For Life Usa, An Allianz Alliance?

`The best thing about 1994," said Robert MacDonald, chairman and CEO of Life USA Holding (LUSA), "is that it's over." He made this remark in commenting on the insurance company's disappointing results. Indeed, 1994 was the year Life USA's shares tumbled nearly 50%, to 67/8, as interest-rate hikes cut into earnings. Recently, the stock has rebounded to 10.

What gives? Two developments may fire up the stock: an expected surge in revenues and earnings, starting in the first quarter, and takeover buzz.

With its own specialties--annuities and universal life insurance--"Life USA has developed a niche market in the fastest-growing segment of the industry: the 60% of the population who wish to save for retirement but aren't covered by an employer-sponsored retirement plan," notes Richard Geist, editor of Geist's Strategic Investing in Newton, Mass. He believes the first-quarter sales and earnings jump will be even bigger than most analysts expect. So annual revenues for 1995, he says, should rise to $1.3 billion from 1994's $950 million. And profits should leap to $20 million, or $1 a share, from $14.1 million, or 71 cents a share.

But more exciting is speculation that Allianz Life Insurance of North America, which has acquired a $30 million stake in Life USA, wants to buy the company. Inside sources say Life USA's brass fended off a purchase--because of the stock's drop from its high last year of 20--and agreed on Feb. 21 to just a joint marketing venture.

With stronger results expected this year, Life USA's management opted instead for Allianz' purchase of 15-year convertible subordinated debentures. Allianz, according to the agreement, may convert the debentures into stock at 121/2 a share during the first five years. That would give Allianz 2.4 million shares, or some 10% of Life USA.

Takeover pros are betting that once the stock price reaches the mid-teens, Life USA will agree to sell the company at 20 a share. "In all likelihood, the stock will hit 15 to 17 sometime this year--after Wall Street wakes up to the resurgence in earnings," says Geist.

Allianz' ardor for Life USA is focused on its marketing strength: Life USA has over 61,000 independent agents. In signing the joint marketing venture with Life USA, Allianz Chairman Lowell Anderson said he was eager to benefit from Life USA's sales network. Life USA's MacDonald says he would listen to any buyout offer, but he claimed there hadn't been any "serious talks with Allianz about an offer."

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