Allianz Quarterly Profit Sharply Down--2nd Update

  By Ulrike Dauer 
 

FRANKFURT-Allianz SE (ALV.XE) on Friday reported a 46% decline in profit for the second quarter on a high disaster bill, a substantial one-time hit from the planned sale of a unit and continuing net asset outflows at Pimco.

And that sent shares in Europe's biggest primary insurer by market value down 4% in morning trading at EUR123.05, making it the weakest stock on the DAX.

Still, the first-half results put the company on course for its full-year operating profit targets. Allianz, which owns U.S. bond fund-manager Pacific Investment Management Co., targets operating profit between 10 billion euros ($11.1 billion) and EUR11 billion for 2016.

"We stick to the midpoint of EUR10.5 billion as a good basis for our guidance," said Chief Financial Officer Dieter Wemmer during a media call.

Net profit fell to EUR1.09 billion from EUR2.02 billion in the year-ago period, well shy of an average forecast of EUR1.51 billion in a Dow Jones Newswires poll. Many analysts hadn't factored in a EUR352 million one-time hit from Allianz's planned sale of a unit in South Korea. Write-downs on equity investments around the time of the Brexit vote in June also weakened the result.

Total revenue fell 2.5% to EUR29.4 billion.

Quarterly operating profit, the company's main yardstick, was also 17% lower at EUR2.35 billion.

Allianz's closely watched asset management business, mainly Pimco, contributed EUR498 million to operating profit, beating analyst expectations of EUR488 million.

But Pimco still had quarterly net outflows of EUR18 billion, after around EUR10.1 billion in the first quarter.

"Pimco remains the trouble spot," said Equinet analyst Philipp Haessler, who kept his "buy" rating for the share.

Nevertheless, Allianz affirmed it expects Pimco's net outflows to stop in the second half.

Of the EUR18 billion net outflows, EUR17 billion was related to a single large customer who withdrew funds in April, Mr. Wemmer said. He declined to name the client and said net inflows and outflows of other Pimco customers were stable.

Pimco has been a drag on group earnings ever since the asset manager's turbulent management reshuffle two years ago that culminated in the abrupt exit of co-founder and chief investment officer Bill Gross in September 2014, six months after Chief Executive Mohamed El-Erian had quit.

Investors have yet to see a clear turnaround at Pimco. Pimco's net asset outflows have gradually eased following an initial hiccup that then spread over several quarters. In 2015, Pimco's flagship Total Return Fund ceded its title as the world's largest bond fund.

Last month, Pimco appointed a new chief executive. Emmanuel Roman, currently chief executive of hedge-fund manager Man Group PLC and a former Goldman Sachs Group Inc. banker, will take the helm on Nov. 1. The present CEO, Douglas Hodge, an internal appointment in the wake of Mr. El-Erian's departure, will assume a role as managing director and senior adviser.

Allianz Chief Executive Oliver Baete, speaking in the same media call, allayed fears that Allianz would in future take Pimco on a shorter leash.

"We won't interfere in Pimco's daily business and fund management," Mr. Baete said. "But we plan to better make use of Pimco's know-how for the group's other products, customers and business in different countries."

In the quarter, Allianz, like other insurers and reinsurers, had to pay claims caused by floods in Europe, wildfires in Canada, and hailstorms in the U.S., among others. The total bill for major disasters amounted to around EUR1.2 billion, about twice the year-earlier number. Of this, natural disasters cost Allianz EUR501 million.

The one-time hit from selling its South Korea life insurance and global investors business to China's Anbang Insurance Group also eroded earnings.

Allianz had said in May that the closing of the sale would curb net profit by around EUR350 million. It sold the business for around $3 million.

Last year, second-quarter earnings received a €200 million one-time boost after Allianz sold the retail business of its U.S. insurer Fireman's Fund to ACE Ltd.

Write to Ulrike Dauer at [e-mail]

(END) Dow Jones Newswires

August 05, 2016 07:14 ET (11:14 GMT)

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