Allianz SE (ALV), Europe’s biggest insurer, confirmed its full-year operating profit target after first- quarter net income climbed 60 percent on lower disaster claims.
Net income rose to 1.37 billion euros ($1.76 billion) from 857 million euros a year earlier, the Munich-based insurer said in a statement today. Operating profit advanced 40 percent to 2.33 billion euros.
Allianz, which reported preliminary figures last week, confirmed its full-year operating profit target of 7.7 billion euros to 8.7 billion euros. Chief Executive Officer Michael Diekmann told shareholders at the May 9 annual meeting that low interest rates threaten insurers over the long term as the industry recovers from record claims related to earthquakes and floods in Japan and Thailand last year.
“Revenues in property and casualty insurance are at record levels, and operating profit is on track,” Chief Financial Officer Oliver Baete said in the statement. “Even though there was a lower incidence of natural catastrophes this quarter, we are seeing a trend toward higher natural catastrophe impacts. For this reason, we have increased our 2012 budget for these impacts to 1.2 billion euros.”
Europe’s biggest insurers and the reinsurers who help them shoulder risks for clients are using last year’s catastrophes to push through higher prices for coverage. Natural disasters caused less than $3 billion of insured losses for insurers and reinsurers in the first quarter, down from almost $53 billion a year earlier, according to estimates from Aon Benfield, the world’s biggest reinsurance broker.
The company’s shares fell 9 euro cents, or 0.1 percent to 77.06 euros at 10:46 a.m. in Frankfurt today. They gained 4.3 percent this year, giving Allianz a market value of 35 billion euros. That compares with the 1.9 percent increase in the 28- member Bloomberg Europe 500 Insurance Index. (BEINSUR)
Allianz’s property and casualty insurance unit, typically the most important in terms of profit, reported a 50 percent increase in net income to 836 million euros in the quarter while premium income rose 3.8 percent to 14.8 billion euros.
“The segment benefited from both positive price and volume effects,” Allianz said.
The unit’s spending on claims and other costs as a percentage of premiums, also known as the combined ratio, improved to 96.2 percent from 101.3 percent a year earlier. A ratio above 100 percent means an insurer’s claims and costs exceed premium income, giving it a loss from underwriting.
The combined ratio at the German property and casualty division, its biggest non-life unit by premium income, improved to 98 percent from 98.5 percent, Allianz said in a presentation posted on its website. Allianz has set a goal to lower the measure to 95 percent by 2014. It also plans cost cuts to improve the unit’s operating profit by more than 500 million euros. The insurer is “on plan” with the initiative, Markus Riess, the company’s head of German operations, said in an interview earlier this month.
Profit at the life- and health-insurance division climbed 30 percent to 626 million euros, Allianz said. Statutory premiums fell 4 percent to 13.7 billion euros.
The firm’s asset-management unit, which includes Newport Beach, California-based Pacific Investment Management Co., saw profit increase 23 percent to 379 million euros in the quarter. Total assets under management rose 11 percent to 1.7 trillion euros while third-party assets under management rose to 1.3 trillion euros from 1.1 trillion euros the year before.
Allianz gave Pimco greater independence last year by separating it from the other asset managers, which are combined in the Allianz Global Investors unit. Both are part of the Allianz Asset Management holding, led by management board member Jay Ralph.
Pimco had 516 million euros in operating profit in the first quarter with 1.33 trillion euros of assets under management, while Allianz Global Investors reported operating profit of 78 million euros and had 295 billion euros of assets under management, Allianz said in the presentation.
Allianz booked a net gain of 84 million euros from its investment in Hartford Financial Services Group Inc. (HIG:US) after the U.S. insurer repurchased of $2.43 billion of subordinated debentures and warrants from Allianz last month. Allianz also expects two-digit million-euro gains from the investment in the second-quarter, Allianz CFO Baete said in a media conference call today.
Option to Buy
Hartford turned to Allianz in October 2008, agreeing to pay 10 percent on $1.75 billion of debt as capital markets froze. The German insurer also bought warrants, which gave Allianz the option to buy 69.3 million shares for $25.23 each. Allianz owns about 5 percent of Hartford. Allianz hasn’t yet decided on future plans for its stake in Hartford, Baete said.
Allianz got shareholder approval at last week’s annual meeting to list its stock on Chinese markets. It also appointed Helmut Perlet, its former chief financial officer, to succeed Supervisory Board Chairman Henning Schulte-Noelle, who didn’t stand for re-election.
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