Allianz First-Quarter Operating Profit Falls 41% (Update2)

By Oliver Suess and Mike Gavin
National Underwriter News
April 29, 2009

April 29 (Bloomberg) -- Allianz SE, Europe's biggest insurer by market value, said first-quarter operating profit fell 41 percent, hurt by the financial crisis and natural disasters.

Operating profit dropped to 1.3 billion euros ($1.7 billion) from 2.2 billion euros a year earlier, the Munich-based insurer said in an e-mailed statement today, citing preliminary figures. That was in line with the median estimate of 1.33 billion euros from five analysts surveyed by Bloomberg.

Insurers' earnings are suffering as the recession and credit shortage roil capital markets, sapping demand for policies linked to stocks and cutting the value of investments. Chief Executive Officer Michael Diekmann today said he expects Allianz to break even in the first quarter and added that the insurer doesn't need to raise capital to prop up its finances.

"Any dilution by a capital increase as a result of regulatory conditions, or even intervention by the state, are not on our agenda," Diekmann, 54, told shareholders at the company's annual general meeting today in Munich.

Allianz rose 87 cents, or 1.3 percent, to 68.27 euros as of 11:36 a.m. in Frankfurt. The shares declined 47 percent during the past 12 months, as the 33-member Bloomberg Europe 500 Insurance Index lost 46 percent.

Allianz's total revenue rose to 27.7 billion euros from 27 billion euros a year earlier. Its solvency ratio, a measure of its ability to absorb losses, fell to 158 percent from 161 percent at the end of 2008, Allianz said.

'More Reliable'

Writedowns on the insurer's investments as well as claims from winter storms in Europe and bushfires in Australia hurt profit in the first quarter, Diekmann said, without elaborating.

"Today's news proves that Allianz has become more reliable regarding its results," said Robert Mazzuoli, an analyst at Landesbank Baden-Wuerttemberg who has a "buy" rating on the stock. "It's reassuring that no new problems have surfaced and an even better second quarter can be expected."

Diekmann stopped a seven-year foray into full-scale banking when he sold Dresdner Bank to Commberzbank AG for 5.1 billion euros. The transaction, completed Jan. 12, will result in charges of 400 million euros in the first quarter. Allianz is scheduled to report final figures for the first three months of 2009 on May 13.

Allianz on Nov. 8 scrapped its operating profit forecasts for 2008 and 2009 because of the turmoil in financial markets. It had targeted operating profit, excluding banking, of 9 billion euros for 2008 and 2009.

Hartford Investment

Allianz's investment in U.S. insurer Hartford Financial Services Group Inc. is "a financial investment," with the purpose to shift investments in European financial securities to the U.S., Diekmann told shareholders today.

The insurer bought about $2.5 billion of Hartford's stock and debt on Oct. 6. Allianz now owns 7 percent of Hartford and has a seven-year option to increase that stake to 24 percent.

Losses at Hartford's life insurance division eroded capital and led to three credit downgrades by Standard & Poor's this year. The company, based in the Connecticut city of the same name, is seeking bids for its profitable property and casualty insurance business from rivals including Travelers Cos., people familiar with the matter said last week.

Allianz booked a fourth-quarter writedown of 318 million euros on its investment in the U.S. insurer. Hartford's shares dropped 64 percent since Allianz's investment.

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