Allianz Posts 2.6% Dip in Operating Profit
May 14, 2014 by Robert O'Connor, London editor: Robert.OConnor@ambest.com
MUNICH – In what it described as a “strong first quarter,” Allianz Group said operating profit fell 2.6% to €2.72 billion (US$3.74 billion) from €2.79 billion for the same period in 2013.
Pretax income was down 2.7% to €2.6 billion from €2.67 billion. Net income fell 3.4% to €1.7 billion from €1.8 billion. Revenues increased 6% to €33.96 billion from €32.05 billion
The figures added further detail to the preliminary results Allianz released at its annual general meeting on May 7, 2014. In that announcement, the group reported net income attributable to shareholders fell 4% during the first quarter to €1.64 billion from €1.71 billion. Revenues, Allianz said, were the highest for any quarter in its history. “The first quarter came in strong like last year,” Michael Diekmann, chief executive officer of Allianz SE, said in a statement released with the first set of results.
In a statement accompanying the expanded results, Dieter Wemmer, chief financial officer of Allianz SE, said the group’s performance for the period, was “comparable to last year’s highs. While it is hard to predict what kind of economic and political volatility lies ahead in the current environment, we are well prepared for the rest of 2014.”
Allianz, Wemmer said, is “on track to achieve our operating profit outlook for the full year of €10 billion, plus/minus €500 million.”
The property/casualty combined ratio improved to 92.6 from 94.3. Shareholders’ equity increased by 6.9% to €53.5 billion from €50.1 billion. The solvency ratio improved to 184% from 182%. Third-party assets under management fell by 1.4% to €1.34 billion from €1.36 billion.
Allianz said its property/casualty performance was helped by a drop in natural catastrophes. Life and health operations reported an increase in life insurance sales.
Property/casualty gross premiums increased by 0.1% to €15.22 billion from €15.2 billion. The group pointed to contributions from the German and Turkish markets, as well as both Allianz Global Corporate & Specialty and Allianz Worldwide Partners. Allianz Global Corporate & Specialty provides commercial insurance into a global corporate market. Allianz Worldwide Partners seeks to create alliances with global companies that are in need of highly developed insurance expertise.
“Our property and casualty business has continued on last year’s successful course with very good results,” Wemmer said. “The segment contributed more than half of the Allianz Group’s total operating profit this quarter.”
Life and health reported a 15.7% increase in statutory premiums to €17.16 billion from €14.84 billion. The increase, Allianz said, was generated by “all core markets,” with good performances in the United States and the Benelux countries of Belgium, the Netherlands and Luxembourg.
“Innovations in core markets like Germany and the U.S. are lifting our life insurance business to new heights,” Wemmer said. “Customers are responding well to our new products. Thus, for the first quarter, results were within the top range of our expectations.”
Asset management operating profit fell 26.3% to €646 million from €877 million. Asset management operating revenues fell by 18.9% to €1.52 billion from €1.87 billion. Allianz cited the effects of its transfer in January 2014 of some activities to other parts of the group and the “exceptionally high” fees that were earned in the first quarter of 2013.
Total assets under management increased by 1.6% to €1.76 billion from €1.73 billion at the end of 2014. During this time, third-party assets under management rose by 1% to €1.34 billion from €1.32 billion. Activity was boosted by higher market values, Allianz said. “As expected, the results in asset management came in lower,” Wemmer said.
Daniel Bischof, an analyst at Swiss broker Helvea, said Allianz had performed well in the property/casualty market, with “Germany firing on all cylinders.”
Allianz’s said property/casualty price increases are coming through and having a positive impact on the combined ratio, Bischof said. Property/casualty, Bischof said, came in ahead of expectations. Price increases, he said, dropped to 1.4% during the first quarter from 2% in the first quarter of 2013.
Bischof attributed weakness on the asset management side to a plunge in fees, along with outflows of €20 billion. “Asset management remains one of the more challenging units,” he said, “while P&C was clearly very strong.”
In a research note, Bernstein Research in London said Allianz’s first-quarter results were “broadly in line with our expectations.” Bernstein noted the group’s improving position in property/casualty and its “stable” performance in life insurance.
“A big surprise” on the life and health side, the Bernstein note said, “is the strong top line growth of 16%, mainly driven by U.S. and Luxembourg, where we need to understand what type of product was selling so well.”
Allianz SE currently has a Best’s Financial Strength Rating of A+ (Superior).
