Allianz SE (ALV), Europe’s biggest insurer, said third-quarter profit jumped more than sixfold, helped by its insurance and asset-management units and as year-earlier writedowns were not repeated.
Net income rose to 1.34 billion euros ($1.7 billion) from 196 million euros a year ago, the insurer said in a statement from Munich today. Allianz’s non-operating impairments in the quarter totaled 56 million euros compared with 931 million euros a year earlier, including losses on investments in banks and insurers and a 122 million-euro Greek debt writedown.
Allianz, led by Chief Executive Officer Michael Diekmann, on Oct. 29 raised its full-year operating profit target to more than 9 billion euros from a previous estimate of as much as 8.7 billion euros, citing “better-than-expected performance across all segments.” The asset-management arm, which includes Newport Beach, California-based Pacific Investment Management Co., did “especially” well, it said.
Hurricane Sandy struck the U.S. East Coast on the same day that Allianz raised the forecast. The, which storm left millions without power and crippled transit systems, may cost insurers and reinsurers $10 billion to $20 billion, according to Eqecat Inc., a provider of catastrophic risk models.
Allianz shares fell 0.2 percent to 94.13 euros in Frankfurt yesterday, paring this year’s advance to 27 percent. The 26- member Bloomberg Europe 500 Insurance Index (BEINSUR) has gained 24 percent in 2012 and Paris-based Axa SA (CS), Europe’s second-largest insurer, climbed 19 percent.
Axa earlier this week revised down its earnings targets through 2015, saying “unfavorable” financial markets are weighing on life insurance and asset management. It expects operating-earnings-per-share to grow 5 percent to 10 percent yearly until 2015 against a previous 10 percent target, it said.
Even after Hurricane Sandy’s damage, Munich Re, the world’s largest reinsurer, and Hannover Re (HNR1), the world’s fourth biggest, raised their full-year earnings forecasts. Higher investment income contributed to better-than-expected profit in the third quarter, they said earlier this week.
At Allianz, the contribution of asset management to operating profit almost tripled over the past five years. The increase was driven by Mohamed El-Erian and Bill Gross-led Pimco, which the insurer acquired more than a decade ago.
Allianz’s asset-management unit reported a 57 percent higher profit of 521 million euros in the quarter. Total assets under management rose 15 percent to 1.8 trillion euros, while third-party assets climbed 11 percent to 1.42 trillion euros.
Pimco had 1.5 trillion assets of Allianz’s assets under management and reported an operating profit of 748 million euros in the quarter. It was separated from the insurer’s other managers last September to give it more independence. Allianz Global Investors, which combines Allianz’s other asset management operations, reported 302 billion euros of assets under management and 77 million euros in operating profit.
Jay Ralph, the Allianz management board member who oversees asset management, said in an interview last month that inflows remained “strong.” Allianz will increase the unit’s operating profit, excluding currency movements, by 5 percent to 10 percent “over a full cycle,” he said. Contribution to Allianz’s operating profit almost tripled to 27 percent over the past five years.
At the life- and health-insurance division, net income more than doubled to 540 million euros, helped by an improved investment result after the year-earlier impairments.
The property and casualty insurance unit, typically the most important in terms of earnings, reported an increase of 59 percent in net income to 814 million euros in the quarter. The unit’s spending on claims and other costs as a percentage of premiums, also known as the combined ratio, improved to 96.3 percent from 97.6 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.
“Our property and casualty insurance business has benefited from positive pricing effects and lower claims from natural catastrophes,” said Chief Financial Officer Oliver Baete, who will swap jobs with management board member Dieter Wemmer at the end of the year to take over responsibility for western European insurance except Spain, Portugal and the German-speaking countries, and global property and casualty.
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