Allianz has picked a brave moment to expand in the United Kingdom. The German insurer on Friday announced it was spending 820 million pounds ($1 billion) to bulk up its car, pet and home insurance businesses in Britain. That will boost scale, but competition and looming regulations will make it hard to make a decent return.

Chief Executive Oliver Baete's mini-M&A spree is smaller than some had expected. Europe's largest insurer has the means to deploy some 15 billion euros of excess capital. Spending 578 million pounds to take full ownership of a joint venture with Liverpool Victoria Friendly Society, and another 242 million pounds to bolt on Legal & General's non-life insurance business, is modest by comparison. Even so, the two deals will make Allianz the UK's second-largest general insurer, with nearly 10 percent of the market. Doubling down on the UK as it grapples with Brexit is not without risks, though. The world's fourth-largest insurance market - according to data from EY - faces increased competition in the three sectors where Allianz is expanding. Consumers are relying on the internet to shop around for cover for their homes, cars and pets. The cost of comprehensive car insurance fell 6 percent in 2018, according to comparison website Confused.com.

More extreme weather will also mess with returns. A surge in subsidence claims prompted by extreme weather wiped out operating profit at L&G's general insurance unit last year. Allianz's joint venture with LVFS also saw its operating profit dip. The UK Financial Conduct Authority's latest probe into the insurance business is another risk. The regulator is examining how providers exclude loyal customers from teaser rates used to lure new buyers.

Allianz's plan is to spend money to make money. The 85-billion-euro company will ramp up investment in technology which will allow it to target more customers directly, cutting out commissions paid to comparison sites. Baete can also keep a tighter leash on costs. The LVFS joint venture currently makes 8 pence of operating profit on every 1 pound it generates in premiums, which is better than peers. But with Brexit threatening an economic downturn, UK customers remain on the prowl for cheap insurance. Allianz will have to work hard to show that returns on its UK deals are better than it could have earned elsewhere.

The author is Aimee Donnellan, a Reuters Breakingviews columnist. The article was first published on Reuters Breakingviews. bizopinion@globaltimes.com.cn