Allianz Sees Flat Mid-Term Operating Profit In Italy, Spain, Portugal

Allianz SE (ALV.XE), Europe's biggest insurer by market capitalization and premium income, faces business challenges in the euro area's peripheral countries Italy, Spain and Portugal, where it expects operating profits to remain flat over the medium term, according to an online investor presentation Wednesday.

By comparison, business prospects in France, Latin America and Turkey look much better, where Allianz expects improvements both in revenues and operating profits.

Allianz didn't provide any forecast figures for those regions. In 2011, the three peripheral euro-zone countries together contributed some 14% of Allianz's total revenue of 103.6 billion euros ($127.2 billion) and about 17% of the group's operating profit of EUR7.9 billion.

Addressing the current low interest rate environment, which curbs life insurers' returns, Chief Financial Officer Oliver Baete emphasized to investors the resilience of the profit margins in Allianz's life insurance business.

"There are very strong buffers between what we are earning and new money we are investing," Mr. Baete said.

He also reiterated that Allianz has consistently derisked its investment portfolio, for instance by reducing its exposure to the financial sector, which it will continue to do. For example, it has gradually cut its stakes in Commerzbank AG (CBK.XE), UniCredit SpA (UCG.MI) and Hartford Financial Services Group Inc. (HIG).

Allianz has also "dramatically reduced" exposure to sovereign debt in peripheral euro zone countries, except for Italy, where it carefully manages exposure and duration of the bonds it holds, Mr. Baete said, citing figures that were released at the end of the first quarter.

Write to Ulrike Dauer at [e-mail]

(Alexandra Edinger contributed to this report.)

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