Munich Allianz exceeded analysts’ expectations in the second quarter. In the months from April to the end of June, Europe’s largest insurer achieved an operating profit of 3.5 billion euros. On average, analysts had expected earnings of just over 3.3 billion euros.
The property and casualty insurance line proved to be the main growth driver, while life and health insurance was below the previous year’s result. For the year as a whole, the group confirmed its profit forecast of 13.4 billion euros, with a range of one billion euros up and down.
CEO Oliver Bäte was optimistic about the further course of the year. “We are well positioned to deal with the impact of high inflation and economic pressures, which are particularly being felt in Europe.”
Allianz had largely solved its biggest problem to date, but the expensive consequences of this are still reflected in the numbers. In May, the group made a further provision of EUR 1.9 billion for failed speculation about structured alpha funds from the subsidiary AGI in the USA, bringing the total amount of provisions to EUR 5.6 billion.
Top jobs of the day
Find the best jobs now and
be notified by email.
This is now reflected in the quarterly surplus. In the second quarter, net income attributable to shareholders was 1.7 billion euros, around half a billion euros below the previous year’s result. If you look at the entire first half of the year, the effects are even clearer: only 2.3 billion euros remained this time and thus less than half of the 4.8 billion euros from the same period last year.
Charges on the annual surplus
There were also consequences for the return on equity (ROE). It was only 6.7 percent in the second quarter, without the burden of the structured alpha funds it would have been 11.1 percent. Earnings per share (EPS) also fell significantly, by 54 percent compared to the same period last year. It was only 5.28 euros.
This has no consequences for the shareholders. The Dax group had already decided last year that special effects such as the Structured Alpha problem will have no impact on the dividend payment. Shareholders can therefore expect a high payout next spring.
Despite the burdens, confidence is emerging in many places that the problems with the US authorities have now been largely resolved. The Munich group had always emphasized that the entire provision included both compensation for customers and possible penalties to US authorities.
The analysts at Bank of America had already given the all-clear a few days ago. “Allianz is getting rid of the noise around structured alpha funds,” they wrote. The further the problems faded into the background, the more the development of investment income should push forward again in the future.
In operational terms, Allianz’s business continued to go well. The total turnover of the Allianz Group increased by 7.2 percent to 81.2 billion euros in the first half of the year. Property and casualty insurance in particular contributed to the growth. In what is usually the most profitable of the three corporate divisions, sales rose above average by 12.1 percent to 37.7 billion euros. In most regions, both prices and customer demand for insurance cover increased.
There was also an increase in operating profit, which rose by more than five percent to three billion euros compared to the previous year.
Great interest in travel insurance
Business was particularly good on the home market of Germany, while Turkey stood out on the foreign markets despite high inflation in the country. Here the group had its accounting because of the inflation switched.
In addition, business in the “Global Lines” areas has recently picked up again. The insurer summarizes its higher-level global units under this. These include the industrial insurer AGCS and the credit insurer Allianz Trade, which until recently operated under the name Euler Hermes. However, Allianz Partners stood out the most, a company that offers travel insurance, among other things, and is therefore feeling considerable demand for its products again after a corona-related lull in 2020.
Burdens threaten from Russia in the third quarter. The partial sale of the business there should reduce the net result by around 400 million euros.
>>> Also read: Hannover Re confirms profit target and sells all shares
The Group felt the effects of high market volatility and high inflation in its second most important segment, life and health insurance. Operating profit fell to 1.1 billion euros in the second quarter, after 1.3 billion euros in the previous year. Analysts had expected an average of 1.168 billion euros here.
Nevertheless, investor interest in this form of hedging remains high, especially in Germany and the USA. New business in life insurance grew by 6.2 percent to EUR 672 million.
Wealth management feels the market fluctuations
Strong market fluctuations and high inflation also made things difficult for asset management, the smallest of the three corporate divisions. The area, in which the two asset managers Pimco and AGI are combined, earned only 771 million euros in the second quarter and thus 6.6 percent less than in the same period last year. The winding-up of AGI’s US business had a negative impact of around EUR 100 million in the second quarter.
Assets under management for third parties fell by 109 billion euros to 1.769 trillion euros. Investors withdrew 34 billion euros between April and June. Together with its own investments, the group managed 2.319 trillion euros at the end of the second quarter.
The major European competitors developed just as positively as Allianz in the second quarter. The biggest competitor, Axa, was able to increase its profits in the first half of the year despite the burden of the Ukraine war. The French surprised the analysts.
The Italian insurer Generali also exceeded expectations in the first half of the year. However, write-downs on Russian securities and the stake in the Russian insurer Ingosstrakh had a negative effect here.
More: These are the consequences of permanently high inflation for old-age provision.