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Could Allianz Chief Buy Old Firm?

Could Allianz Chief Buy Old Firm?

16:07 23 April in In the News

by Jim Hammerand and featured in Minneapolis/St. Paul Business Journal April 20, 2012

It could be a coincidence that Walter White has become CEO of Allianz Life Insurance Co. of North America while Woodbury Financial Services Inc., the securities broker/dealer he helped build, looks for a new owner.

Or it could be fate.

Industry observers see Golden Valley-based Allianz as a likely buyer of Woodbury Financial. However, in his first interview as Allianz’s chief executive, White carefully considered his words when asked whether his firm should — or would — acquire the Twin Cities’ third-largest broker/dealer by revenue.

“I obviously have an affinity for Woodbury. It’s a quality firm. I have no doubt they will find a buyer,” he said.

He also discussed his time at Woodbury Financial, the challenges now before him, and the future of Allianz, which sells annuities and life insurance.

“In the long-term view, things have never been more promising,” White said.

White at Woodbury Financial

Originally an East Coaster, White came to Minnesota in 1998 to work for Fortis Investors Inc. That firm became Woodbury Financial after its current owner, The Hartford Financial Services Group, acquired Fortis’ parent company in 2001.

In 2007, White became president of Woodbury Financial, then the second-largest broker/dealer headquartered in the Twin Cities. He learned there to appreciate and build ties with the representatives who sold his firm’s products.

“They’re right at the front line. Sometimes at the home office you have a limited understanding of what happens,” White said. “It’s a totally different experience when you’re in the field working directly with clients.”

White was “instrumental in helping Woodbury become a major force in the broker/dealer community,” Woodbury Financial Chairman Brian Murphy said in a statement. “Walter helped establish a relationship-based culture that continues to this day.”

Still headquartered in Woodbury, the 216-employee firm had 75 metro-area financial advisers and revenue of $254 million at the end of 2011, according to Minneapolis/St. Paul Business Journal research.

It would make sense for Allianz to buy Woodbury Financial for more reasons than just the geographic and executive connection, said Jon Henschen, a broker/dealer recruiter in Marine on St. Croix. Woodbury Financial doesn’t have compliance issues that could cost a buyer down the road, and it’s a strong seller of the kind of proprietary products that Allianz offers and big enough to add some market muscle. “If they don’t get more scale, it’s going to be tough for [Allianz] to compete,” Henschen said.

Private-equity firms and other insurers also are likely eyeing Woodbury Financial. A spokesman for The Hartford declined to comment, as did Woodbury Financial President and CEO Pat McEvoy.

White at Allianz

Allianz’s last CEO, Gary Bhojwani, hired White in 2009 to oversee operations, compliance, suitability and information technology as chief administrative officer. It was a test of his ability to lead the company, Bhojwani said.

“I have every faith that he will not only do a good job; I believe he will ultimately be a better CEO than I was,” Bhojwani said in an e-mail.

White succeeded Bhojwani, now chairman of Allianz’s U.S. insurance business, as president and CEO on Jan. 1, and promoted ex-Woodbury colleague Gretchen Cepek to general counsel in February.

Allianz’s products are less profitable and its investment returns subdued in times of depressed interest rates, which makes today’s extraordinarily low rates the firm’s top challenge, White said, adding that profitability and capital management are more important for success than top-line growth while interest rates are low.

“I wouldn’t say, until we are in a more stable economic environment, that we’ve focused a lot of energy to try to drive our premium volume to higher levels,” he said.

Still, there’s room for targeted expansion. White believes Allianz can grow aggressively in the life insurance business and expects double-digit growth in the line, which last year brought in $40 million in premiums, compared to more than $10 billion in annuity premiums.

Total premium income for 2011 remained stable from the prior year at $10.8 billion, while assets under management grew by 9 percent to $95.3 billion, according to publicly reported financials. The company reported a $428 million operating profit, down 9 percent from $472 million in 2010.

The long-term outlook is positive for Allianz as retirement-bound baby boomers consider annuities as an alternative to Social Security or pensions, White said.

“No one is oblivious to the baby boomer opportunity. There are going to be winners and also-rans, and it’s going to be critical for us to be positioned effectively in a very competitive environment,” he said.