(Updates with CEO comment in fifth paragraph.)
Feb. 23 (Bloomberg) -- Allianz SE, Europe’s biggest insurer, proposed an unchanged dividend after fourth-quarter earnings missed estimates on Greek debt writedowns and natural- disaster losses.
Net income dropped 57 percent to 492 million euros ($652 million), the Munich-based insurer said today, short of the 876 million-euro mean estimate of 18 analysts surveyed by Bloomberg. Allianz will keep the dividend at 4.50 euros a share and is targeting operating profit of 7.7 billion euros to 8.7 billion euros this year, compared with 7.87 billion euros in 2011.
Insurers are seeking higher prices for their policies as low interest rates, natural disaster losses and writedowns on investments related to the sovereign-debt crisis weigh on earnings and capital buffers. Allianz, led by Chief Executive Officer Michael Diekmann, 57, had its credit rating placed on a negative outlook by Standard and Poor’s on Jan. 27. That threatens the insurer’s AA long-term rating, the highest among the 28 members of the Bloomberg Europe 500 Insurance Index.
“The impairments were one of the major problems,” said Konrad Becker, a Munich-based analyst at Merck Finck & Co. “The 2012 target is rather conservative considering that writedowns should have peaked last year.”
Allianz considers “a large portion” of its writedowns booked in 2011 to be one-time adjustments, Diekmann told reporters in Munich.
Net income in 2011 dropped 50 percent to 2.55 billion euros as Allianz booked 1.9 billion euros of non-operating impairments on Greek sovereign debt and investments, particularly in financials. The insurer wrote down its Greek bonds to market values at the end of 2011, representing 24.7 percent of their nominal value.
“2011 was a tough year, but we maintained our stability throughout,” said Diekmann, adding that the company “refrained” from boosting earnings through asset sales. While he doesn’t see “any urgent need to act,” Allianz will take a “very close look” at any acquisition opportunities.
Allianz rose 1.1 percent to 90.79 euros as of 12:37 p.m. in Frankfurt, giving the company a market value of 41 billion euros. The stock has climbed 23 percent this year compared with a 14 percent gain in the Bloomberg Europe 500 Insurance Index. Axa SA, Europe’s second-biggest insurer, has advanced 22 percent and Zurich Financial Services AG, Switzerland’s biggest insurer, 5.3 percent over the same period..
Allianz’s proposed 2011 dividend reflects a payout ratio of 81 percent, the firm said in a presentation posted on its website. The company said in November it may pay out more than its usual target of 40 percent of profit as a dividend for 2011. The insurer’s solvency ratio, a measure of its ability to absorb losses, increased to 179 percent at the end of last year from 173 percent the year before.
The property and casualty insurance unit, typically the most important in terms of profit, reported a 2.5 percent decrease in operating profit to 4.2 billion euros in 2011, which the company described as “the costliest year in the history of Allianz for natural catastrophes.”
The unit’s spending on claims and other costs as a percentage of premiums, also known as the combined ratio, worsened to 97.8 percent from 97.2 percent a year earlier with natural catastrophes representing 4.4 percentage points after 3.2 percentage points a year ago, Allianz said. A combined ratio above 100 percent means an insurer’s claims and costs exceed premium income, giving it a loss from underwriting.
“Our property and casualty insurance segment remains robust,” Chief Financial Officer Oliver Baete said in the statement. “Selective underwriting and cost discipline have protected the profitability of this segment.”
Operating profit at Allianz’s asset-management unit, which includes Newport Beach, California-based Pacific Investment Management Co., rose 9.5 percent to 2.26 billion euros, while the life- and health-insurance division reported a 16 percent decline to 2.42 billion euros as the company “focused on business with good margins and protected profitability and capital.”
Zurich Financial last week reported fourth-quarter profit that missed analysts’ estimates, declining 46 percent to $557 million after losses from Thai floods and other natural catastrophes. Paris-based Axa reported an 82 percent drop in second-half profit to 325 million euros after writedowns on Greek sovereign debt and a one-time cost at its U.S. variable- annuity life-insurance book.
--With assistance from Mariajose Vera in Munich. Editors: Dylan Griffiths, Keith Campbell.
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