Allianz Shows Improvement, But Posts $593M Q1 Net Loss

Germany’s Allianz reported a first quarter net loss of 520 million euros ($593.06 million), mostly due to another series of writedowns in the value of its investments, but from an operating point of view Europe’s largest insurer achieved some significant progress.

The company cited the following highlights:
— In the first three months of 2003,total premium income from the insurance business increased 9.8 percent to 25.1 billion euros [$28.626 billion]. Disregarding exchange rate and consolidation effects, the growth rate would have been 14.2 percent. In life and health insurance, we boosted our revenues 17.3 percent to 10.7 billion euros. [$12.2 billion]
— We were able to improve the combined ratio, which measures claims and expenses as a percentage of net premiums earned, by 5.7 percentage points to 97.7 percent in the first quarter of 2003.This brings us a decisive step closer to reaching our objective of keeping the combined ratio to under 100 percent for the full year.
— In banking, we were able to generate net revenues of 2.0 billion euros [$2.281 billion], unchanged from last year. On the cost side, we pared administrative expenses by 10.8 percent compared to the first quarter 2002. With loan loss provisions staying within expected limits, we reached a positive operating result of 69 million euros [$78.7 million].
— The asset management segment produced an operating profit of 137 million euros [$156.25 million]. After deduction of acquisition-related expenses as well as taxes and minority interests, we had to record -as expected – a loss of 85 million euros [$97 million].

The real problem, for Allianz, as for many other insurers, continues to be the depressed state of the world’s equity markets. “By March 31,2003, share prices on the international stock markets had once again dropped substantially from the end of the previous year,” said the company’s announcement. “This weakness in the capital markets resulted in further write-downs of 2.3 billion euros [$2.623 billion] on our investment portfolios. Of this amount, 0.8 billion euros [$912.4 million] impact first-quarter earnings.” The result – a fourth consecutive quarterly loss.

“From an operating point of view, fiscal year 2003 has seen an encouraging start, commented Dr. Helmut Perlet, responsible for Controlling and Accounting on the Board of Management of Allianz in a press release. “This shows that our homework has paid off. However, in view of the continuing uncertainties in the performance of the capital markets and the economy, it’s too early to say whether a change in trend is already underway. The situation remains serious. The ongoing review of all business segments and concentration on improving operating results remain the key challenge for the rest of the year.”

The company noted that Allianz P/C “premium income rose by 4.7 percent during the first three months, from 13.9 to 14.6 billion euros [$15.85 to $16.65 billion]. This growth is notable because in individual markets, primarily in the USA, aggressive portfolio rationalization has been implemented and sales in unprofitable business areas have been curtailed. The companies in France and Spain have been particularly effective in supporting sales performance with significant growth rates, while credit insurance also played a significant role.”

Allianz singled out substantial growth in premium income “due to sales successes in the USA, Italy and Germany.” In the U.S. Allianz recorded a growth rate of 46.2 percent, an even higher percentage, 75.9 percent, if calculated on the basis of the US dollar’s current value. “Total premium income in Italy rose by 54.6 percent, primarily due to the successful bancassurance cooperation with Unicredito and Banca Antoniana Veneta. New premiums in Germany went up by 36 percent,” said the announcement.

Allianz’ acquisition of Newport Beach-based PIMCO, also seems to have turned out very well, as it continues to grow. “New inflows [of assets under management] amounted to a total of 11 billion euros [$12.5 billion] overall, “said Allianz, with PIMCO making “a significant contribution to this result.” It now has assets under management totaling 73 billion US dollars [$83.25 billion], and “has established itself as the world’s biggest actively managed investment fund. Its European equivalent, the dit Euro Bond Total Return Fund ‘powered by PIMCO’, has already generated new inflows of 3 billion euros [3.42 billion] during the first eleven months since its introduction.”