment. They have the support of some of the major investors, but the world is very uncertain now."

The rights issue, which is due to be launched soon, is at a heavy discount to Allianz's shares, which closed at €65.55 on Wednesday, prior to the announcement of the capital raising. Yesterday they fell a further 10 per cent.

The capital-boosting measures come just six weeks before Michael Diekmann takes over as chairman of Allianz's board. Mr Diekmann attempted to strike an upbeat note about the future of the loss-making Dresdner business, saying: "We are convinced of the opportunities of a profitable investment bank free of burden of old liabilities. The priority today is returning investment and corporate banking at Dresdner Bank to profitability. We have the right management and the right business model."

Allianz revealed a record €1.2bn net loss for 2002, fuelled by €5.5bn of writedowns on equity investments and €1.4bn in banking losses.

Allianz's banking business proved a drag on group earnings, ending the year with a post-tax loss of €935m. Charges for bad debts rose to €2.2bn.

Deutsche Bank said it would fully participate in the rights issue, taking up 3.2 per cent of the shares on offer, but Germany's second-largest bank, HVB, which holds 4.6 per cent of Allianz, will not participate.