Germany's Allianz AG has regained the throne as the top European insurance group, after announcing a deal with Italian insurer Generali to take over AGF. The deal, signed yesterday, gives Allianz an entry to the Irish market as AGF is the controlling shareholder in Church & General and Insurance Corporation of Ireland.

The deal calls for Allianz to make a 9 billion deutschmark offer to AGF shareholders. In return, Allianz and AGF will sell their stakes in German insurer AMB to Generalli, giving the Italian insurance giant a controlling stake in AMB.

"Generali, Allianz and AGF have reached an understanding concerning the tender offers for AGF," Allianz said about the transaction, which had been widely expected after news of the talks was leaked to French and German newspapers on Wednesday.

Allianz said the deal was still subject to regulatory approval from the European Union merger task force.

Allianz will now make a tender offer for AGF, keeping the same terms that it made in November with an offer of 320 francs per share. The Allianz offer topped the Generali offer of 300 francs a share, which put the two groups at loggerheads.

Industry analysts this week had said leaked details about the anticipated deal was an elegant solution to what could have become a protracted problem for the insurers.

Allianz praised the deal, which it said would improve the competitiveness of the European insurance industry.

"If this agreement would be reached, it would be beneficial to all shareholders of Allianz, Generali, AGF and AMB," Allianz chief executive Mr Henning Schulte-Noelle said in a statement.

"Minority shareholders of all companies will benefit both through offers with good premium on their shares as well as through substantial growth potential of all the companies involved," he said. "It is a very rational agreement."

Allianz will now gain the strong position it wants in France, to restore it to the top position in the European insurance industry from which it was ousted last year, through the merger of French groups UAP and Axa.

A combined Allianz and AGF would rank also as the world's second largest insurer after Japan's Nippon Life.

In return for Allianz winning AGF, the deal calls for Generali to take a majority stake in AMB by making a public tender offer at DM210 per share, as had been expected.