Pacific Life May Be Acquired by German Insurer
California’s largest insurance company, Newport Beach-based Pacific Life Insurance Co., is in talks that could lead to it being sold to German insurance giant Allianz for more than $3 billion.
The negotiations were disclosed Tuesday in a filing with the Securities and Exchange Commission and are separate from the pending $3.3-billion acquisition by Munich-based Allianz of Pimco Advisors Holdings, which is 30%-owned by Pacific Life.
Pacific Life, which is owned by its policyholders, could fetch between $3.1 billion and $3.6 billion, based on values of comparable life insurers, industry experts said. With about $40 billion in assets, Pacific Life is the nation’s 18th-largest life insurer and one of California’s oldest companies. It was founded in 1868 by some of the state’s business legends, including Leland Stanford, Charles Crocker and Mark Hopkins.
The company has about 370,000 policyholders and employs 2,900 worldwide, including 2,200 in Orange County.
Talks between the two companies began in April, as Allianz was expressing its interest in Pimco Advisors, the world’s largest bond manager, which was formed by Pacific Life. Allianz and Pacific Life have signed confidentiality agreements that enable them to review one another’s private business records, but no acquisition agreements have been reached, according to the filing.
Pacific Life executives declined to comment about the talks. In a prepared statement, spokeswoman Marie Connell said: “We are constantly researching and studying possible opportunities to better position our company for the future. Some of those possibilities might involve further corporate restructuring. We are frequently contacted by other companies, foreign and domestic, to discuss possible collaborative opportunities. It would not, however, be productive or beneficial for us to elaborate on such discussions when they occur.”
Representatives for Allianz could not be reached for comment Tuesday.
The SEC filing did not characterize or detail how a potential merger or other deal would be structured, but analysts said it was highly likely that Allianz--because of its size--would acquire Pacific Life, rather than the other way around.
“Also, I would think Allianz would be more interested in acquiring the entire company, rather than doing some kind of partnership,” said Ira Zuckerman, analyst at Nutmeg Securities in Westport, Conn.
Allianz, the world’s No. 2 insurer, has $360 billion in assets, not including the $250 billion in assets it will acquire after the Pimco deal.
The German company has operations around the world and has been eyeing the U.S. market for years. It also owns U.S. property and casualty insurer Fireman’s Fund and a small life insurance operation based in Minneapolis.
“This would be a nice fit,” said Russell Miller, chairman of Russell Miller Corporate Finance Inc., a San Francisco-based investment banker that specializes in insurance companies. He said Allianz would likely retain Pacific Life’s name and management, and operate it separately from Fireman’s Fund.
In 1997, Pacific Life joined a growing list of mutual life insurance companies that restructured themselves to allow for the issuance of publicly traded stock. But the company has not yet sold any shares because it says it hasn’t needed the money.
Depending upon how a deal is structured, Pacific Life’s policyholders--who currently own the insurance operations through a mutual holding company known as Pacific Mutual Holding Co.--might receive a share of the proceeds, analysts said.
In recent months, Pacific Life Chairman Thomas Sutton has not publicly indicated any interest in affiliating his company with a European partner, but he has frequently commented in the past on the rapid consolidation in his industry.
“Large mergers and frequent acquisitions of companies have become the norm,” he told policyholders in the company’s last annual report.
European takeovers of U.S. life insurers are increasingly common.
“There’s a growing globalization of the life insurance industry,” said Joseph Belth, insurance analyst and editor of Insurance Forum, an Indiana-based newsletter.
Lured by the large size, but relative fragmentation, of the U.S. life insurance market, several European companies have come shopping for their American counterparts in recent years.
Earlier this year, Dutch life insurance giant Aegon paid $9.7 billion for San Francisco-based Transamerica Corp. French insurer AXA owns a majority stake in New York-based Equitable Cos. and changed the U.S. insurer’s name this year to AXA Financial.
A potential merger between Pacific Life and Allianz would not affect the pending $3.3-billion sale of Pimco, which is expected to close early next year, according to the SEC filing.
In that deal, Pacific Life has opted to retain its 30% stake in Pimco, which would make it co-owners of the bond management company with Allianz.
