Allianz Central and Eastern Europe Operations 1st Half Results

August 14, 2012

Allianz said its Central and Eastern Europe (CEE) operations “produced solid underlying results for the first six months of 2012 in challenging economic circumstances.” The regional companies reported total revenues of for the first six months amounted of €2.053 billion [$2.54 billion] compared to €2.0471 billion [$2.532 billion] in the same period last year, “despite unfavorable foreign currency effects.”

Operating profit for the first half of 2012 declined 6.3 percent to €133 million [$164.52 million] from €142 million [$175.65 million] in the prior year period. Allianz noted that a “main driver of negative development was the Hungarian crisis tax for 2012 which already had to be fully booked in the first half of the year and affected both Property and Casualty insurance and the Life and Health insurance.

“Adverse claims experience in Property and Casualty insurance business in Slovakia also affected operating profit. These impacts were partially offset by positive developments elsewhere in the region, notably in Property and Casualty business in Poland where claims costs improved significantly.”

Allianz also indicated that at “€99 million [$122.46 million], net income in the first two quarters of 2012 was 28 percent lower than the €138 million [$170.71 million] earned in the same period in 2011. Significant non-recurring items in both periods make up the majority of the large year-on-year deviation in net income.” In addition the first half of 2012 “contains restructuring charges and write-downs of intangible assets in Russia of around €12 million [$14.84 million], the first half of 2011 benefited from a €20 million [$24.74 million] deferred tax credit arising out of the loss on disposal of the Bank in Poland.”

The report also indicated that “Allianz operations in most of the CEE region saw lower revenue levels due to a contracting market amid worsening economic conditions, as well as strong price competition. A notable exception was Allianz in Croatia, which managed to grow despite a declining market.”

Gross premiums written in the group’s P&C operations declined by 8 percent to €1.272 billion [$1.5735 billion] in the first six months of 2012 compared to €1.383 billion [$1.7108 billion] over the same period in 2011. Unfavorable foreign exchange effects amounted to €38 million [$47 million].

Operating profit for the first six months of 2012 in the P&C sector declined by 6.2 percent to €76 million [$94 million] from €81 million [$100.20 million] last year. In addition the sector’s “combined ratio rose by 1.5 percentage points to 98.1 percent from 96.6 percent.

“Both measures were adversely impacted by the Hungarian crisis tax booking, which burdened the operating profit of the first 6 months of 2012 with €13 million [$16.08 million] and the combined ratio with 1.3 percentage points. Excluding this effect, which will unwind over the second half of 2012, first half 2012 operating profit was 10 percent higher than in 2011.”

Allianz said its “operations in Poland, Russia and Ukraine showed improved operating profit but these were outweighed by several major impacts from other markets in the first half of the year. Allianz in Hungary suffered from the already mentioned crisis tax, while other entities in CEE recorded significantly higher weather related claims, most notably in Bulgaria.

“In Russia the integration of CJSC Allianz Russia, OJSC IC Progress Garant and OJSC IC ROSNO was successfully completed at the beginning of the second quarter. In the process, the newly created company was re-branded to Allianz Russia. With this step, Allianz in Russia is well positioned to participate in the fast-growing Russian market.

Bruce Bowers, regional CEO of Allianz in Central and Eastern Europe commented: “The introduction of new taxes as well as a higher level of natural catastrophes have impacted our profitability.

“The economic situation is very difficult but we are expecting it to improve next year. Nonetheless throughout the economic cycle our fundamentals remain robust with a consistent focus on maintaining our margins. With the new setup in Russia we will continue to strengthen our position among the top players in this key market.”

Source: Allianz

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