Allianz is poised to reappoint Michael Diekmann as chief executive in October, investors believe, possibly delaying tough choices on whether Europe’s largest insurer expands its global presence or returns more cash to shareholders.

The German group has grown to become the world’s second-biggest investor after BlackRock, excelling at its core insurance business but increasingly struggling to manage a global empire from its headquarters alongside Munich’s luxurious English Garden.

Diekmann, a 26-year veteran of the company known for his calm and measured voice in public, weathered a hailstorm of criticism this year about the firm’s asset manager, Pimco.

Sagging performance at the world’s largest bond fund and the outspoken style of its idiosyncratic leader Bill Gross, 70, created the impression that the Bavarians had little control over their California-based firm.

Profits from Pimco have enabled Allianz to overlook slow growth in its core insurance business. But with Pimcofaltering, the company may risk falling behind peers such as Axa, which is powering forward in emerging markets.

“Allianz needs to decide what it is,” said Nick Holmes, insurance analyst at Societe Generale. “Diekmann has failed to answer that question.”

For now, investors appear mostly sanguine about Diekmann’s tenure: he steered Allianz out of a disastrous investment in Dresdner Bank and through the chaos of the euro debt crisis. He is managing the challenges of tougher financial services regulation and low interest rates with aplomb, investors say.

Allianz’s share price has doubled since Diekmann took the reins back in 2003, outpacing a 60 percent rise in the STOXX Europe 600 insurance index. However, Germany’s blue-chip DAX more than tripled over the same period.

Diekmann will reach the traditional retirement age of 60 and the end of his contract in December and may not be able to address strategic issues in a rump term in which he will likely groom a successor.

Investors want a more generous dividend payout to bring Allianz on par with rivals, more growth in insurance, and tighter controls at Pimco, which Allianz wants to keep because it contributes about one quarter of group operating profit.

“Pimco has been very successful but Pimco in particular has a very different remuneration and governance structure from the rest of the group,” said JP Morgan analyst Michael Huttner.

“This is a continuing challenge for Allianz,” he said.

GENERATIONAL CHANGE

Although Allianz has not positioned anyone clearly as successor, the company harbors a number of candidates.

Oliver Baete, 49, Allianz’s board member for insurance operations in Western and Southern Europe, is seen as front runner for the job.

The ex-McKinsey executive joined Allianz’s board in 2008, serving as chief operating officer and chief financial officer before moving into his current regional role last year.

That move was part of an Allianz “plan” to give Baete hands-on, operational experience in insurance, Diekmann said at the time, fueling speculation he was being groomed for the top job.

One Allianz manager familiar with Baete’s progress said the plan appeared to be working, with Baete showing impressive technical knowledge on nuts-and-bolts insurance issues.

However, Baete may need more time to show that his efforts to improve operations in test cases France, Italy andTurkey, where he led the takeover of insurer Yapi Kredi Sigorta last year, are paying off, said the manager, who declined to be named because he is not authorized to speak publicly on the matter.

Shareholders say Markus Riess, 48, chief executive of Allianz’s German unit for the past four years, also had strong credentials after reorganizing insurance operations at home.

Chairman Helmut Perlet has also promised to vet external candidates for board positions and could be inspired by the sweeping strategy changes brought to Italian insurer Generali by its CEO, Mario Greco, a former Allianzboard member and a senior executive at Zurich Insurance.

Six of Allianz’s 11 board members including Diekmann will see their current contracts expire at the end of 2014. Two, Manuel Bauer and Clement Booth, will have reached their 60th birthday and are expected to retire, while CFO Dieter Wemmer’s contract will be renewed, sources familiar with the matter said.

Allianz declined to comment on potential board changes.

WITH A BANG

Perlet, the man tasked with finding a successor, has said a decision on the future leadership of the $80 billion company will be taken in October, two months before the CEO’s term ends.

That narrow window has encouraged the view among large shareholders that Diekmann will be asked to stay on for a year or two for an orderly transition to a new chief.

Postponement of Diekmann’s departure would mean the company could prepare a change in leadership with calm, said Henning Gebhardt, head of Europe, Middle East and African equities at DWS, the fund management arm of Deutsche Bank and one of Allianz’s largest shareholders.

“We would welcome Diekmann’s continuing for a bit longer,” Gebhardt said.

Diekmann, who is preparing to celebrate Allianz’s 125th anniversary next year, has kept quiet about his career plans.

“I could well imagine Diekmann taking advantage of the company’s anniversary celebrations at the shareholder meeting next spring,” said a fund manager at one of Allianz’s top 10 shareholders, predicting the chief executive would reveal his successor and a record dividend to mark the occasion.

“That would be a farewell to his taste: on a big stage, with a loud drum roll,” said the manager, whose company policy did not allow him to comment publicly. (Additional reporting by Kathrin Jones and Alexander Huebner; Editing by Thomas Atkins, Elaine Hardcastle and Mark Potter)