Germany’s Allianz SE had a rotten quarter with revenues down 2.5% from prior year (at euros 29.4 bn) coupled with ultra-low investment returns on its holdings from premiums and serious payouts for disasters. These included everything from US hailstorms to floods in Germany and France, to wildfires in Canada. Insurance firms are victims of global warming and central bank zero interest rate policies.
The result was that quarterly net income fell by 44% to euros 1.185 bn while EPS plummeted 46.3% euros 2.4 per share, and even worse for dollar stockholders.
The key P&C combined ratio was 96.4% vs 93.5% the year before. The combined ratio measures profitability by adding up incurred losses and expenses and dividing them by earned premiums. Lower is better. This shows that AZSEY has been able to recuperate some of its payouts by boosting premiums. It also hugely boosted premiums for new business in its life-health insurance lines, up 62.2% in Q2 and overall, new business came in at margins 2.6% higher than old.
It also shifted its life insurance business toward greater capital efficiency, which cut revenues but increased profits from new business.
Allianz also put at “held for sale†its South Korean sub which will generate euros 352 mn from buyer Anbang eventually. However the classification also cut Q2 net income. Its year ago income was also boosted from the sale of its US Fireman’s Fund personal insurance line, which of course was not repeated.
And for US owners also, it finally got around to better integrating its Pimco fund management operations in San Diego with its parent fund management ones in Frankfurt, Germany. It has cut its wage bill with a spate of retirements and named Manny Roman, a Frenchman hired from Man Group in Britain, as Pimco CEO. It hired several new portfolio managers at Pimco, which still has $1.5 bn under management, luring them in with a chance to make a name for themselves and live in sunny southern Califormia. In the quarter, operating profits dropped by 9.3% from continuing net outflows to the equivalent of euros 961 mn. Thanks to lower operating expenses, the profit in this area, at euros 498 mn fell 1.4% y/y but actually rose 8% sequentially. Way to go, guys.
