German insurer Allianz SE (AZSEY.PK) and Turkey's Yapi Kredi have reached an agreement to enter into a 15-year exclusive distribution agreement and for Allianz to acquire property and casualty insurer Yapi Kredi Sigorta, including its life and pension business Yapi Kredi Emeklilik.
Allianz has agreed to acquire Yapi Kredi's 93.9 percent shareholding in Yapi Kredi Sigorta for a total consideration to Yapi Kredi of 684 million euros ($877.13 million). The transaction is expected to close during the second half of 2013.
The remaining 6.1 percent of Yapi Kredi Sigorta is listed on the Istanbul Stock Exchange and will be subject to a mandatory tender offer by Allianz shortly after closing.
Yapi Kredi will retain a 20 percent stake in Yapi Kredi Emeklilik, which is a subsidiary of Yapi Kredi Sigorta, to support the long-term strategic partnership with Allianz.
Yapi Kredi Sigorta is the fifth largest property and casualty insurance company in Turkey. It has total premiums of 531 million euros.
Yapi Kredi Emeklilik holds a top-4 position in life insurance with premiums of 90 million euros, with a pensions business ranked 3rd with assets under management of 1.5 billion euros.
The combination of Allianz Turkey with the Yapi Kredi insurance operations is expected to create the number 1 non-life insurer, the number 2 pensions provider and the number 3 life insurer in Turkey.
A key part of the agreement between Allianz and Yapi Kredi is a 15-year bancassurance agreement. This will provide Allianz exclusive access to the 5th largest banking network in Turkey with 928 branches and 6.5 million customers.
Allianz has a 90-year history in Turkey, which is a strategically important market for the German insurer.
Allianz noted that Turkey is one of the fastest growing insurance markets globally, backed by a robust economic outlook and a large, young population of 75 million people.
The Turkish market has low penetration and thus offers significant growth potential for insurance. Premiums are at just 1.3 percent of GDP in Turkey compared to 7.9 percent for Western Europe and 2.6 percent for Central and Eastern Europe.
Oliver Bäte, member of the board of management of Allianz, said, "The transaction with Yapi Kredi is a unique opportunity to move into a market-leading position in one of Europe's key growth markets which is also an important bridge between Europe and Middle East/Central Asia.
Bäte added that this transaction fits perfectly into Allianz's strategy to use bolt-on acquisitions to strengthen its position in growth markets.
The stock closed at 108.30 euros on Tuesday.
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