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Talanx Profit Doubles as German Insurer Prepares for IPO

Talanx AG, Germany’s third-biggest insurer that may seek an initial public offering as early as the second quarter of this year, said profit more than doubled in 2011, helped by reserve releases and lower taxes.

Net income rose to 520 million euros ($683 million) from 216 million euros in 2010, the Hanover-based company said in an e-mailed statement today. Talanx expects the restructuring completed last year to further boost earnings in 2012.

Talanx, led by Chief Executive Officer Herbert Haas, has retained Deutsche Bank AG, Citigroup Inc. and JPMorgan Chase & Co. as managers as well as Rothschild as an adviser for its IPO, which could raise about 750 million euros, people with knowledge of the plans said earlier this week. The size and timing of the sale will depend on market conditions, the people said.

“Compared with a year ago, conditions have improved for capital markets as well as for insurance markets,” Haas told reporters in Hanover. “The prospects are good, but we’ll still keep all our options open regarding an IPO.”

Haas declined to comment further because of legal obligations relating to the IPO preparations.

The insurer earlier this year bought Poland’s Towarzystwo Ubezpieczen i Reasekuracji Warta SA from KBC Group NV for 770 million euros, beating rivals in a bid to expand in eastern Europe’s largest insurance market. When the purchase is completed in the second half of 2012, Talanx’s Japanese partner Meiji Yasuda Life Insurance Co. will take over 30 percent of Warta, Poland’s second-largest insurer.

Bond Conversion

In 2010, Talanx sold Meiji Yasuda, Japan’s third-largest life insurer, a 300 million-euro bond, which will be converted into shares in the event of an IPO. The German insurer has been considering the share sale for more than a decade to fund international expansion.

Warta is the second Polish takeover announced by Talanx within two months, after the company said in December that it will pay 912 million zloty ($291 million) for a controlling stake in the insurer Europa SA. Meiji Yasuda will buy a stake in Europa from minority shareholders in a public offer.

“Following the acquisitions in Poland, our further growth in central and Eastern Europe will most likely be organic, while I could still imagine that we’ll spend money on acquisitions in South America,” Haas said. “Acquisitions in the industrial insurance segment are also an option.”

Restructuring Charges

Talanx, which owns a 50.2 percent stake in reinsurer Hannover Re, is fully owned by German mutual insurer HDI Haftpflichtverband der Deutschen Industrie VaG.

The insurer booked 106 million euros in restructuring charges last year on its German property and casualty units, down from about 290 million euros in 2010, when the charges mostly consisted of reorganization costs at its German life-insurance units.

Last year’s result was boosted by about 64 million euros from the release of provisions set aside for “legal disputes relating to the legitimacy of double taxation of foreign investment income as well as to antitrust proceedings,” Talanx said. The firm’s tax bill declined to 187 million euros from 231 million euros a year ago.

“Last year’s result hasn’t been steered in any way,” Haas said. “Even if we hadn’t been planning an IPO, we would have reported exactly the same result.”

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