UPDATE: Allianz 1Q Net EUR29 Million; No Concrete 09 Earnings Goal
May 13 2009 - 4:04AM
Dow Jones News
Allianz SE (AZ), Europe's largest primary insurer by market
capitalization, Wednesday reported a substantial decline in
first-quarter net profit, on crisis-triggered write-downs on
financial investments, a charge related to the sale of Dresdner
Bank and higher claims costs.
The company gave no concrete earnings target for 2009, saying
that the environment for financial services companies will remain
"challenging" and that it can't rule out "further impairments, or
indeed credit defaults on corporate bonds," which amount to about
EUR50 billion, excluding banks, in its bond portfolio. Investment
margins in its life-health portfolio will remain vulnerable to
weaker financial markets.
It said, however, that the group's "underlying fundamentals in
our operations are healthy" and that it is "able to withstand a
prolonged difficult market environment." Its solvency ratio - a
measure of its ability to meet long-term obligations - fell to 159%
at the end of March from 161% at the end of December but was still
substantially above the 100% regulatory requirements. It also said
it accrued a EUR200 million dividend equivalent in the first
quarter.
First-quarter net profit fell 98% to EUR29 million from EUR1.15
billion in the year-earlier quarter. Net profit from continuing
operations, which excludes the negative contribution of EUR395
million still associated with the sale of Dresdner Bank, fell 69%
to EUR424 million from EUR1.38 billion.
Chief Executive Michael Diekmann, had at the annual general
meeting last month prepared markets for a break-even figure at the
net level.
Total revenue rose 2.8% to EUR27.7 billion from EUR27 billion a
year earlier, in line with the preliminary figure of EUR27.7
billion provided by the company at the AGM.
Operating profit was down 36% to EUR1.42 billion from EUR2.21
billion, but above Allianz's announcements at the AGM, when it said
it expected a decline in operating profit to around EUR1.3
billion.
The figure was pressured mainly by write-downs on investments in
the company's life-health insurance portfolio and higher costs for
damage claims that hurt the underwriting result in property and
casualty insurance.
All three business segments contributed positive, though lower,
operating profit, with the insurance segments the hardest hit.
After the sale of Dresdner, Allianz has insurance and asset
management operations and a small banking business.
Diekmann had attributed the lower operating profit to the weaker
global economy, write-downs on financial investments, and damage
claims caused by winter storms in France and Spain, as well as
forest fires in Australia.
In the quarter, Allianz realized net losses and impairments on
investments of EUR498 million compared with EUR13 million in gains
in the year-earlier quarter. As a result of higher claims costs,
including losses in credit insurance, the combined ratio, which
compares costs and revenue and strips out the investment result,
rose to 98.5% from 94.8%. A figure below 100% means the
underwriting business is profitable. In coming quarters, the
combined ratio is expected to benefit from efficiency gains.
Allianz sold Dresdner Bank to Commerzbank last year for around
EUR5.1 billion, with the closing in mid-January. Allianz has said
the total burden related to 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 has had total crisis-related
mark-downs of EUR6.7 billion since mid-2007.
Landesbank Baden-Wuerttember analyst Robert Mazzuoli said the
final figures were "slightly better than the preliminary figures"
presented at the AGM, with life insurance business a positive
surprise, as "the traditional business in mainland Europe proved to
be more resilient than we had thought," while the combined ratio
disappointed. Mazzuoli, who rates the shares at buy, said he
expects a limited impact on Wednesday's share price moves "due to
the mixed picture of the business segments.
At 0714 GMT, Allianz shares were down EUR1.21, or 1.6%, at
EUR74.38, underperforming the wider market, which was up slightly.
The share has lost 41% over the past 12 months, bringing the
company's current market value to around EUR34 billion.
Company Web site: www.allianz.com
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com