Allianz to Break Up Troubled Dresdner, Source Tells Reuters

March 14, 2008

Allianz is preparing Dresdner Bank for a break-up and possible sale, a source told Reuters on Friday, a move that could end the marriage of the bank and insurer which many investors wished never happened.

Allianz has hacked away billions of euros in overhead at Dresdner since buying it in 2001 in a 24 billion euro ($37.4 billion) deal a shareholder once described as the biggest disaster in German industrial history.

The architects of the takeover deal had hoped to sell bank accounts to Allianz customers as well as car insurance, for example, over the counter at branches.

Instead, Dresdner racked up losses of almost 3 billion euros as cross-selling floundered.

It then appeared to turn the corner with modest profits before market ructions pulled it back into the red again in recent months.

Now Europe’s largest insurer wants to split the business into two — a retail bank and a corporate bank that includes investment banking laggard Dresdner Kleinwort.

Dresdner’s supervisory board was due to decide on the move on Friday.

This could pave the way for a bank takeover, said the source who had direct knowledge of the matter. Germany’s biggest retail bank and Dresdner rival Postbank, is, for example, up for sale.

Allianz may also want to pursue the sale of the corporate bank, the source added. Dresdner declined to comment and Allianz could not immediately be reached.

The problems of the bank, whose green logo is a familiar sight on German television, tarnished Allianz’s image as an immovable financial powerhouse, dragging its share price down to less than a quarter of what it was.

Allianz shares fell 1.5 percent to 110.10 euros by 1453 GMT, slightly lagging European insurance peers, down 1 percent.

(Reporting by Patricia Nann; Editing by Jason Neely)

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