Allianz has decided to make good on a promise to return unused funds from its acquisitions budget to shareholders through a €3-billion buyback program, a first in the company's history and a move that suggests the German insurer isn't planning a major acquisition any time soon.
The buyback program will begin Friday and run for up to 12 months. The full implementation of the program is dependent on Allianz maintaining a Solvency II ratio – a measure of its financial health – of 160 percent, the company said in a statement Thursday evening.
The decision comes as Allianz, Europe's largest insurer by revenue, has struggled to find a suitable major partner to acquire. Chief Executive Oliver Bäte has been looking for a merger possibility for much of the past year, going as far away as Australia to do it.
With Thursday's announcement, which preempted an annual press conference by the company planned for Friday morning, Mr. Bäte was meeting a pledge made by his predecessor Michael Diekmann, who at the end of 2014 declared the insurer would hand back any money set aside for acquisitions every three years.
The insurer also surprised investors by releasing its full annual results Thursday night, though the results fell into the background given the unexpected buyback announcement. Allianz's operating profit climbed 0.9 percent to €10.8 billion ($11.52 billion) in 2016, which is on the higher end of what analysts had expected. Net profits came in at €6.9 billion for the year, up 4 percent. The insurer also announced its dividend payments will rise to €7.60 per share for 2016 from €7.30 the previous year.
Given the shaky environment for insurance firms these days, Mr. Bäte didn't discount a decline in earnings this year. Allianz set a target for operating profit of €10.3 billion to €11.3 billion for 2017.
"The year was filled with surprises, not all of them welcome, that challenged many assumptions, fueled geopolitical uncertainty and market volatility, and that make 2017 difficult to predict," Mr. Bäte said in a statement.
Allianz’s executive board and non-executive supervisory board have also decided to loosen rules for paying equity back to shareholders. The repayment of equity will no longer be tied to the company’s unused acquisition budget.
Carsten Herz is Handelsblatt's insurance correspondent based in Frankfurt. Christopher Cermak and Spencer Kimball are editors with Handelsblatt Global. To contact the authors: [email protected] and [email protected]