Pimco Exodus Cuts Allianz Asset Management Profit

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Allianz CFO Dieter Wemmer
Dieter Wemmer, Chief Financial Officer of Allianz SE, speaks during a full-year results news conference at the company's headquarters in Munich on Feb. 26. Photographer: Martin Leissl/Bloomberg

Allianz SE, Europe’s biggest insurer, said first-quarter profit from asset management slid on outflows from Pacific Investment Management Co.

Operating profit at the business, which consists of Newport Beach, California-based Pimco and Allianz Global Investors, fell 14 percent to 555 million euros ($620 million), the Munich-based company said in a statement Tuesday.

“Pimco is still the biggest construction site at the company,” Roland Pfaender, a Frankfurt-based analyst at Oddo Seydler Bank AG, said by telephone. “There’s a huge uncertainty when a turnaround will come.”

Two years of withdrawals at Pimco’s flagship Pimco Total Return Fund, spurred by the departure of Bill Gross in September, have hit returns at Allianz’s asset management business, the largest in Europe. Allianz replaced Gross with Daniel Ivascyn and added former Federal Reserve Chairman Ben Bernanke as a senior adviser to the unit in April.

Allianz Chief Financial Officer Dieter Wemmer said that client redemptions were expected and other funds were performing well. The company continues to bet on a revival and won’t reduce costs, he said.

Pimco posted 68.3 billion euros of net outflows in the quarter, taking the total for Allianz to 62.1 billion euros. The smaller Allianz Global Investors had inflows of 6.2 billion euros.

Revenue Drops

While Pimco’s revenue also dropped 3.1 percent to 1.14 billion euros, fund outflows were less than half of the volume in the previous quarter, Allianz said.

“With the slowing of outflows from Pimco along with Pimco’s excellent three-year investment performance and the ninth consecutive quarter of third-party net inflows at AllianzGI, we are positive about the further development of our asset management segment,” Wemmer said.

Allianz’s shares declined 3 percent to 144.95 euros at 4:31 p.m. in Frankfurt. The Bloomberg Europe 500 Insurance Index fell 1.8 percent.

The Pimco Total Return Fund lost its title of the world’s biggest bond mutual fund to the Vanguard Total Bond Market Index Fund after investors pulled $5.6 billion in April, reducing assets to $110.4 billion. It dropped 1.9 percent in the past month, meaning 96 percent of similar funds beat its performance. Gains this year were 0.6 percent.

Pimco Income Fund, with $44.9 billion in assets, rose 3 percent in 2015, outperforming 99 percent of peers.

Assets Grow

Total assets at Allianz’s asset management unit rose 7.3 percent to 1.93 trillion euros from the end of 2014, driven by market value increases and beneficial currency effects, Allianz said. Revenue at Allianz Global Investors increased by 27 percent to 435 million euros.

First-quarter operating profit from asset management was 555 million euros, “in line” with the full-year target of between 2.2 billion euros and 2.8 billion euros, Allianz said.

Operating profit in property and casualty insurance fell to 1.29 billion euros from 1.49 billion euros in the year-earlier quarter. The losses were offset by gains in life and health insurance, which posted a 1.1 billion euro profit versus 880 million euros previously.

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