Allianz SE (ALV), Europe's biggest insurer, aims to acquire more wind farms and solar plants to help boost investment returns.
"We will continue to invest in renewable energy and we hope to make a number of investments in the second half of the year," David Jones, chief executive officer of the Munich-based insurer's Allianz Specialised Investments unit, said in an interview. "We have invested more than 1 billion euros ($1.4 billion) over the past five years in renewable energy. That's double what we had anticipated earlier."
Insurers are searching for new investment opportunities as low interest rates hurt returns from bonds and other fixed- income securities, the asset class in which the industry typically invests most of its customers' money. Public opinion has focused more on renewable energy after Japan's Fukushima Dai-Ichi nuclear plant was damaged in the March earthquake and tsunami, causing the worst nuclear disaster since Chernobyl.
"Renewable energy investments have the advantage that they offer relatively good risk-adjusted returns, a long duration, and that they lack correlation with capital markets," Jones said.
Munich Re, the world's biggest reinsurer, said in June it plans to increase its investments in renewable energy operations such as wind parks and solar plants to about 2.5 billion euros from a "low three-digit-million-euro range" to help boost its investment returns. The Munich-based reinsurer most recently acquired four photovoltaic plants in Italy.
Competition for Assets
Blackstone Group LP (BX), the biggest private-equity firm, said earlier this month it secured financing for a 1.2 billion-euro wind farm in the German North Sea as the nation abandons nuclear power in favor of renewable energy.
"The emergence of new competitors such as Munich Re brings more competition for the assets that are available, but it's also positive as new serious institutional types of investors are indicative of the asset class becoming more mainstream," Jones said. "Returns are still significantly higher than they were in the run-up to the financial crisis, but in the last six months some pressure has returned."
Allianz, which targets an internal rate of return of 7 percent to 8 percent from renewable energy investments, is focusing on euro zone countries and has so far invested in 31 land-based wind farms and solar photovoltaic plants in Italy, France and Germany with a total capacity of more than 600 megawatts. The insurer has made one investment in a wind park in France so far this year.
"We expect to decide on whether we will invest in offshore wind parks by the end of this year," Jones said.
