Allianz CEO: Geopolitical Tensions, Drop in Interest Rates Led to Lower Global Growth in 2014
February 26, 2015 by Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com
MUNICH – Allianz S.E.’s 2014 net income increased 3.8% but geopolitical tensions, continued market volatility and a further decline in interest rates last year led to lower global economic growth than expected, according to its chief executive officer.
Full-year net income attributed to shareholders increased €6.2 billion (US$6.9 billion). But fourth-quarter net income fell 2.9% to €1.2 billion.
“Despite these challenges, Allianz achieved very good results in revenues, operating profit and net income,” Michael Diekmann, CEO of Allianz SE, said in the statement.
Its asset management business generated lower operating profit amid the change in management at its U.S.-based Pimco subsidiary. A new investment management team is now in place following the exit of the company’s founder Bill Gross last September. Third-party net outflows had reached their highest point after the announcement of his departure, amounting to a total of €236 billion for the full year.
However, the net outflows were offset in large part on strong market return and favorable foreign currency exchange effects, Allianz said.
“After weekly net outflows at Pimco peaked around the end of the third quarter of 2014, we saw a clear trend of receding outflows that has continued in 2015,” said Dieter Wemmer, chief financial officer at Allianz SE, in a statement. “Pimco’s strong and stable investment management team and their continued excellent investment performance will be the basis for further stabilization in 2015.”
Pimco had named Daniel Ivascyn as group chief investment officer, effective immediately, after Gross resigned on Sept. 26 (Best’s News Service, Sept. 29, 2014).Ivascyn, who has 23 years of investment experience, is also group chief information officer and will continue overseeing alternative strategies, structured credit and income strategies.
In Allianz’s life and health insurance business, statutory premiums and operating profit grew at double-digit rates, reflecting demand for its products amid low-interest rates, Allianz said. Statutory premiums grew in 2014 grew by 18.6% to €67.33 billion, driven by Allianz companies in the United States, as well as in Italy and Germany.
Indexed annuities were driver of growth in the United States, where total statutory premiums increased by €4.5 billion, Allianz said.
“The growth in market share in the life and health insurance segment reflects the success of our products designed for the interest rate environment,” said Wemmer. “However, low interest rates in the euro zone and the United States will put pressure on new business margins and volume in the coming quarters.”
Operating profit in its property/casualty insurance business increased in 2014 and made up more than half of the operating profit of the total group. Internal growth, in particular in the global insurance lines and the United Kingdom, drove premiums. Gross written premiums rose 3.7 % to €48.32 billion in 2014.
Operating profit and the combined ratio benefited in 2014 from a benign natural catastrophe environment but were impacted by items, including reserve strengthening in Brazil, at Fireman’s Fund in the United States and in Russia. In the United States, Allianz said it will realign Fireman’s Fund by consolidating the corporate insurance activities and divesting the retail insurance business.
In September, Allianz said it was reorganizing its U.S. commercial lines operations by folding its Fireman’s Fund commercial lines business into its Allianz Global Corporate & Specialty segment. It sold Fireman’s Fund’s personal lines business to Ace Ltd. for $365 million in December.
The combined ratio remained unchanged at 94.3.
Full-year total revenues rose 10.4% to €122.3 billion.
Last October, the supervisory board of Allianz SE agreed to the request of Diekmann to not extend his board appointment beyond the age limit of 60. Oliver Bäte was appointed new CEO, effective May 7. Diekmann will remain Allianz SE’s chairman of the board of management up to the annual general meeting on May 6. Bäte will continue to be responsible for global property/casualty up to the 2015 annual general meeting (Best’s News Service, Oct. 2, 2014).
Allianz SE currently has a Best’s Financial Strength Rating of A+ (Superior). The U.S.-based Allianz Life Insurance Company of North America currently has a Best’s Financial Strength Rating of A (Excellent).
