Pimco Part of Allianz’s Move to the Top

Behind Allianz AG’s interest in Newport Beach-based Pimco Advisors Holdings LP is a plan to post double-digit profit growth on the way to becoming one of the top five insurers in the world’s major markets.

Over the past 15 years, the Munich-based insurer has quietly swelled into a global company with more than $103 billion in premiums, $1.9 billion in profits and a market value of almost $70 billion.

Until recently, the company was relatively secretive about its strategy, giving investors few hints about how it wanted to grow. But that has changed, as global competition heats up and the company strives to become a major player in the lucrative U.S. market.

Allianz has said it plans to list its shares on the New York Stock Exchange as early as next year, to make it easier to finance U.S. acquisitions.

In interviews, Allianz Chief Executive Henning Schulte-Noelle has said he wants to acquire at least one large U.S. life insurer with strong asset-management elements.

In May, Allianz said it would buy First Life Insurance Co., South Korea’s fourth-largest life insurer, with $1.4 billion in annual premiums, and pay $540 million for the approximately 75% of Life USA Holding Inc. in Minneapolis that it doesn’t already own.

Both deals were relatively modest for the German powerhouse, said analysts, who have been waiting for Schulte-Noelle to make a larger move into the U.S. market.

“Allianz has the power and the name and the size,� said Michael Lindsay, a financial analyst at Lehman Brothers in London.

Allianz officials declined to comment on Pimco Advisors Holdings LP, one of the world’s biggest bond-fund managers with $250 billion in assets. Though a leader in Europe, Allianz has long emphasized its desire to bolster its presence in the United States and the United Kingdom.

In addition to the acquisition spree, industry analysts attribute Allianz’s double-digit growth to a rise in premium income, which jumped 9% to $51.4 billion last year.

The insurer also is aiming for a net return of 15% on its equity within the next three to five years.

This target encompasses its traditional insurance categories, which include property, casualty, life and health. Schulte-Noelle said he expects a higher return from asset management because it doesn’t tie up as much capital as its insurance business does.

In 1998, the group taken together had a return of 11.2%.

Allianz expects the value of its managed assets to rise to about $365.5 billion this year. That amount includes $26.1 billion in funds managed for private and institutional investors, said Diethart Briepohl, Allianz’s chief financial officer.

At the end of 1998, Allianz’s investment portfolio totaled about $350.3 billion, of which nearly $23 billion was managed for third parties.

To attract more customers, Allianz is introducing a health insurance program for people who live and work outside their own countries. It estimates the program’s market potential to be about 2 million new customers worldwide.

Bloomberg News, Dow Jones News Service, Reuters and Times staff writer P.J. Huffstutter contributed to this report.

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Pimco on the Block?

Pimco Advisors, one of the world’s largest money-management firms, is considering a sale. Here’s a look at the company and its operations.

Headquarters: Newport Beach

Operations: Manages $250 billion for corporate, institutional and individual investors, primarily through 50 bond and stock mutual funds

Founded: 1971

Leadership: William D. Cvengros, chief executive; Kenneth M. Poovey, chief operating officer

Employees: 1,200

O.C. operations: Pimco Advisors, Newport Beach, 55 employees; Pacific Investment Management Co., Newport Beach, 530 employees

Offices: Newport Beach, New York City, Dallas, Boston, Seattle, London, Singapore, Tokyo, Sydney

Assets Under Management

(billions)

1994: $101

1995: 132

1996: 158

1997: 200

1998: 244*

Profits

(millions)

1995: $58.6

1996: 55.3

1997: 44.1

1998: 76.1

* Year-end figure. Pimco has since added another $6 billion in assets.

Buyout Blip

Pimco Advisors shares are off nearly 9% this year and, until Wednesday, had lagged behind other financial stocks. The company’s stock leaped 14% Wednesday, to $33.88, on news of a possible buyout.

Wednesday close $33.88

Hefty Holdings

Eight Pimco managing directors have stakes worth more than $5 million in Pacific Advisors Holdings LP, based on Wednesday’s close of $33.88. Holdings based on partnership units held as of Dec. 31, 1998. Dollar amounts in millions:

Executive Holdings

William H. Gross: $22.8

John L. Hague: 7.8

Brent R. Harris: 7.8

Dean S. Meiling: 7.8

James F. Muzzy: 7.8

William S. Thompson: 7.8

William D. Cvengros: 6.9

William C. Powers: 5.1

Sources: Securities and Exchange Commission, Bloomberg News, Pimco Advisors LP