Allianz Q2 net falls by half, hit by claims, unit sale

Net profits in April through June slumped by 46 percent compared with the second quarter previous year to 1.1 billion euros, driven down by a one-off 352-million-euro charge for ending its activities in South Korea as well as the costs of claims due to natural disasters and bad weather.

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Quarterly net profit was 1.1 billion euros ($1.22 billion), compared with an average forecast of 1.53 billion euros in a Reuters poll and 2.0 billion in the year-earlier quarter, which was favoured by realised gains on equity and debt investments. The Munich-based company confirmed its target for full-year operating profit of €10 billion to €11 billion, compared with €10.7 billion in 2015. The company said it earnings were burdened by claims from natural catastrophes, higher large and weather-related losses and lower returns on investments due to market turbulence.

CFO Dieter Wemmer said, “Operating profit was burdened by European floods and storms, wildfires in Canada, hailstorms in the USA, as well as lower investment income”. The expected sale of the South Korean business resulted in a charge of 352 million euros in the quarter, Allianz said. In September, co-founder and co-CIO Bill Gross announced he was leaving to join Janus Capital. Since then, Pimco lost about a quarter of its assets and now manages about $1.5 trillion. In May, Pimco’s largest fund, the Total Return Fund, saw its 38 month of outflows.

Total revenues went down 2.5 percent to 29.4 billion euros from 30.2 billion euros past year, driven by all business segments, in particular by Life and Health.

“Internal growth was strong in the second quarter, demonstrating the strength of our business”. Outflows in May and June were in line with a longer term trend of declines, it said.

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Pimco has been in a period of upheaval since 2014 when CEO and co-CIO Mohamed El-Erian abruptly left the fund manager. He will start on November 1 and report to Jacqueline Hunt, Allianz’s head of asset management. Earnings per share dropped to 2.35 euros from 4.38 euros previous year. The Bloomberg Europe 500 Insurance Index declined 21 per cent over the same time.

Gross departure has hit Allianz business Pic Getty