Pacific Life, Allianz Talk Possible Sale
Newport Beach-based Pacific Life Insurance Co., California’s largest insurance company, is in talks that could lead to it being sold to German insurance giant Allianz AG for more than $3 billion.
The company is Orange County’s largest privately held concern and one of its largest employers with 2,200 workers. It is also a leading corporate citizen, overseeing a $2.4 million charitable foundation that has provided support for such events as AIDS Walk Orange County and Race for the Cure.
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 L.P., also based in Newport Beach, which is 30%-owned by Pacific Life.
If the talks result in a sale, Pacific Life 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.
It isn’t clear what effect, if any, a potential sale would have on the company’s presence in Orange County. In its acquisition of Pimco Advisors, Allianz has said it will leave the company’s management and operations intact.
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.
Talks between Pacific Life and Allianz 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 agreements have been reached, according to the filing.
Pacific Life officials 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 about $400 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 its new acquisition 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 yet to list any shares.
Should Pacific Life be sold, analysts said, it is likely that Pacific Life’s policyholders--which currently own the insurance operations through a mutual holding company--would receive a share of the proceeds.
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.
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 NV paid $9.7 billion for San Francisco-based Transamerica Corp. French insurer AXA owns a majority stake in New York-based The Equitable Cos. and this year changed the U.S. insurer’s name to AXA Financial.
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Pacific Life Sale?
German insurance giant Allianz AG is in talks to acquire Newport Beach based Pacific Life Insurance Co. for as much as $3.6 billion. Here’s a look at the two companies.
ALLIANZ AG
Headquarters: Munich, Germany
Operations: World’s second largest insurer with about $400 billion in assets. The company’s 1998 profit of $2.02 billion was up 29% from a year earlier.
Leadership: Henning Schulte-Noelle, chairman of the board of management; Diethart Breipohl, chief financial officer.
Employees: 105,675
U.S. holdings: Fireman’s Fund Insurance Co., Novato; Allianz Underwriters Insurance Co., Burbank; Allianz Life Insurance Co. of North America, Minneapolis; Jefferson Insurance Co. of New York, New Jersey; Monticello Insurance Co., New Jersey
PACIFIC LIFE
Headquarters: Newport Beach
Operations: California’s largest life insurer; ranks 18th nationwide
Leadership: Chairman Thomas C. Sutton; President Glenn Schafer
Employees: 2,900 worldwide, 2,200 in Orange County
Total assets: $40 billion
1998 net income: $241 million
Source: Pacific Life Insurance Co., Times reports
