Bloomberg News

Allianz Profit Beats Estimates on Life, Health Unit

August 03, 2012

Allianz Chief Executive Officer Michael Diekmann

Allianz Chief Executive Officer Michael Diekmann said, “Our operative business is stable and remains on course.” Photographer: Guenter Schiffmann/Bloomberg

Allianz SE (ALV) and Axa SA, Europe’s biggest insurers, reported profit that beat analysts’ estimates, helped by higher earnings at their life and health businesses.

Net income at Munich-based Allianz rose 23 percent to 1.23 billion euros ($1.5 billion) in the second quarter, beating the 1.15 billion-euro average estimate of 13 analysts surveyed by Bloomberg. First-half net income at Paris-based Axa fell a smaller-than-estimated 36 percent after year-earlier gains from asset sales weren’t repeated.

Allianz reiterated its full-year operating profit target of 7.7 billion euros to 8.7 billion euros as the insurance industry recovers from record claims related to earthquakes and floods in Japan and Thailand last year. Insurers are struggling to cover payments to life policyholders as Europe’s sovereign debt crisis depresses interest rates.

“These results show good resistance,” said Jacques-Pascal Porta, who helps manage 500 million euros at Ofi Gestion Privee in Paris, including Allianz and Axa (CS) shares. “These big insurers dealt with sovereign crisis risks better than banks.”

Allianz rose 3.7 percent to 81.49 euros by 11:46 a.m. in Frankfurt trading, bringing this year’s gain to 10 percent. Axa advanced 3.6 percent to 10.05 euros in Paris, trimming its 2012 decline to 0.3 percent.

Property, Casualty

Europe’s biggest insurers and the reinsurers who help them shoulder risks for clients used last year’s catastrophes to push through higher prices for coverage. Natural disasters caused an estimated $5.48 billion of insured losses for insurers and re- insurers in the second quarter, down from more than $27 billion a year earlier, according to estimates from Aon Benfield, the world’s biggest reinsurance broker.

“Our operative business is stable and remains on course,” Allianz Chief Executive Officer Michael Diekmann, 57, said in the statement. “Despite the challenging environment, we confirm our outlook.”

Allianz’s property and casualty unit, typically the most important in terms of earnings, raised prices by 1.4 percent, the insurer said. Profit at the business fell 15 percent to 807 million euros in the quarter after the company boosted reserves by 120 million euros following last year’s Thai floods.

The unit’s spending on claims and other costs as a percentage of premiums, also known as the combined ratio, worsened to 97.4 percent from 95 percent a year earlier. That compares with the average 96.6 percent estimate of 11 analysts surveyed by Bloomberg. A ratio above 100 percent means an insurer’s claims and costs exceed premium income, giving it a loss from underwriting.

Life, Health

Allianz’s life- and health-insurance division saw net income more than double to 506 million euros, helped by reduced impairments and gains from selling assets. Operating profit at the unit rose 21 percent to 821 million euros.

Net investment income advanced to 5.66 billion euros in the quarter from 4.52 billion euros a year ago, helped by currency gains, the company said in a presentation on its website. Allianz wrote down its Greek debt holdings by 326 million euros in the year-earlier period.

The firm’s asset-management unit, which includes Newport Beach, California-based Pacific Investment Management Co., posted an increase in profit of more than 19 percent to 345 million euros in the quarter. Assets under management rose almost 16 percent to 1.7 trillion euros while third-party funds the company oversees climbed to 1.4 trillion euros from 1.2 trillion euros.

Axa Targets

Axa’s asset management earnings rose 2 percent to 159 million euros in the first half. The business had 7.7 billion euros of net outflows, mostly in the first quarter, figures from Axa show. AllianceBernstein Holding LP, the New York-based fund- management unit, had 5.2 billion euros of outflows in the half.

Axa, led by Chief Executive Officer Henri de Castries, 57, is expanding in Asia as it aims for 10 percent annual growth in operating earnings a share through 2015. The French insurer last year set a 2015 target to reach annual operating profit of 6 billion euros, compared with 3.88 billion euros in 2010. Axa is “perfectly in line” with its cost-cutting and productivity targets, de Castries said in an interview on Axa’s website.

Property and casualty earnings climbed 6 percent to 1.04 billion in the first six months of the year. Average price increases of 3 percent boosted the unit’s revenue, the company said in a statement today. The combined ratio improved to 96.4 percent from 97.2 percent.

Profit at Axa’s life-and-savings business, the insurer’s largest, increased 7 percent to 1.41 billion euros, beating analysts’ estimates. First-half annual premium equivalent, a common measure of sales for insurers, rose 11 percent to 1.25 billion euros at health-and-protection, which includes coverage for critical illnesses and long-term nursing care, Axa said.

“Our strategy has been for several years now to develop in business lines that are not market sensitive -- property and casualty, health, protection,” Chief Financial Officer Gerald Harlin said on a call with journalists.

To contact the reporters on this story: Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net; Oliver Suess in Munich at osuess@bloomberg.net Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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