German insurer Allianz is looking at ways to defend its position in financial services, including the option of merging with a bank, sources familiar with the situation told Reuters.
The board of Europe's biggest insurer, led by Chief Executive Michael Diekmann, has already examined various scenarios where it could merge with a big bank, one source familiar with the matter said.
A tie-up with a bank similar in size to the insurer could strengthen Allianz's presence abroad, the sources said.
But while the board has looked at how such merger might work, there have been no talks with potential partners and no deal is imminent. The insurer declined to comment.
One of the sources said that finding an equal partner to Allianz's own 73 billion-euro ($97.45 billion) market value would give the insurer critical mass in the rapidly consolidating financial services landscape.
Allianz is weighing its options amid a frenzy of activity as big European banks search for partners. There is a fierce battle for control of ABN Amro as well as talk that French banks BNP Paribas and Societe Generale may be examining a tie-up.
Allianz became one of the few insurers to own a bank when it bought Dresdner Bank in 2001, weathering a hail of criticism after the lender racked up almost 3 billion euros in losses.
More recently, however, Dresdner has started to make modest profits and investor criticism has abated. However, almost no analysts thought another bank deal likely.
New Home For Dresdner
As well as a merger with a bank, Munich-based Allianz is examining other options.
Another source said the insurer could spin off Dresdner as part of a larger deal with another bank that would grant Allianz greater access to key foreign markets.
This possibility has been raised in a report by investment bank and financial services specialist Keefe, Bruyette & Woods.
It concluded that Dresdner could be worth more to another bank than Allianz. While judging a straight sale unlikely, the report's author said "a merger, joint venture or cooperation structure with another bank" was possible. And this could include a big merger, it said.
Allianz chief Diekmann has been credited with turning around the group since taking charge after what his predecessor Henning Schulte-Noelle described as the "terrible year" of 2002 that forced his own departure.
Heavy losses from a dive in the value of its stock market investments saw the insurer's market value plumb a record low of 22 billion euros.
Diekmann has since boosted the profitability of its insurance work and cut costs to pull Dresdner out of the red. Profits in the meantime have more than doubled from their 2003 level to more than 7 billion euros last year.
But some analysts have questioned how Allianz can grow, with profits tight in traditional insurance.
The recent aggression of hedge-fund investors, meanwhile, has made European companies wary that they too could fall prey.
One hedge fund manager told Reuters that he thought it highly likely a German financial services group could be targeted, and that activist investors were already eying the country's insurers.
The Children's Investment Fund, which ousted the chief executive of Deutsche Boerse and ended his bid for the London Stock Exchange, has more recently been instrumental in accelerating the sale of Dutch lender ABN Amro.
That bank, which has a market value approaching Allianz's, could now be broken up if it ends up in the hands of a consortium led by Royal Bank of Scotland.