Allianz SE (ALV), Europe’s biggest insurer, said profit at its asset management unit, which includes Pacific Investment Management Co., slid 29 percent on client withdrawals, fueling a decline in total earnings.
Net income in asset management dropped to 406 million euros ($557 million) in the first quarter from 568 million euros reported a year earlier, the Munich-based insurer said in a statement today. Pimco had net outflows of 21.7 billion euros, while Allianz Global Investors had net inflows of 1.9 billion euros.
Michael Diekmann, 59, Allianz’s chief executive officer, had to defend Newport Beach, California-based Pimco at the insurer’s annual general meeting in Munich last week against shareholder criticism over declining returns and management infighting. Pimco has been a very profitable investment since the German insurer took it over in 1999, Diekmann said.
Pimco’s performance fees in the first quarter of last year were boosted by non-recurring carried interest from “certain private funds,” Allianz said in February.
“As expected, the results in asset management came in lower, but the business is in line with our target for the year,” Allianz Chief Financial Officer Dieter Wemmer said in the statement. “Given its solid performance and the outperformance of both of our insurance segments, we remain on track to achieve our operating profit outlook.”
Allianz targets operating profit of 9.5 billion euros to 10.5 billion euros this year. The asset management unit’s contribution to the earnings increased to about 31 percent in 2013 from 12 percent five years ago, helped by expanding assets under management and lower payouts of profit participation rights for the firm’s senior management, granted as part of Pimco’s acquisition by Allianz.
As Pimco struggles to navigate rising interest rates and client withdrawals, the unexpected resignation of CEO Mohamed El-Erian amid reports of clashes with founder Bill Gross spurred an overhaul of top management.
Investors including Union Investment, Allianz’s ninth-biggest shareholder according to data compiled by Bloomberg, used the firm’s annual general meeting on May 7 to highlight deteriorating fund performance and asked whether Allianz plans to change a hands-off approach toward Pimco, as assets surged to almost $2 trillion under its ownership.
Allianz acquired a majority stake in Pimco in 1999 for $3.3 billion. Pimco managed about $256 billion at the time. The insurer gave the fund manager, which Gross co-founded in 1971, greater independence in 2011 by separating it from its other asset managers, which are combined in the Allianz Global Investors unit.
El-Erian, who had shared the role of co-chief investment officer with Gross, has continued to work for Allianz as chief economic adviser. Since El-Erian’s resignation, Pimco named six new deputies and Gross has said his firm is now in better shape than before.
Net income at Allianz’s property and casualty insurance unit, typically the most important in terms of earnings, fell 37 percent to 645 million euros in the first quarter from a year ago. Lower non-operating realized gains and “a one-off effect from inter-segment pension revaluation recorded in the non-operating administrative expenses” contributed to the decline, the insurer said in its quarterly report.
Profit at the life- and health-insurance division was little changed at 629 million euros.
Allianz reported last week that first-quarter operating profit fell 2.9 percent to 2.72 billion euros. The shares lost 6.4 percent this year, valuing the company at 56 billion euros. That compared with a gain of 0.8 percent for the Bloomberg Europe 500 Insurance Index.
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