Stephan Theissing: We use the capital market to raise capital. This external capital allows us to invest in our business to make it grow. We use the funds we get from issuing bonds for things like strategic investments or to roll over maturing debt when the conditions are attractive for us.
When Allianz places a bond, how does that differ from when other companies or financial institutions place bonds?
Theissing: First of all: We are not a bank – and that's a good thing. We're considered to be much more stable – especially for European investors. We're also helped by our strong rating, even compared to the rest of the insurance sector. That increases our attractiveness for investors who are increasingly looking for stability.
On top of that, Germany right now is considered a "safe haven" which also helps us. As a result, our spreads – the difference in yield between our bonds and swap rates – are lower than most of our competitors. So our bonds offer an attractive combination of security and return.
How do you determine when to issue a bond?
Theissing: Our strategy boils down to taking advantage of windows of opportunity. We do not want to chase the market. Making use of these windows is more important for us than actual funding needs. We are happy to pay the extra carry cost – that is the cost of holding liquidity – if we manage to get into the right window.
Since we don't go to the market very often, we're able to place larger-sized bonds. The strategy is an old Allianz tradition that we've been following for decades. Our investors know: we're rarely in the market, so they're encouraged to buy our bonds.
What kind of investors do you find?
Theissing: First and foremost, we're dealing with institutional investors like pension funds. Our investor base is also Euro-centric, and they've been loyal to us for a long time. That's a very comfortable position for us.
Why?
Theissing: We don't have to educate them as much because our investors have often known us and our bonds for a long time. Allianz also enjoys an excellent reputation thanks to our strong capital base and the long-term view we take toward our relationships together with the fairness with which we treat our investors. Part of that is also not trying to squeeze our investors but rather finding good compromises with them. You see, we're also active as an investor, so we know how important these things are when working with an issuer.
Is that why the market received the bond so well that Allianz issued this February?
Theissing: Definitely, and we were extremely pleased about that. Windows are so narrow right now that we only had a very short time period to talk with the market. But investors saw that this was a high quality security.
And yet what you are saying comes with caveats...
Theissing: Absolutely. Unlike the past, the windows of opportunity have become really unpredictable. There is only a very brief period when the market has any appetite. For example, liquidity has practically dried up in parts of the subordinated debt market. Investors have simply walked away.
So what does that mean for you?
Theissing: Our maturities are in principle funded until 2013. That's a pretty comfortable situation to be in under the current circumstances.
