Allianz Upgrades Full-Year Operating Profit Guidance

Germany's Allianz SE (ALV.XE) Friday raised its full-year guidance for operating profit, saying its performance in the first nine months put it on track to achieve a figure slightly above 9.7 billion euros ($13.1 billion), the upper end of its previous target range.

After the first nine months, it had reached an operating profit of EUR7.68 billion, up 8% from EUR7.12 billion in the same period a year earlier.

When Allianz, Europe's No. 1 insurer by market value and revenue, released second-quarter earnings in August, it had already said it is on target for the upper end of its previous target range of an operating profit of between EUR8.7 billion and EUR9.7 billion.

In the third quarter alone, operating profit of EUR2.52 billion was a tad lower than EUR2.54 billion in the same period a year earlier, mainly due to a lower contribution in the life/health insurance and asset management segments and a lower investment result. It was still above the forecast EUR2.43 billion. Asset management saw third-party net outflows, notably at Pacific Investment Management Company LLC, or Pimco. Negative currency effects such as from the weaker U.S. dollar against the euro also weakened the result, Allianz said.

Nonetheless, on a net level, profit was up 6.3% at EUR1.45 billion, also slightly above the forecast rise to EUR1.44 billion.

Total revenue was down 0.2% at EUR25.1 billion, lower than analysts' forecasts of a rise to EUR26.1 billion.

In the same quarter a year earlier, Allianz had also been able to raise its forecast for the 2012 operating profit due to a strong third quarter, when net profit rose almost sevenfold, in the absence of hits on financial sector investments and amid a dearth of natural disasters.

Allianz has property/casualty insurance, life/health insurance, asset management operations and a tiny regional banking arm.

Insurers suffer from the protracted low-interest rate environment, which makes it challenging for the sector to generate the annual returns promised to policyholders. Over recent years, the sector has gradually lowered the level of guaranteed returns, as capital market rates fell. These cuts make life insurance policies less appealing for old-age retirement so that many insurers try to come up with new products.

On the other hand, the sector is currently attracting fresh capital from outside investors, which pressures the rates primary insurers have to pay to reinsurers that are taking part of insurers' risks on their own books.

Write to Ulrike Dauer at [e-mail]; Twitter: @UlrikeDauer_

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