Allianz SE named board member Oliver Baete to succeed Michael Diekmann as chief executive officer as Europe’s biggest insurer grapples with upheaval at Pacific Investment Management Co. (Pimco)
Diekmann, 59, will stay on until Allianz’s next annual general meeting in May when Baete, 49, takes over, the Munich- based insurer said in a statement today.
Investors have pulled billions of dollars from Pimco’s funds since Allianz said on Sept. 26 that Pimco Chief Investment Officer Bill Gross was joining Denver-based Janus Capital Group Inc. Analysts at Deutsche Bank AG were among those predicting outflows of more than $200 billion.
Shares of Allianz, which has owned the world’s biggest mutual fund since 2000, fell the most in almost three years on the day Gross’s departure was announced, wiping out €3 billion ($3.8 billion) of the company’s market capital.
“The first challenge for the new CEO will be to get Pimco back on track and stem its outflows,” Werner Schirmer, an analyst with Landesbank Baden-Wuerttemberg who recommends investors hold Allianz shares, said by phone from Stuttgart. “That’s a difficult job — they’ve acted so independently for so long.”
Allianz’s shares fell 0.1 percent to €127.2 [$161.01] at 3 p.m. in Frankfurt, extending losses this year to 2.3 percent and valuing the company at €57.6 billion [$72.91 billion]. The Bloomberg Europe 500 Insurance Index slid 0.5 percent.
Baete serves as board member responsible for global property and casualty insurance, and insurance in western and southern Europe. He also worked as chief operating officer and chief financial officer since joining from McKinsey & Co. Inc. in 2008.
Allianz’s management is seeking to reassure the company’s biggest investors, who include BlackRock Inc. and Deutsche Bank AG, that it can contain the damage from the abrupt departure of an industry legend who helped build Pimco into one of the world’s largest fixed-income investment managers. Moody’s Investors Service said today higher outflows at Pimco will mean lower profits for Allianz. The firm, which manages almost $2 trillion in client assets, provides a quarter of Allianz’s operating profit.
Even before Gross’s departure, Pimco was raising eyebrows among investors in Allianz. Gross’s flagship Total Return Fund has seen outflows for 17 straight months through August, among Pimco funds that have underperformed peers. In January Pimco was forced to reshuffle its management team after former CEO Mohamed El-Erian left the firm.
Pimco is also under scrutiny from the U.S. Securities and Exchange Commission over how the firm assigned asset prices at Gross’s Pimco Total Return Exchange-Traded Fund.
Diekmann told analysts earlier this week that Allianz remains committed to Pimco, acquired in 2000. Wemmer, speaking in the same conference call, said Allianz’s full-year operating profit forecast for the year hasn’t changed. Within hours of Gross’s exit, Pimco announced that Daniel Ivascyn, one of six deputy CIOs appointed after El-Erian’s exit, will replace Gross as chief investment officer.
Apart from stabilizing Pimco, challenges for Allianz’s top managers include coping with lower returns from low interest rates. Like most insurers, Allianz has most of its investments in fixed-income such as government, corporate and covered bonds. And the company is revamping Fireman’s Fund, its property & casualty business in the U.S. that has struggled to remain profitable.
Allianz is also under pressure from investors including Union Investment in Frankfurt to pay out a higher share of its profits as dividend than the 40 percent of profit typically distributed in the past.
“The fact that Baete was one of the candidates was long known,” said Thomas Seidl, a London-based analyst with Sanford C Bernstein. “The question is: is this the right moment.”
Baete was born in Bensberg, Germany and has an MBA from the Leonard Stern School of Business, New York University. He served as COO after joining in 2008 and became CFO in 2009.
Diekmann has led Allianz since 2003, as the insurer posted its first annual loss since World War Two on equity write-downs and mounting bad loans at Dresdner Bank, the Frankfurt-based lender acquired in 2001. He returned the company to profit and orchestrated the emergency sale of Dresdner in August 2008, just weeks before the Lehman Brothers debacle.
Chief Financial Officer Dieter Wemmer will remain until 2017, Allianz said today.
–With assistance from Nicholas Comfort in Frankfurt.
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