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Alternative Market Briefing

Europe’s biggest insurer turns away from Euro sovereign bonds - report

Friday, September 28, 2012

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Michael Diekmann
From Benedicte Gravrand, Opalesque Geneva, and Florian Guldner, Opalesque Munich – Allianz, Europe’s biggest insurer and one of its biggest investors, wants to invest Eur1.65bn ($2.1bn) but is changing its strategy. CEO Michael Diekmann is not interested in Euro sovereign bonds anymore, he tells German daily Handelsblatt.

He said during an interview with Handelsblatt: "we are trying to avoid government bonds in our new investments."

He adds that German bunds would not be attractive because their yield is below inflation level. And in other European countries, risk has increased because of the debt restructuring in Greece.

"This is why all investors go out of European sovereign bonds and instead invest in emerging economies, in corporate bonds, in infrastructure and real estate," Diekmann explains. Allianz is planning to diversify further. Some of the investments that are attractive to insurance companies, which are long term investors, include renewable energy and infrastructure. Allianz also wants to invest in power grids because in Germany the energy regulator regulates prices; and this gives investors some security, he says.

He believes he sovereign debt crisis in Europe cannot be solved through economic growth. According to his calculations, Germany would have to reach a 4% inflation level and a 4% GDP growth to reduce its own debt, which is not realistic. The only solution, he states, would be in government reducing its expendit......................

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