by
Bloomberg 27 Feb 2020 By Lucca de Paoli and Suzy Waite
Markets
are overreacting to the threat of the rapidly spreading coronavirus and the
global economy will only see a short-term impact, said the head of Allianz SE, Europe’s biggest insurer.
Chief
Executive Officer Oliver Baete said the firm was more concerned about the
safety of its clients than any impact to its business, in an interview with
Bloomberg Television’s Anna Edwards in London. He compared the virus with a
“strong flu,” saying it hadn’t yet become a pandemic.
“There’s
a lot of panic at that moment that’s not warranted,” said Baete. “Short-term
economic activity will contract and it will have an impact on global GDP, but
it’s not like the world will end tomorrow.”
Heightened
fears surrounding coronavirus have roiled financial markets, with Asian
stocks falling Wednesday after a rout on Wall Street. The US Centres for
Disease Control and Prevention warned Americans to prepare for a potential
outbreak at home, while mounting cases across the Middle East, Europe and Asia
sparked concern the outbreak is widening into a pandemic.
Allianz’s
biggest potential risk would be from any bankruptcies in Europe spurred by the
virus’s spread, due to its credit insurance coverage in the region, said Baete.
While that business isn’t large in Asia, the firm has been cutting such
exposure in China for the past two months, he said.
“The
issue that may affect us is if you have massive bankruptcies in small and
medium size companies, because we have the world market leader in credit
insurance,” Baete said in a separate interview.
Baete has
relied on cost cuts, inflows at Allianz’s asset management unit and smaller
deals to lift profits as low interest rates and squeezed fees weigh on the
industry. That’s recently been paying off, with the insurer managing to stop
four straight quarters of bleeding assets at key investment arm Allianz Global
Investors in the final three months of 2019.
Allianz
recently bought two businesses in the UK -- the general insurance business of
Legal & General Group Plc and the 51% of LV General Insurance Group that it
didn’t already own. Baete said that the firm doesn’t need to carry out any
major acquisitions thanks to the health of its earnings.
“There is
consolidation and there will be consolidation coming particularly with weaker
participants,” Baete said. “Whether we will play a role, will depend on where
the prices are and whether we can create value out of it. We have no urge to
merge or to do anything.”
--With
assistance from Anna Edwards.
Copyright
Bloomberg News
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