Allianz SE investors may get more from the sale of Dresdner Bank than they ever got from the purchase.

Disposing of the Frankfurt-based bank and its Dresdner Kleinwort securities unit would lift Allianz by at least 25 percent, said Lutz Roehmeyer, a fund manager at Landesbank Berlin Investment.
Europe's largest insurer is in talks to sell or merge the banking division, and analysts predict Dresdner may fetch about $11 billion, or about half the takeover price.
Dresdner has been a drag on Allianz since the Munich-based company bought it for almost $21 billion in 2001 to sell more insurance through bank branches. Bad loans at Dresdner contributed to the insurer's first annual loss in at least half a century in 2002, while the securities unit had 2.2 billion euros ($3.5 billion) of sub-prime-related write-downs in the past year.
``Above all, what investors want to see is Allianz kiss Dresdner and especially its investment banking unit goodbye,'' said Berlin-based Roehmeyer, who helps oversee $20.5 billion and owns Allianz shares.
Questions about possible markdowns have weighed on Allianz, which trades at 6.2 times estimated earnings, a lower multiple than Axa SA and Assicurazioni Generali SpA, its two largest competitors in Europe. Allianz's price-to-earnings ratio compares with a median of 8.65 times for Europe's 25 biggest insurers, data compiled by Bloomberg show.
Dresdner Discount
``The Dresdner discount is the main reason Allianz shares are cheaper,'' said Ernst Konrad, who helps oversee about $38 billion, including the insurer's stock, as head of equities at BayernInvest in Munich. ``The shares are bound to rise should Allianz find a solution for Dresdner. The better the solution, the higher the upside potential.''
Allianz Chief Executive Officer Michael Diekmann said last month that talks were taking place about a possible sale or merger of Dresdner. Commerzbank AG, Germany's second-largest bank, and London-based Lloyds TSB Group Plc are among the companies that expressed interest, people with knowledge of the matter said earlier this month. Gesa Walter, an Allianz spokeswoman, declined to comment.
The German insurer has dropped about 61 percent in Frankfurt trading since the Dresdner acquisition was announced on April 1, 2001, more than the 47 percent drop in the Bloomberg Europe 500 Insurance Index. The stock fell 1.9 percent to 112.30 euros in Frankfurt today, bringing declines this year to 24 percent.
The strategy that led to the Dresdner purchase was devised by former CEO Henning Schulte-Noelle, who was replaced by Diekmann in 2003 after the Dresdner deal and a decline in stock markets worldwide led to the full-year loss.
Worst deal
Since its takeover of Dresdner, Allianz has cut more than 18,000 jobs at the bank, or about 40 percent of the workforce, and shed about $48 billion of bad loans to revive profit. Even so, Dresdner posted a first-quarter loss of 513 million euros on writedowns at the securities unit, which was created from the merger in 2000 of Dresdner Kleinwort and Bruce Wasserstein's Wasserstein Perella & Co. After joining Dresdner, Wasserstein's firm and Goldman Sachs Group Inc. advised on the sale to Allianz.
``Dresdner was Allianz's worst deal with the biggest value destruction in absolute terms,'' said Lucio Di Geronimo, an analyst at UniCredit in Munich who recommends buying the shares.
``For Allianz, it's essential to get its ownership in Dresdner below 20 percent, as in that case they would only have to account for it as a normal investment and wouldn't have to bear Dresdner's risks.''
Daimler AG took that route last year when CEO Dieter Zetsche sold 80.1 percent of Chrysler to New York-based private-equity firm Cerberus Capital Management LP, ending its nine-year ownership of the U.S. carmaker. Daimler wound up investing $650 million to shed Chrysler and $19 billion in retirement liabilities, after former CEO Juergen Schrempp paid $36 billion for the carmaker in 1998.
The 118-year-old insurer announced plans in March to separate Dresdner's private and corporate-client unit from the remainder of the bank, which includes Dresdner Kleinwort, an initiative it expects to complete by the end of August. When Allianz bought Dresdner, it had envisioned ``a stock market flotation'' for the investment bank within a few years, the company said at the time. For Allianz, it's critical that Dresdner Kleinwort and whatever
``toxic assets'' remain on its balance sheet are disposed of as part of any deal, WestLB analyst Andreas Schaefer wrote in a June 16 note to clients.
Dresdner Kleinwort, headed by Stefan Jentzsch, posted a 759 million-euro pretax loss in 2007 following a pretax profit of 422 million euros a year earlier. The unit's name was changed from Dresdner Kleinwort Wasserstein in 2006.
``Allianz had a window of opportunity during two years of booming investment banking business to sell Dresdner Kleinwort,'' Landesbank Berlin Investment's Roehmeyer said. ``Trying to sell it now amid the credit crisis is a terrible sign for management.''
Selling Dresdner and its securities unit may prove challenging, in part because Deutsche Post AG in Bonn and New York-based Citigroup Inc. are also trying to dispose of banking units in Germany, analysts said.
Deutsche Post, Europe's largest postal operator, may sell its majority stake in Deutsche Postbank AG, Germany's biggest consumer bank with more than 14.5 million customers. Citigroup, reeling from record losses on subprime assets, is weighing a sale of its Dusseldorf-based Citibank Privatkunden AG, the market leader for consumer loans in Germany, with 340 branches and about 3.2 million clients.
----------Overshadowing insurance
``Should Allianz not succeed in selling Dresdner, the banking discount will continue to weigh on the shares,'' UniCredit's Di Geronimo said. ``In that case, one can only hope that Allianz will make use of the next recovery phase for banking shares to give the sale another try.''
In an indication that the banking unit has come to dominate investors' concerns, Dresdner was mentioned 32 times on the insurer's last analyst call on May 9, compared with nine times for Allianz, even after Chief Financial Officer Helmut Perlet said he didn't plan to speculate about the bank.
Allianz canceled its annual investors' meeting in mid-July, saying it wasn't ready to discuss ``important topics that enjoy high attention within the investment community.'' Allianz's insurance units, which accounted for more than 85 percent of operating profit during the past three years, reported record net income in 2007.
``Let's hope they are going to focus on insurance going forward,'' BayernInvest's Konrad said.
(Source: Bloomberg)