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Allianz SE, Europe’s biggest insurer, increased its full-year earnings goal after third-quarter profit rose 6.3 percent, beating analysts’ estimates.
Net income advanced to €1.45 billion ($1.946 billion) from €1.36 billion [$1.825 billion] a year earlier, the Munich-based company said in a statement today. That compared with the €1.37 billion [$1.838 billion] average estimate of 14 analysts surveyed by Bloomberg. Natural disasters, especially storms that hit Germany and Ireland in July and August, cost the insurer €464 million [$622.7 million] in the quarter, it said.
Allianz, led by Chief Executive Officer Michael Diekmann, 58, raised its target for operating profit this year to “slightly above” €9.7 billion [$13 billion] from a previous range of €8.7 billion [$11.675 billion] to €9.7 billion. It reported €9.5 billion [$12.75 billion] for 2012. The company said in August that the upper end of that target range was “in reach” after reporting operating profit of €5.16 billion [$6.92 billion] in the first half. The figure was €7.68 billion [$10.31 billion] for the first nine months.
“This is the second quarter in a row that saw major natural catastrophes,” Dieter Wemmer, the company’s chief financial officer, said in the statement. “And yet, we were able to increase profits.”
Allianz shares fell 0.7 percent to €123 [$165] in Frankfurt yesterday, paring gains this year to 17 percent and valuing the company at €56.1 billion [$75.286 billion]. That compares with a 23 percent increase for the Bloomberg Europe 500 Insurance Index.
Tougher Regulation
Operating profit at Allianz’s property and casualty insurer, typically the most important in terms of earnings, advanced 6.4 percent to €1.24 billion [$1.665 billion] from a year earlier, as higher earnings in Italy and at the Allianz Global Corporate and Specialty commercial insurance unit helped offset a decline in storm-struck Germany.
Insurance industry losses from this year’s floods and hailstorms in Germany may be as high as €5 billion [$6.71 billion], Hannover Re, the world’s third-biggest reinsurer, said two weeks ago. The Oct. 28 storm Christian, also known as St. Jude in the U.K., which mostly hit Germany and Denmark, may cost the industry €1.5 billion to €2.3 billion [$2 to $3 billion], catastrophe modeling firm AIR Worldwide said yesterday.
Operating profit at Allianz’s life and health insurance division decreased 5.6 percent to €769 million [$1.032 billion] on a lower investment result in Germany and “investment de-risking in Italy,” the company said.
Asset Management
Third-quarter operating profit at the asset-management unit, which includes Newport Beach, California-based Pacific Investment Management Co., declined 11 percent annually to €754 million [$1.012 billion]. Third-party managed assets at the unit shrunk by 2.4 percent to €1.4 trillion [$1.8788 trillion] in the quarter, which according to Allianz “mainly reflects the impact of a weaker U.S. dollar.”
The asset management unit had third-party net outflows of €26.7 billion [$35.83 billion] in the quarter, mainly from traditional fixed-income products, Allianz said. That compared to net inflows of €31.5 billion [$42.273 billion] a year ago.
Allianz CEO Diekmann said in an interview last month that a plan by Pimco to expand into equities is proving harder than expected. At the same time, Bill Gross’s Pimco Total Return Fund lost its position as the world’s biggest mutual fund. It has shrunk by $37.5 billion since the start of this year, ending last month with $247.9 billion in assets, according to data provided by Pimco and compiled by Bloomberg. The Vanguard Total Stock Market Index Fund ended October with $251 billion.
Lower Amortization
Allianz’s third-quarter earnings were boosted by a €94 million [$126.15 million] increase in non-operating earnings, mainly due to lower amortization of intangible assets and lower acquisition- related expenses.
Tougher financial regulation such as Solvency II and Basel III will create takeover opportunities for Allianz, especially as mutual insurers may find it difficult to raise capital depleted by low interest rates or high disaster claims, Diekmann said in an interview last month.
Solvency II, intended to harmonize the way insurers in Europe allocate capital against the risks they take, was originally scheduled to come into force in 2012. It has been delayed several times over issues such as the treatment of long- term guarantees and may now be implemented on Jan. 1, 2016 with a transitional period.
–Editors: Mark Bentley, Dylan Griffiths