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Allianz: Insurance companies occupy the middle ground

Insurance company issuers occupy a small and rather uncomfortable niche in the debt capital markets somewhere between banks and corporates.

"We can say that we are not a bank, which is a good thing," says Stephan Theissing, treasurer of Allianz. "And if you look at the spread development on our bonds, we are trading better than most banks. Insurance companies, unlike banks, are not being forced to reinvent the business model. The model of receiving premiums first and paying out later is better than needing the constant refinancing of the balance sheet that banks do. And through the crisis, insurers have generally done better than banks at preserving their capital."

Theissing must also be giving thanks that Allianz is headquartered in Germany and that it has maintained an Aa3/AA rating. Its spreads in the secondary market suggest a certain flight to a safe haven within the insurance sector. But insurers, whose returns are in large part driven by returns on investments in financial markets that are suddenly beset by risks to sovereign and bank bonds that investors did not realize would arise when they first bought them, are hardly immune to the gyrations of financial markets.

"When the crisis hit we were seen by some investors, such as US-based investors in the euro markets, as a European financial player," says Theissing.

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