Munich Re, the world’s second-largest resinsurer after Swiss Re, is exploring ways to merge its asset management unit Meag with Guggenheim Partners in the US, according to a person familiar with the talks. The combination of Meag’s €250 billion ($290 billion) assets under management would double the size of the US money manager.
The talks, first reported by the Wall Street Journal, are in a preliminary stage. One option would be to fully merge the asset managers, with Munich Re acquiring a stake in privately held Guggenheim. The US firm has approached a number of European and Asian insurers and other money managers in an effort to increase its size and to diversify geographically, Bloomberg reported, citing sources.
“A deal with Munich Re’s asset manager could make sense,” said Michael Haid, an analyst at Commerzbank. Guggenheim and Meag would have a lot of synergies and they are about the same size, he said.
The Meag unit, which manages the proceeds Munich Re generates from its insurance sales, is relatively small, limiting the investments it can undertake. Munich neighbor Allianz, for instance, has some $1.77 trillion under management at its Pimco unit, enabling it to take part in large infrastructure projects that can be much more remunerative. Allianz Global Investors manages an additional €500 billion.
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Munich Re and Meag declined to comment, while a Guggenheim spokesperson said the company was “from time to time” in talks about investment proposals. An industry insider said the talks between Munich Re and Guggenheim were at a very early stage and they were not an indication that there were concrete plans to merge operations.
Although asset management is considered a core business for insurers as they seek to match investment returns with potential liabilities, the current low interest rate environment is challenging. Allianz’s Pimco suffered for a while during a dispute with company founder Bill Gross, and just now is attracting fresh funds again. Europe’s second-biggest insurer, Axa, listed its US insurance business Axa Equitable Holdings last month, including its investment unit AllianceBernstein.
Although Munich Re’s business took a hit from hurricanes and other natural disasters last year, its capital position would allow it to buy businesses. “Our strong balance sheet will allow growth, either organically or through acquisitions,” CEO Joachim Wenning said at the annual shareholders meeting in April.