Allianz Q4 Profit Misses Estimates; Shares Drop

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Allianz SE, Europe’s biggest insurer, posted fourth-quarter earnings that missed analysts’ estimates and said operating profit may decline this year amid low interest rates. The shares fell.

Net income grew to €1.26 billion euros ($1.72 billion) in the quarter from €1.24 billion [$1.7 billion] in the year-earlier period, the Munich-based company said in a statement today. That compared with the €1.31 billion [$1.788 billion] average estimate of 13 analysts surveyed by Bloomberg.

Insurers and reinsurers are focused on bolstering earnings from underwriting as lower interest rates weigh on investment returns. Allianz, led by Chief Executive Officer Michael Diekmann, 59, is targeting €9.5 billion [$12.966 billion] to €10.5 billion [$14.33 billion] of operating profit this year after earning €10.1 billion [$13.784 billion] in 2013, the company said.

“We continue to see more downside risk than upside risk at Allianz,” Thomas Seidl, an analyst at Sanford Bernstein in London, said in an e-mailed report to clients. Property and casualty insurance “is the only segment improving while we see margins compressing in life and falling profits at Pimco.”

Allianz shares lost 2.4 percent to €127.8 [$174.42] at 9:10 a.m. in Frankfurt. Losses this year totaled 1.8 percent compared with a gain of 1.9 percent for the Bloomberg Europe 500 Insurance Index.

The share declined as Allianz said it will raise its dividend payout for 2013 to €5.30 [$7.23] per share from €4.50 [$6.14]. That matched a Bloomberg forecast.

Asset Management

At Allianz’s asset-management unit, which includes Newport Beach, California-based Pacific Investment Management Co., or Pimco, operating profit fell 23 percent to €703 million [$959.5 million] in the fourth quarter. Assets under management declined 4.4 percent to €1.77 trillion [$2.4157 trillion] at the end of December from a year earlier amid negative foreign currency exchange effects of a weak dollar, Allianz said.

Following last month’s surprise resignation of Pimco Chief Executive Officer Mohamed El-Erian, the asset manager named six deputy chief investment officers to emphasize the depth and breadth of its investment talent. El-Erian had shared the role of co-chief investment officer with Bill Gross.

Clients pulled a record $41 billion from the $237 billion Pimco Total Return fund last year as investors turned away from bonds. The fund had redemptions of $3.5 billion in January, the ninth straight month of withdrawals and the lowest since May, according to estimates from Morningstar Inc. this month.

“Our Asset Management has further diversified its products and geographic base,” Dieter Wemmer, Allianz’s chief financial officer, said in the statement. “Thus, even though growth in assets under management went through a lull in 2013, I am optimistic about the continued strength of the segment.”

Diekmann said in an interview in October that a plan by Pimco to expand into equities is proving harder than expected.

Casualty Insurance

Diekmann, whose current contract as CEO ends in 2014, may remain in the position for two more years, Manager Magazin reported on Feb. 19.

Allianz’s property and casualty insurance unit was the only division to make a profit in the fourth quarter. Operating earnings rose 26 percent to €1.53 billion [$2.088 billion]. The unit’s spending on claims and other costs as a percentage of premiums, known as the combined ratio, improved to 92.2 percent from 95.3 percent a year earlier. A ratio below 100 percent means an insurer is making a profit from underwriting.

Profit from life and health insurance dropped 14 percent to €416 million [$568 million]. A unit Allianz terms “Corporate and Other” saw earnings slide 35 percent to €261 million [$356 million].

–Editors: Mark Bentley, Jon Menon