Allianz Sees Return to Profit after Asset Sale, Tax Changes

October 24, 2003

Germany’s Allianz said it expects to achieve “positive results” for its 2003 fiscal year, not only from improved profitability in its operations, but also following the sale of 40 percent of its stake in Beiersdorf (known mainly for its “Nivea” brand) and expected changes in tax and accounting procedures.

An Allianz bulletin characterized the sale of the Beiersdorf stake to German coffee retailer Tchibo Holdings for 4.4 billion euros ($5.2 billion) as an asset management move to further trim its holdings in German companies in order to concentrate on its core insurance businesses.

The sale, however, was seen by a number of commentators as also designed to assure that Beiersdorf remains in German hands. Tchibo already held a 30 percent stake in the company, and the acquisition of the Allianz shares represents a 19.6 percent increase in that stake, nearly 50 percent. This makes it extremely unlikely that the U.S. Procter and Gamble, who has been interested in Beiersdorf, would be able to launch a successful bid.

Allianz announced a positive trend in its operating business, particularly in its P/C units, for the first six months of 2003 and said it expected it would continue over the first nine months. “The combined ratio is estimated to amount to 97 percent. Allianz Group has continued to build on the growth trend in life and health insurance and is likely to continue the positive trend in earnings,” said the bulletin.

“In the banking segment, third quarter 2003 results after tax and minority interests have improved, despite restructuring costs, but are still slightly negative. While operating profits declined, costs were at the same level as in the second quarter of the year. Risk provisioning developed more favorable than expected. The banking segment also benefited from improved results from financial investment,” it continued.

Asked in an interview on the company’s Web site if the Beiersdorf sale marked a turning away from equity investments, Allianz CEO Paul Achleitner responded; “There’s no reason to, particularly since we have been quite successful with our investment policy and were able to outperform the market. It all depends on the right mix, in terms of the asset classes and within each individual class.

With the introduction of the euro, our investment policy is no longer limited to investing German premium income in Germany. This allows us to further diversify risks, also in equities, and will ultimately lead to a shift in our portfolio. The sale and purchase of industrial holdings will continue to be one of our core business activities. This means we will in future continue to actively buy, hold, increase, and of course, also sell.”

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