Dresdner Q3 Loss Hits Allianz Again

Allianz’s Dresdner Bank unit posted its biggest quarterly loss since the start of the financial crisis, the insurer said on Monday, pushing the group to a €2 billion ($2.58 billion) net loss.

Allianz is selling Dresdner Bank, which had a third-quarter operating loss of €835 million ($1.077 billion) to Commerzbank to end an ill-fated foray into banking.

Europe’s biggest insurer late on Friday abandoned its operating earnings target for this year and next, saying financial market turmoil made a new forecast impossible.

The quarterly group net loss was lower than the €4.365 billion ($5.69 billion) loss expected on average in a Reuters poll, but analysts played down the effect.

“We believe the huge difference is due to an accounting treatment of the Dresdner sale different to our expectation,” said DZ bank analyst Thorsten Wenzel in a note to clients. Its shares rose more than 2 percent in early trade.

Dresdner continued to suffer from weak and volatile markets in the third quarter, Allianz said. The €835 million loss would have been €422 million ($544 million) wider without a reclassification of assets allowed under changes to international accounting rules.

Dresdner Bank, which Allianz counted as a discontinued operation from Sept. 1, generated a net loss from its operations of €1.2 billion ($1.548 billion) and an additional €1.4 billion ($1.8 billion) in writedowns linked to the sale transaction.

The bank’s Tier 1 capital ratio stood at 8.1 percent at the end of September, Allianz said.

The insurer struck a deal three months ago to sell loss-making Dresdner for nearly €10 billion ($1.29 billion), after paying €24 billion ($30.93 billion) to buy it in 2001.

The value of Commerzbank shares that Allianz gained as part of the Dresdner sale fell to €4.9 billion ($6.314 billion) at the end of September from €6.5 billion ($8.376 billion) at the end of August, Allianz said.

PRESSURING THE BUSINESS
The financial market turmoil also hit revenues and operating profit in Allianz’s insurance and asset management businesses, prompting the company on Friday to warn that it was likely to miss its earnings targets.

“Without a major equity market recovery, the operating profit outlook of €9 billion ($11.6 billion) before banking for this year and next year cannot be reached,” Chief Financial Officer Helmut Perlet said in a statement. “In this environment, reliable statements about future earnings are not possible,” he added.

Group operating profit fell by nearly 40 percent to €1.6 billion ($2.06 billion), worse than the €1.9 billion ($2.45 billion) expected on average by analysts, with the P/C segment falling in line with expectations but life/health and asset management faring worse than expected.

Dresdner’s performance has weighed on Allianz, whose shares have fallen by more than half so far this year, lagging the 45 percent drop in the DJ Stoxx index of European insurers.

According to StarMine, which weights analysts’ forecasts according to their track record, Allianz trades at 5.0 times 12-month forward earnings, a discount rivals such as France’s AXA and Italy’s Generali, which trade at multiples of 6.1 and 9.9, respectively.