Pimco's Strongest Inflows in Four Years Boost Allianz ProfitBy
Bond manager attracts 21 billion euros in first quarter
Operating profit at Allianz asset management unit rises 24%
Pacific Investment Management Co., the bond manager owned by German insurer Allianz SE, saw its biggest third-party inflows in four years in the first quarter as clients flocked to Chief Investment Officer Dan Ivascyn’s Pimco Income Fund.
The firm, based in Newport Beach, California, attracted 21 billion euros ($23 billion) in the first three months of the year, the most since the first quarter of 2013, Allianz said Friday in a statement from Munich. Earnings at the asset management unit, which includes Allianz Global Investors, rose 24 percent, helping put Europe’s largest insurer ahead of target.
The second quarter “will continue the success story of Pimco,” Dieter Wemmer, Allianz’s chief financial officer, said in an interview.
Allianz stuck with its bond manager after outflows following the departure of Pimco founder Bill Gross prompted some analysts to call for a divestment. Chief Executive Officer Oliver Baete, 52, last year hired Jacqueline Hunt to oversee the U.S. life insurance unit and its $2 trillion asset management business. She and Pimco CEO Emmanuel Roman are pushing an expansion into alternative assets as traditional strategies come under pressure from low-cost index funds.
Baete’s counterpart at rival Axa SA, Thomas Buberl, this week took a potentially different path, announcing a plan to float a minority stake in its U.S. life and savings unit and its asset manager AllianceBernstein Holding LP to raise money for insurance deals in other regions. AllianceBernstein has seen assets drop from more than $800 billion before the financial crisis to less than $500 billion.
Much of Pimco’s turnaround is being driven by Ivascyn, Gross’s successor as CIO. He and co-manager Alfred Murata have beaten 99 percent of peers over five years with Pimco Income. The fund in February overtook Pimco Total Return, the former flagship fund under Gross, and now has more than $82 billion in assets. Allianz says it’s the largest active bond mutual fund globally.
Baete unsuccessfully tried to find suitable acquisition targets for Allianz last year. He announced the insurer’s first-ever share buyback this year, pledging to return 3 billion euros to shareholders, to make good on a promise to hand back cash not used for deals. Wemmer said the insurer will be opportunistic about takeovers.
“We have a lot of organic potential in the company to produce profit,” he said. “If there comes an opportunity we take it, but that is really opportunistically. We have a very strong capital position, so we can move in all directions and we can sit and wait and look for good opportunities.”
Allianz confirmed a full-year operating profit target of 10.3 billion euros to 11.3 billion euros for the group, including a 2 billion-euro to 2.6 billion-euro contribution from the asset management unit. Operating profit rose 9.4 percent in the first quarter, a figure that puts the insurer some 200 million euros ahead of its target this year on a pro-rated basis, Wemmer said.
“But insurance is a volatile business, therefore it’s too early to adjust our outlook,” he said.