Allianz Quarterly Profit Sharply Down--2nd Update
05 August 2016 - 9:29PM
Dow Jones News
By Ulrike Dauer
FRANKFURT-Allianz SE (ALV.XE) on Friday reported a 46% decline
in profit for the second quarter on a high disaster bill, a
substantial one-time hit from the planned sale of a unit and
continuing net asset outflows at Pimco.
And that sent shares in Europe's biggest primary insurer by
market value down 4% in morning trading at EUR123.05, making it the
weakest stock on the DAX.
Still, the first-half results put the company on course for its
full-year operating profit targets. Allianz, which owns U.S. bond
fund-manager Pacific Investment Management Co., targets operating
profit between 10 billion euros ($11.1 billion) and EUR11 billion
for 2016.
"We stick to the midpoint of EUR10.5 billion as a good basis for
our guidance," said Chief Financial Officer Dieter Wemmer during a
media call.
Net profit fell to EUR1.09 billion from EUR2.02 billion in the
year-ago period, well shy of an average forecast of EUR1.51 billion
in a Dow Jones Newswires poll. Many analysts hadn't factored in a
EUR352 million one-time hit from Allianz's planned sale of a unit
in South Korea. Write-downs on equity investments around the time
of the Brexit vote in June also weakened the result.
Total revenue fell 2.5% to EUR29.4 billion.
Quarterly operating profit, the company's main yardstick, was
also 17% lower at EUR2.35 billion.
Allianz's closely watched asset management business, mainly
Pimco, contributed EUR498 million to operating profit, beating
analyst expectations of EUR488 million.
But Pimco still had quarterly net outflows of EUR18 billion,
after around EUR10.1 billion in the first quarter.
"Pimco remains the trouble spot," said Equinet analyst Philipp
Haessler, who kept his "buy" rating for the share.
Nevertheless, Allianz affirmed it expects Pimco's net outflows
to stop in the second half.
Of the EUR18 billion net outflows, EUR17 billion was related to
a single large customer who withdrew funds in April, Mr. Wemmer
said. He declined to name the client and said net inflows and
outflows of other Pimco customers were stable.
Pimco has been a drag on group earnings ever since the asset
manager's turbulent management reshuffle two years ago that
culminated in the abrupt exit of co-founder and chief investment
officer Bill Gross in September 2014, six months after Chief
Executive Mohamed El-Erian had quit.
Investors have yet to see a clear turnaround at Pimco. Pimco's
net asset outflows have gradually eased following an initial hiccup
that then spread over several quarters. In 2015, Pimco's flagship
Total Return Fund ceded its title as the world's largest bond
fund.
Last month, Pimco appointed a new chief executive. Emmanuel
Roman, currently chief executive of hedge-fund manager Man Group
PLC and a former Goldman Sachs Group Inc. banker, will take the
helm on Nov. 1. The present CEO, Douglas Hodge, an internal
appointment in the wake of Mr. El-Erian's departure, will assume a
role as managing director and senior adviser.
Allianz Chief Executive Oliver Baete, speaking in the same media
call, allayed fears that Allianz would in future take Pimco on a
shorter leash.
"We won't interfere in Pimco's daily business and fund
management," Mr. Baete said. "But we plan to better make use of
Pimco's know-how for the group's other products, customers and
business in different countries."
In the quarter, Allianz, like other insurers and reinsurers, had
to pay claims caused by floods in Europe, wildfires in Canada, and
hailstorms in the U.S., among others. The total bill for major
disasters amounted to around EUR1.2 billion, about twice the
year-earlier number. Of this, natural disasters cost Allianz EUR501
million.
The one-time hit from selling its South Korea life insurance and
global investors business to China's Anbang Insurance Group also
eroded earnings.
Allianz had said in May that the closing of the sale would curb
net profit by around EUR350 million. It sold the business for
around $3 million.
Last year, second-quarter earnings received a €200 million
one-time boost after Allianz sold the retail business of its U.S.
insurer Fireman's Fund to ACE Ltd.
Write to Ulrike Dauer at ulrike.dauer@wsj.com
(END) Dow Jones Newswires
August 05, 2016 07:14 ET (11:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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