By Jonathan Gould
FRANKFURT (Reuters) - Six months after taking the helm at German insurer Allianz (DE:ALVG), Oliver Baete is at last set to reveal his plans to reshape Europe's biggest insurer to slice through blasting headwinds from low interest rates and onerous regulation.
Baete, a 50-year-old former McKinsey consultant who was rotated through top operational and regional roles at Allianz over the last seven years to prepare him for chief executive, has spent much of this year out of the public spotlight, honing strategies to boost growth, profit and the share price.
Coaxing an insurance behemoth with 150,000 employees and more than 120 billion euros ($128.42 billion) in revenue to become a more agile, profitable company cannot be done in a few quick steps.
The strategy that Baete will present at a capital markets day on Tuesday - internally titled "Heritage and Renewal" - needs to lay out plans for efficiency gains in property-casualty and life insurance, capital management and digitisation of the business, one of Allianz's top 10 shareholders said.
Stanching problems at asset manager Pimco - which had seen massive investor outflows even before last year's acrimonious departure of long-time leader, "Bond King" Bill Gross - should still be high on Baete's agenda, even as outflows slow, the shareholder said.
"If they don't get the revenue in, they'll have to cut costs," the shareholder said of Pimco, which lost its claim to the world's biggest bond fund earlier this year.
Asset management contributed one fourth of Allianz's 10.4 billion euros in operating profit last year.
Flaccid economic growth and rock bottom interest rates are eroding insurers' earnings prospects, even as regulators demand they devote more resources to the protection of policy holders.
Against this difficult terrain, Baete has already started pushing his ideas down through the organisation, drawing on his McKinsey skills at a meeting of around 200 top executives from around the world in September, an Allianz executive said.
"He's telling us to keep the focus on the profit pulse," the executive said, adding that the company must no longer overlook small but profitable niche markets that are successfully exploited by competitors such as ACE (N:ACE) or Chubb (N:CB). "It's a real salesman's strategy," the executive said.
Allianz is not saving all the news for the capital markets day, announcing this week the creation of a unit to push forward the group's digital transformation, including the appointment of a Chief Digital Officer.
Digitisation entails disruption and possibly job losses at a company comfortably used to its ways as market leader at home, requiring Baete to marshal his persuasive power even as competitors such as Axa (PA:AXAF) and Generali (MI:GASI) forge ahead.
"Baete certainly has a head for numbers; now he has to show he can bring the people with him," the top 10 shareholder said.
A second Allianz executive said that the company's managers, at least, know change is needed. "Baete is doing the doctoring but that doesn't mean the cure will be easy," he said.
Analysts and investors expect Allianz to remain prudent on both price and execution risk when it comes to acquisitions.
Allianz aims to grow "in a disciplined way" in growth markets and also sees room for consolidation in Europe, mainly in property-casualty insurance and in markets where it is already strong, Baete said in a television interview last month.
JP Morgan analyst Michael Huttner calculates the insurer has about 3 billion euros available for takeovers through the end of 2016. "This amount is relatively modest given the scale of the Allianz group," Huttner said.
($1 = 0.9344 euros)