CEO change

So Long, Farewell, Auf Wiedersehen, Adieu

Diemann dpa
Bye bye, it's been swell. Michael Diekmann will retire from Allianz sooner than some expected.
  • Why it matters

    Why it matters

    Allianz assured investors its U.S. business was under control after its asset management unit Pimco was rocked by the departure of Bill Gross. A few days later, the Allianz chief executive announced he too was stepping down.

  • Facts

    Facts

    • Allianz is Europe’s biggest insurance group.
    • Michael Diekmann turns 60 in December 2014 and will resign as Allianz CEO next May.
    • His replacement, Oliver Bäte, joined Allianz in 2008 and has served as CFO and COO.
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    Audio

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Germany’s biggest insurance company said Thursday that its chief executive Michael Diekmann will step down in May.

Gary Bhojwani, who is responsible for the group’s insurance operations in the U.S., and Clement Booth, who covers global insurance line operations, will leave in December.

The move comes as investors withdrew billions of funds from Allianz’s flagship investment company Pimco after its star manager Bill Gross quit abruptly at the end of last month.

Allianz shares fell slightly, down 0.6 percent from 127.15 euros in the morning, to 126.55 euros.

Pimco said it lost $23.5 billion, or 10 percent of its assets, in September, with the outflow spiking in the hours after Mr. Gross announced his resignation and move to rival Janus Capital. In January, Pimco’s co-chief executive Mohamed El Erian left the company, ostensibly to spend more time with his family.

Mr. Bäte will be only the 10th CEO at Allianz since it was founded in 1890. In the group’s Munich headquarters, they like to point out there have been more popes in this period.

Mr. Diekmann turns 60 on the 23 December, the standard retirement age for management at Allianz, but many in the industry had expected his contract to be renewed for at least one, or probably two, years.

Allianz said in a statement that it had “agreed to the request” of Mr. Diekmann and Mr. Booth to not extend their board appointments between the age limit of 60. It added that Mr. Bhojwani, who is 46, will leave on December 31 2014 “upon mutual agreement and in keeping with his request.”

Analysts at the Baader Helvea bank said in a research  note  that “although some investors would have liked Mr. Diekmann to stay at least for another year following the challenges at Pimco with the departure of both Mr. El-Erian and Mr. Gross, we believe today’s announcement leaves enough time to ensure a smooth transition.”

The bank maintained its “buy” rating for Allianz shares.

 

baete
Oliver Baete, who will succeed Mr. Diekmann. Source: DPA

 

Mr. Diekmann will be replaced by Allianz board member Oliver Bäte, who is currently responsible for Western and Southern Europe. Allianz is slow to change its leaders: Bäte will be only the 10th CEO at Allianz since it was founded in 1890. In the group’s Munich headquarters, staff like to point out there have been more popes in this period.

Mr. Bäte is widely perceived to be the current chief executive’s preferred candidate to succeed him and his role as head of the West and Southern Europe business was seen as grooming him for the top job.

“We would like to see a more open commitment to keeping a stable dividend. Investors put a premium on that now.”

Craig Bourke, Insurance analyst, Whitman Howard

The former McKinsey man is regarded as very ambitious, a “doer,” which means that he has also made some enemies in the company. He is also well known to investors, primarily because as financial officer he was responsible for announcing the company results.

“Oliver Bäte was our favorite for the CEO post,” said Werner Schirmer, an analyst at Baden-Wüttermberg based bank LBBW. “It is not just a question of his competence but also his age that makes him the right choice. After the departure of Bill Gross, however, Pimco is already going to be his first big challenge – if their problem of the massive outflow of funds is still a problem when Michael Diekmann steps down.”

Mr. Diekmann took control of Allianz in 2002 after his predecessor Henning Schulte-Noelle left the insurer with a loss of €1.2 billion, low capital and a share price of €50. Mr. Diekmann managed to restore the company’s fortunes, and in 2013 it reported a net profit of €6 billion.

Investors had complained that Mr. Diekmann had focused too much on expanding the firm through mergers and acquisitions, at the expense of paying shareholder dividends. Analysts suggested that Mr. Bäte would be more likely to focus on dividends.

“At the moment we are sort of penciling in to move up towards 50 percent dividend payout over the next couple of years. I think that is also one thing we would like to see, a more open commitment to keeping a stable dividend. Investors put a premium on that now,” said Craig Bourke, insurance analyst with Whitman Howard.

“Allianz in Europe will rise and fall with the developments in the euro zone.”

Herbert Weinmann, Professor of Banking and Insurance, Ludwigshafen University of Applied Sciences

Andreas Schäfer of Germany’s Bankhaus Lampe said that Mr. Bäte will likely bring continuity to the firm rather than any “major strategic shifts,” but suggested he may focus more on efficiency and synergies within the company.

Many of the challenges Mr. Bäte will face over the coming years are outside of his control. Insurers and asset managers in Europe in particular have suffered in the midst of the euro zone debt crisis, which has pushed interest rates to record lows, leaving investors struggling to find products that are both safe and offer enough yield to be profitable.

“Allianz in Europe will rise and fall with the developments in the euro zone,” said Herbert Weinmann, professor of banking and insurance at the Ludwigshafen University of Applied Sciences.

Mr. Diekmann may not be gone for long. German law states he has a cooling-off period of two years, after which he could potentially join Allianz’s supervisory board, the body that oversees its management and has the power to hire and fire its executives. Indeed, the desire to join the supervisory board may have played into his decision to leave now, rather than in two years’ time, Mr. Weinmann suggested.

 

014 Allianz

 

Meera Selva, Christopher Cermak and Lára Hilmarsdottír write for Handelsblatt Global Edition in Berlin covering politics, economics and finance. Kerstin Leitel covers banks and insurance companies for Handelsblatt from Munich.  To contact the authors: selva@handelsblatt.com, cermak@handelsblatt.com, hilmarsdottir@handelsblatt.com and leitel@handelsblatt.com.

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