Shareholders Seek Clues to Allianz’s Plan for Pimco from New CEO

By | May 6, 2015

Allianz shareholders will see new CEO Oliver Baete installed on Wednesday and will be eager for any clues about his strategy for Europe’s largest insurer – and how he plans to improve the prospects of its asset manager Pimco.

California-based Pimco saw record outflows last year and management turmoil, including the acrimonious departure of its leader Bill Gross, known as the “Bond King.”

Investors have continued to withdraw money this year, albeit at a slower pace, and Pimco’s flagship Total Return Fund has lost its title as the world’s biggest bond mutual fund.

For the wider Allianz group, meanwhile, Baete must chart a course through perils created by rock-bottom interest rates, which have pressured the returns it can earn on investments and intensified competition with other insurers.

The 50-year-old – the company’s first new CEO in 12 years – has bought himself some time; in a joint interview with outgoing boss Michael Diekmann last month he said he planned to use the rest of 2015 to develop a strategy for the coming years.

But shareholders at the annual general meeting on Wednesday will be keen to learn how he plans to deliver on the German group’s aim of raising its dividend payout to 50 percent of net profit from 40 percent currently.

Ingo Speich, a fund manager at major Allianz shareholder Union Investment, said the group faced serious challenges in the coming years from low interest rates, new EU rules governing capital and risk management that take effect next year and the expansion of its digital business.

But he added: “We don’t expect any radical strategy change.”

PIMCO RUCTIONS
Expectations of continuity are supported by the fact that Baete has been with Allianz since 2008, and has rotated through the positions of chief operating officer, chief financial officer and member of the board responsible for insurance in western and southern Europe as preparation to take the helm.

The headline-grabbing ructions at Pimco last year had prompted some large shareholders to demand Allianz take action to exert more control over the business, which contributes more than a fifth of group operating profit.

There have been suggestions that the insurer could spin off the unit but these have been firmly rejected by Baete and Diekmann, who cited the “enormous synergies” between asset management and life insurance in the joint interview with Germany’s Manager Magazin.

However Diekmann also warned net outflows at Pimco were expected to continue in the full year.

Allianz managed to raise operating profit by 3 percent to €10.4 billion [$11.685 billion] last year and is aiming to match that result in 2015, plus or minus €400 million [$450 million] depending on how capital markets and damage claims develop.

Setting ever new records appears increasingly tough, a high-ranking manager at the insurer told one of its major shareholders in a closed-door meeting recently.

“A significant beat of 2014 will be difficult,” the manager said.

(Additional reporting by Kathrin Jones; Editing by Pravin Char)

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