Talanx CEO Says Timing ‘Perfect’ for IPO as Rates Rise
Talanx AG (TLX), the German insurer that began trading on the stock market today, said the timing of its initial public offering was “perfect” amid a rally in equities and higher insurance rates.
“The time right now is perfect,” Herbert Haas, Talanx’s chief executive officer, said in an interview on Bloomberg Television’s “The Pulse” with Maryam Nemazee. “We have booming capital markets. We also have a perfect environment as far as the insurance industry is concerned.”
Talanx, based in Hanover, revived the share sale on Sept. 20, a week after calling it off for the second time in three months. The day after Talanx canceled the IPO, the U.S. Federal Reserve announced a third round of quantitative easing, sending benchmark stock indexes to the highest levels since 2007.
Talanx rose 1.6 percent to 18.60 euros as of 1 p.m. local time in Frankfurt from the IPO price of 18.30 euros. That was a bigger gain than the 0.9 percent increase for the Bloomberg Europe 500 Insurance Index.
“Talanx has a cheaper valuation than its insurance peers like Allianz, which may prompt a little bit of a rally for the shares,” said Stefan Bongardt, an analyst with Independent Research GmbH. “Talanx has a very attractive dividend ratio and being strongly established in Germany gives them a stable basis.”
The IPO has a volume of about 817 million euros, including a 300 million-euro convertible bond held by Meiji Yasuda Life Insurance Co., the company said. That makes the IPO Germany’s largest since the port operator Hamburger Hafen und Logistik AG’s stock sale in 2007, data compiled by Bloomberg show.
“We were the so-called icebreaker for the IPO market in Germany,” said Haas. “If you are the icebreaker after such a long period, you have to sometimes zigzag to come to your final destination.”
The shares were priced at 18.30 euros, the company said in a regulatory statement yesterday, compared with the original range of 17.30 euros to 20.30 euros. Earlier, the range was adjusted to 17.80 euros to 18.80 euros apiece, according to a term sheet obtained by Bloomberg.
Haas cited auto insurance, reinsurance and industrial business as areas where Talanx and its competitors are able to raise rates.
The IPO may bode well for Royal Bank of Scotland Group Plc’s plans to raise about 1 billion pounds ($1.6 billion) in the initial stock sale of its Direct Line Insurance Group Plc unit.
“Sooner or later there will be further capital increases at Talanx,” Haas said. While Talanx currently has “sufficient” capital, the company may sell shares in 24 to 36 months to fund growth, he said. German mutual insurer HDI Haftpflichtverband der Deutschen Industrie VaG, Talanx’s majority shareholder, won’t sell shares, according to Haas.
Talanx, which has been considering the share sale for more than a decade, owns a 50.2 percent stake in Hannover Re, the world’s fourth-biggest reinsurer.
The company will use some of the funds from the IPO to consolidate positions in Poland and Mexico and fund growth in Brazil, the CEO said in the interview. The insurer has said it will repay loans for recent acquisitions of two Polish rivals.
“What is missing is a true growth story as the markets in which they operate are more or less stagnating,” said Bongardt, who is based in Frankfurt. “I would prefer them to invest in growing markets than to reduce their loans with the proceeds of the share sale. That would give them an equity growth story.”
Deutsche Bank AG and Berenberg Bank led the Talanx share sale as joint global coordinators and joint bookrunners, while Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) acted as additional joint bookrunners. Rothschild advised the insurer on the IPO.
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