Insurer Allianz Faces Shareholder Grilling over Pimco

By Jonathan Gould | May 7, 2014

Top Allianz executives face a grilling on Wednesday from shareholders worried about a wobbly performance at its U.S-based Pimco fund management business.

 

Europe’s biggest insurer has made a strong comeback from the financial crisis, generating record first-quarter revenue of €34 billion ($47.37 billion) this year, which it said puts it on track to achieve its full-year operating profit forecast of €10 billion [$1.3914 billion].

 

But shareholders, including some of Allianz’s largest, told Reuters last month that they were concerned about Pimco, the bond powerhouse that has had its reputation tarnished by a run of poor returns and the departure of CEO Mohamed El-Erian amid a row with co-founder Bill Gross.

 

Over the past year Pimco has seen investors pull $55 billion [€39.5 billion] from its flagship bond fund, The Pimco Total Return Fund, which is overseen by Gross.

 

Investors have also pulled almost $2 billion [€1.437 billion] from Pimco’s emerging markets debt funds during the first four months of this year as ill-timed investments in Russia, Brazil and Mexico hurt returns.

 

In the face of investor defections, Allianz’s third-party assets under management only remained stable during the first quarter because of market value increases.

 

RETHINK

 

Three top shareholders told Reuters they want Allianz to rethink the six-person management structure put in place at Pimco after El-Erian’s departure and provide greater detail on Pimco’s long-term plan to broaden its focus beyond fixed income, among other things.

 

Allianz has said little publicly about Pimco’s performance or the internal disagreements at the fund manager, which is based in Newport Beach, California, nearly 6,000 miles from Allianz’s Munich headquarters.

 

The insurer’s head of investor relations, Oliver Schmidt, said in an interview published on Allianz’s website that the company is working to address investor concerns about asset management and the fallout from rock-bottom interest rates.

 

“We are currently in the midst of extensive discussions with investors regarding both our investment and our product strategy,” Schmidt said.

 

Extensive discussions may not satisfy everyone, however.

 

Fund manager Union Investment, Allianz’s tenth-largest shareholder according to Thomson Reuters data, said it would make its concerns public at the shareholder meeting in Munich.

 

SHARE PRICE CONCERNS

 

“The Allianz share price is currently showing a clear Pimco discount,” Union fund manager Ingo Speich told Reuters.

 

Allianz shares have underperformed the STOXX Europe 600 insurance index by about 4.5 percent so far this year.

 

Investors are also keen to hear plans about Allianz’s own management structure, given that the contracts of six of its 11 board members – including Chief Executive Michael Diekmann – are due to expire at the end of the year.

 

Diekmann, who turns 60 in December, has not tipped his hand whether he wants to continue in the job.

 

Allianz has previously said that its supervisory board would take up the issue of board positions in October, far too late for investors who fear the delay may add to uncertainty surrounding the business.

 

(Reporting by Jonathan Gould; Editing by David Goodman)

 

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