Allianz SE agreed to buy two insurance businesses in the U.K. in deals valued at a combined $1 billion, transforming the firm into the second-biggest general insurer in the country.
The Munich-headquartered company agreed to acquire the general-insurance business of Legal & General Group Plc for 242 million pounds ($305 million), and said it would buy the 51% in LV General Insurance Group that it doesn’t already own, according to statements from Allianz and L&G.
The two deals will take the German firm’s share of the market for general insurance in the U.K. to 9%, with about 4 billion pounds in gross written premiums. Allianz Chief Executive Officer Oliver Baete has been exploring deals to grow and potential targets have included Zurich Insurance Group AG, Aviva Plc and RSA Insurance Group Plc, Bloomberg News reported last year.
L&G expects to complete the sale of its unit to Allianz in the second half, pending regulatory approval, it said in a statement on Friday. The 578-million-pound LV transaction will likely complete at the end of the year, Allianz said in a separate statement.
L&G said the disposal will allow it to concentrate on its core businesses of asset management and life insurance. The firm, which is the U.K.’s biggest money manager with assets of more than 1 trillion pounds, failed to make a profit from its general-insurance unit last year as a combination of flooding and a heat wave led to increased claims from people with home and contents policies.
“Last year we had the lot in terms of weather,” L&G’s corporate affairs director John Godfrey said in a telephone interview. “Heat waves are very bad for this business because you get subsidence as the ground dries up.”
The unit generated an average profit of 27 million pounds over the last three years. L&G may get further payments from Allianz over the next three years depending on the performance of the professional-indemnity book that the German insurer will run as part of the deal.
The head of Allianz’s U.K. business, Jon Dye, declined to say on a call with journalists on Friday how much money the company expects to save by combining L&G’s general-insurance division with its soon-to-be wholly owned LV division. Allianz will employ some 8,300 people in the U.K. once the deals complete, he said, without saying whether any jobs will be cut afterwards.
Allianz shares slipped 1.5% to 198.38 euros at 12:56 p.m. in Frankfurt.
(Updates with comments from Allianz’s U.K. head in penultimate paragraph.)
–With assistance from Christian Baumgaertel.