UPDATE: Allianz Sees 1Q Net Break-Even; Operating Profit -41%
April 29 2009 - 7:29AM
Dow Jones News
Allianz SE (AZ), Europe's largest insurer by market
capitalization, expects to break even on a net level in the first
quarter, Chief Executive Michael Diekmann said Wednesday.
The net break-even compares with a EUR1.15 billion net profit in
the first quarter of 2008.
Write-downs on financial investments and the announced EUR400
million hit related to the sale of Dresdner Bank AG are weighing on
the first-quarter result, Diekmann told shareholders here.
Allianz sold Dresdner to Commerzbank AG (CBK.XE) for around
EUR5.1 billion in a deal that closed in mid-January. Allianz has
said the total negative effect of the sale amounted to EUR6.8
billion, of which EUR6.4 billion was booked in 2008 and the
remaining EUR400 million in the first quarter.
The bank had total crisis-related markdowns of EUR6.7 billion
since mid-2007, the bulk of which was related to hits it took from
asset-backed securities, conduits, leveraged buyout commitments,
credit enhancements, monoline insurers that insure bonds, and a
Dresdner K2 structured investment vehicle, which was a pool of
risky assets the bank had to fund when the credit markets seized
up.
Earlier Wednesday, Allianz reported a 41% decline in operating
profit in the first quarter, which Diekmann attributed to the
weaker global economy, write-downs on financial investments, and
damage claims caused by winter storms in France and Spain, and
forest fires in Australia.
Meanwhile, all business segments "made a positive contribution
to the operating result," Diekmann said. After the sale of
Dresdner, Allianz has insurance and asset management operations and
a small banking business.
First-quarter operating profit is expected to fall to around
EUR1.3 billion from EUR2.2 billion a year earlier, on total revenue
of EUR27.7 billion, up 2.6% from a year earlier, the company said.
The year-ago figures have been restated to account for the Dresdner
Bank sale in discontinued operations.
The insurer's solvency ratio - a measure of its ability to meet
long-term obligations - fell to 158% at the end of March from 161%
at the end of December but was still substantially above the 100%
regulatory requirements.
Merck Finck analyst Konrad Becker said if the net break-even
were to mean "zero net profit," that would be below his
expectations.
The net figure likely reflects a higher-than-forecast hit the
property/casualty insurance business took from damage claims and
the Dresdner burden, said the analyst, who rates the shares at
hold.
The decline in operating profit will likely be due to a
substantially weaker capital investment result and asset
write-downs, but could also signal that that problems at the U.S.
operations have increased.
Diekmann called the U.S. life insurance business "a particular
challenge," reiterating that Allianz's business there will again
require "tough cost-cutting measures" and "massive product changes
this year."
Becker called positive that the solvency ratio was reached
despite crisis-related burdens from investments, and as signaling
the insurer won't need a capital increase, which CEO Diekmann
confirmed.
"Any dilution of your shareholding by a capital increase as a
result of regulatory conditions, or even intervention by the state,
are therefore not on our agenda," Diekmann told shareholders.
Allianz will report all first-quarter earnings May 13.
Company Web site: www.allianz.com
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com