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Allianz Buys Turkish Insurer

Source: WSJ

Posted on 27 Mar 2013 by Neilson

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AllianzAllianz SE, Europe's largest insurer by market value, is buying 94% of a Turkish insurer and will partner with the firm's banking parent to try and take advantage of Turkey's young, fast-growing population to boost sales of insurance, retirement and asset-management products.

Germany-based Allianz said Wednesday it would pay about €684 million ($878 million) for the stake in Yapi Kredi Sigorta, which is the insurance business of Yapi Kredi Bank —Turkey's fourth largest private bank by assets. As part of the deal, Allianz will also get 80% of the Turkish bank's pensions business Yapi Kredi Emiklilik.

The deal is expected to be completed by in the second half of this year and Allianz plans to launch a tender offer for the remaining 6% in Yapi Kredi Sigorta shortly thereafter.

Allianz, like many peers, is under pressure to find business opportunities outside established markets, which are suffering from aging populations, low economic growth rates and prolonged low interest rates in the wake of the euro-zone crisis.

Turkey, with a population of around 75 million people—just below the size of Germany—and more than half the population under 30, a fast-growing economy and middle class, offers promising business opportunities.

DZ Bank analysts said they considered the transaction a "smart deal," because Allianz will become one of the market leaders in an evolving insurance market, and the 15-year agreement with Yapi Kredi would give the German company exclusive access to Turkey's fifth-largest banking network with 6.5 million customers.

As a result of the deal, Allianz said it would gain the top market position in property and casualty insurance in terms of premium revenue and would become No. 3 in life insurance and No. 2 in the Turkish pensions market. Allianz was already Turkey's No. 3 in nonlife insurance, No. 10 in life insurance and No. 7 in pensions.

Analysts at Berenberg said they consider Turkey to be an attractive market, that the price paid can be considered "sensible" and that synergies, notably from combining the nonlife operations—which have yet to be quantified—should make the transaction even more attractive. "We do not consider that Allianz had to overpay," the analysts said.