Allianz CFO Looks to Strategic Changes in Life/Health; P/C Performance Shines
August 11, 2015 by AM Best
MUNICH – Allianz Group had a strong second quarter on lower catastrophe losses and premium growth in property/casualty lines, while the group’s chief financial officer said he looks to strategic changes in product offerings for the life/health segment and ongoing recovery in its asset management segment to overcome lower results.
CFO Dieter Wemmer said in a conference call that Allianz is looking to life/health products that will take advantage of changing economic conditions in its core European and U.S. markets. He added that the property/casualty segment continues to lead the group with very strong results.
Second-quarter net income for the group rose 15% to €2.02 billion ($2.20 billion), mainly on non-operating realized gains that were €181 million higher than in the second quarter of 2014. Revenue for the quarter rose 2.4% to €30.2 billion.
Wemmer noted that Allianz saw weaker second-quarter numbers in the life/health and asset management segments related to product and strategic retrenchments. He said there were “negative one-offs,” but added the group confirms an operating profit outlook for 2015 at the upper end of a target range at €10.8 billion, or an increase of more than 4% for the year.
Wemmer said the property/casualty insurance segment had a strong increase in operating profit supported by a lower impact from natural catastrophes and a net gain from the sale of the personal insurance business of Fireman’s Fund Insurance Co. in the United States.
Earlier this year, Ace Ltd. completed its US$365 million acquisition of the Fireman’s Fund high net-worth personal lines insurance business from Allianz, making Ace one of the largest high net-worth personal lines insurers in the United States (Best’s News Service, April 1, 2015).
The property/casualty combined ratio for the quarter improved to 93.5 from 94.6 in the second quarter of 2014. Wimmer said costs from natural catastrophes fell to €122 million, down from €172 million a year earlier. Those losses came mainly from storms and hail in Australia, he said.
For the quarter, the life and health insurance segment’s statutory premiums fell 1.4% to €16.72 billion as demand for non-traditional life insurance products continued to increase amid overall lower sales. The segment’s operating profit fell 13.4% for the quarter.
Wemmer said that in Italy and Taiwan, growth in unit-linked products was strong. In Germany and France, sales of new life insurance products with alternative guarantees continued to increase.
With a change in product strategy, sales for traditional products declined, Wemmer said. “In the United States, sales of fixed-indexed annuities declined but were in line with expectations following pricing changes in 2015,” he added. “Demand for life insurance products increased the most in the Asia-Pacific region. Total internal growth in statutory premiums in the region was 23%.”
Wemmer said that unlike other companies, Allianz “firmly believes in keeping life insurance and asset management operations separate,” as this allows greater product diversification and more strategic opportunities for the company.
Asset management, including Pimco, performed “within expectations,” said Wemmer. “Third-party net inflows at Allianz Global Investors reached a new record high while outflows at Pimco more than halved compared to the first quarter of 2015.”
Third-party net outflows rose to €22.5 billion in the second quarter, from €17.2 billion a year earlier. “Third-party net outflows at Pimco continued to decrease compared to the end of 2014 and amounted to €29.3 billion in the second quarter,” Wemmer said. “Allianz Global Investors recorded strong third-party net inflows in particular in Europe, amounting to €6.7 billion over the same period.”
Wemmer said Allianz’s overall Solvency II capitalization rose 22 percentage points to 212% as of June 30, from 191% at the end of 2014. Shareholders’ equity remained stable at €60.69 billion compared to €60.75 billion at year end.
Allianz SE currently has a Best’s Financial Strength Rating of A+ (Superior).
(By David Pilla, international editor, BestWeek: David.Pilla@ambest.com)
BN-NJ-8-7-2015 1634 ET #
