Chubb Ltd’s $23bn takeover offer for Hartford Financial Services Group Inc has prompted Germany’s Allianz SE to study the feasibility of a counteroffer, according to people familiar with the matter.
Europe’s biggest insurer is discussing its options with potential advisers, said the people, asking not to be identified because the discussions are private. While Allianz views Hartford as one of the remaining property and casualty insurance targets with scale in the US, it’s also reluctant to enter into a pricey bidding war with Chubb because of a lack of synergies between the two, the people said.
Deliberations are in an early stage and Allianz could likely decide against pursuing a deal, which would be transformational for the German financial giant that has mostly staid away from mega transactions, the people said.
Representatives for Allianz and Hartford declined to comment on the story.
Markets are overreacting to the threat of the rapidly spreading coronavirus and the global economy will only see a short-term impact, Baete said during the interview.
In spite of its dominance in Europe, Allianz has a relatively small footprint compared with Chubb or other peers in the world’s largest economy. A combination of Chubb and Hartford could further marginalise the German insurer in the US, which like other insurance companies, is battling low interest rates, slowing growth and Covid-related business costs.
Among other European insurers, Zurich Insurance Group AG isn’t currently considering such a deal, according to a person familiar with the matter. The Swiss insurer agreed in December to buy MetLife Inc’s US property and casualty business for $3.94bn. A spokesperson for Zurich declined to comment.
Hartford rejected Chubb’s proposal earlier in the week, putting pressure on Evan Greenberg to sweeten the offer. A post-bid jump in its stock has pushed Hartford’s market value to $24bn as of Friday’s close. Chubb has a market cap of $71.9bn, while Allianz is worth €87.9bn ($103.7bn).
Mergers and acquisitions among property and casualty insurers have been active in recent years. It’s the biggest sector within insurance, and life coverage has fallen out of favour with many groups due to low interest rates and higher capital requirements.
Allianz’s chief executive officer Oliver Baete has largely avoided major acquisitions since taking the helm. Still, he’s been seeking new avenues of growth, including a €2.5bn deal in the past week to acquire Aviva Plc’s Polish life insurance business.
The German company did pursue a takeover of property and casualty insurer XL Group Ltd in 2018 before losing out to France’s Axa SA, which paid over $15bn for the asset.
Allianz has a life-insurance business in the US and is mainly serving large companies in the country in the property and casualty space. It also owns US bond asset manager Pacific Investment Management Co or Pimco. Buying Hartford could help expand the business with smaller corporations, and any deal could also help make consolidation easier in the future through synergies.
Among the financing options for such a deal include a capital increase, raising debt and offering stock. The insurer also has excess cash and could lower the amount of its annual dividend or buyback. In November, Allianz cancelled a share buyback program that it had suspended earlier in the year as the hit from the Covid-19 pandemic continued to mount.
There’s also history with Hartford. The US company turned to Allianz for capital in 2008, agreeing to pay 10% on $1.75bn of debt as capital markets froze.