Allianz's Profit Misses Estimates on Natural Catastrophes

Allianz 4Q Profit Falls Short of Analyst Estimates
  • Plans to distribute 2015 dividend of 7.30 euros per share
  • Says Pimco outflows continue to slow down, to remain in focus

Allianz SE missed analyst estimates for fourth-quarter profit because of claims from natural catastrophes.

Net income at Europe’s biggest insurer increased to 1.42 billion euros ($1.6 billion) in the quarter from 1.22 billion euros a year earlier, the Munich-based company said in a statement Friday. That compares with the 1.56 billion-euro average of six estimates compiled by Bloomberg. The insurer’s shares fell 1.44 percent to 133.75 euros at 12:07 p.m. in Frankfurt.

“Allianz steadily delivers strong results in increasingly challenging operating conditions,” Chief Executive Officer Oliver Baete, 50, said in the statement. “Our business is healthy and well-diversified. This makes us confident that we will continue to deliver strong earnings.”

Insurers in Europe are grappling with stricter regulatory capital requirements, low interest rates that hurt their investment income and subdued prices in some of their markets. Still, Allianz is seeking to achieve annual earnings per share growth of 5 percent on average from 2016 to 2018. It is also targeting a return on equity of 13 percent, adjusted to exclude unrealized capital gains on bonds and other items, by 2018.

Allianz plans to increase its dividend by 6.6 percent to 7.30 euros a share for 2015. That’s less than the Bloomberg Dividend Forecast of 7.40 euros.

Some analysts had expected Allianz to announce a share buyback on top of the dividend to help it reach its return on equity and earnings per share targets. The company hasn’t discussed either of those strategies, Chief Financial Officer Dieter Wemmer said in an interview with Bloomberg TV. 

“We want to deliver 15 percent EPS growth over three years,” he said. “There might be opportunities in the market, there might be excess capital to be given back to shareholders.”

The insurer’s asset management unit, which comprises Pacific Investment Management Co. and Allianz Global Investors, has seen upheaval after the departure of Bill Gross from Pimco in September 2014. Group third-party net outflows fell to 8 billion euros in the fourth quarter, compared with outflows of 141 billion euros a year earlier. Outflows at Pimco dropped by almost half last year while the Global Investors unit saw record inflows.

Allianz’s full-year operating profit rose 3.2 percent to 10.7 billion euros. That compares to a target of 10 billion euros to 10.8 billion euros. For 2016, the company aims for 10 billion euros to 11 billion euros. Fourth-quarter operating profit was impacted by claims from European storms and floods, the company said Friday.

“Claims have had a stronger impact on the combined ratio in the fourth quarter,’’ said Roland Pfaender, an analyst at Oddo Seydler Bank AG in Frankfurt, who has a buy rating on the stock. “The operating profit outlook is disappointing as it has been increased only little and the range has been been widened as a tribute to volatile markets.’’

The property and casualty insurance unit’s spending on claims and other costs as a percentage of premiums, known as the combined ratio, improved to 96.2 percent from 96.5 percent, missing the average analyst estimate of 94.4 percent. A ratio below 100 percent means an insurer is making a profit from underwriting.

Allianz paid 738 million euros for natural catastrophe losses last year, compared to a year-earlier bill of 400 million euros. The net loss related to European storms and floods in December was 163 million euros, of which the U.K. accounted for 102 million euros.

The stock has fallen 19.5 percent in Frankfurt this year, valuing the company at about 60 billion euros. The Bloomberg Europe 500 Insurance Index declined 16 percent over the same time.

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