Allianz Q2 Profit Rises Beating Estimates

Allianz SE (ALV), Europe’s biggest insurer, said second-quarter profit climbed more than analysts estimated after earnings increased at its life and health business.

Net income rose to 1.23 billion euros ($1.5 billion) from 1 billion euros a year earlier, the Munich-based insurer said in a statement today. That compares with the 1.15 billion-euro average estimate of 13 analysts surveyed by Bloomberg.

Allianz reiterated its full-year operating profit target of 7.7 billion euros to 8.7 billion euros as the insurance industry recovers from record claims related to earthquakes and floods in Japan and Thailand last year. Insurers are struggling to cover payments to life policyholders as Europe’s sovereign debt crisis depresses interest rates.

“At first glance the numbers look very good despite the challenging market environment for insurers,” said Philipp Haessler, an analyst with Equinet AG in Frankfurt who has an accumulate rating on the shares. “Allianz is well on track to reach their full-year targets.”

Allianz climbed as much as 1.4 percent in Frankfurt trading and was up 0.8 percent to 79.26 euros as of 9:03 a.m., bringing this year’s gain to 7.2 percent. The 26-company Bloomberg Europe 500 Insurance Index rose 7.8 percent over the same period with Axa SA dropping 3.3 percent and Zurich Insurance Group AG (ZURN) gaining 9.4 percent.

Raising Prices

“We weather the difficult market conditions very well. Our operative business is stable and remains on course,” Chief Executive Officer Michael Diekmann said in the statement. “Despite the challenging environment, we confirm our outlook.”

Europe’s biggest insurers and the reinsurers who help them shoulder risks for clients used last year’s catastrophes to push through higher prices for coverage. Natural disasters caused an estimated $5.48 billion of insured losses for insurers and re- insurers in the second quarter, down from more than $27 billion a year earlier, according to estimates from Aon Benfield, the world’s biggest reinsurance broker.

Allianz’s property and casualty insurance unit, typically the most important in terms of earnings, raised prices by 1.4 percent, the insurer said. Profit at the business fell 15 percent to 807 million euros in the quarter after the company boosted reserves by 120 million euros following last year’s Thai floods.

“Premiums are growing both in markets where Allianz is well-established and in important growth markets like Brazil,” Chief Financial Officer Oliver Baete said in the statement.

Combined Ratio

The unit’s spending on claims and other costs as a percentage of premiums, also known as the combined ratio, worsened to 97.4 percent from 95 percent a year earlier. That compares with the average 96.6 percent estimate of 11 analysts surveyed by Bloomberg. A ratio above 100 percent means an insurer’s claims and costs exceed premium income, giving it a loss from underwriting.

Allianz’s life- and health-insurance division saw net income more than double to 506 million euros, helped by reduced impairments and gains from selling assets. Operating profit at the unit rose 21 percent to 821 million euros.

Net investment income advanced to 5.66 billion euros in the quarter from 4.52 billion euros a year ago, helped by currency gains, the company said in a presentation on its website. Allianz wrote down its Greek debt holdings by 326 million euros in the year-earlier period.

Asset Management

The firm’s asset-management unit, which includes Newport Beach, California-based Pacific Investment Management Co., posted an increase in profit of more than 19 percent to 345 million euros in the quarter. Assets under management rose almost 16 percent to 1.7 trillion euros while third-party assets under management climbed to 1.4 trillion euros from 1.2 trillion euros the year before.

Allianz gave Pimco greater independence last year by separating it from the other asset managers, which are combined in the Allianz Global Investors (AUSHYAM) unit. Both are part of the Allianz Asset Management holding, led by management board member Jay Ralph.

 

Bloomberg