2nd UPDATE: Allianz 3Q Net Profit More Than Doubles; Shares Up
November 09 2009 - 7:42AM
Dow Jones News
Allianz SE (ALV.XE), Europe's largest primary insurer by market
capitalization, Monday said third-quarter net profit more than
doubled on lower asset write-downs, and as improvements in
life/health insurance and financial services more than offset lower
contributions from property/casualty insurance.
The figures reflect Allianz's improved earnings power in its
core operations following the sale of loss-making Dresdner
Bank.
Allianz shares were among the top gainers in the German
blue-chip index as most of the earnings figures topped consensus
forecasts.
At 1230 GMT, the stock was up EUR4.64, or 5.9%, at EUR83.90,
outperforming the Stoxx Europe 600 insurance index, which was up
2.8%.
UniCredit analyst Andreas Weese said net profit and operating
profit were ahead of consensus following a better-than-forecast
contribution from life/health insurance and financial services,
while the contribution from property/casualty insurance was in
line. Weese, who rates the share at buy, described the capital
position good.
JPMorgan analyst Michael Huttner said the company's "margins
were OK" and said the figures showed signs of "a little bit of
growth" in life/health insurance and asset management. He said that
the company's statement that it is not in need of capital and that
no acquisitions are planned do give the share a lift compared with
competitors French Axa SA (AXA) and Zurich Financial Services AG
(ZURN.VX).
"The capital statement helps - though a capital hike wasn't
expected - and there's no deal risk," Huttner said.
Earlier Monday, Axa said it planned to launch a EUR2 billion
rights issue to swell its war chest for potential acquisitions,
including the possible purchase of AXA Asia Pacific Holdings Ltd.'s
(AXA.AU) Asian assets.
Merck Finck analyst Konrad Becker also said the figures topped
his forecast, though he would have liked to see some full-year
guidance.
Still, the company refrained from giving concrete earnings
targets for 2009 or beyond.
Chief Financial Officer Oliver Baete, who took up his post on
Sept. 1, said a full year earnings forecast for 2009 or for 2010
wouldn't be reliable in the current, still highly volatile, market
environment.
But, Allianz is well capitalized and prepared for delivering
solid earnings even in the "challenging market environment with
structurally lower returns" ahead, due to its high-quality
investment portfolio and conservative risk management approach,
Baete said.
Allianz, which accrued a dividend equivalent of EUR1.4 billion
for the first nine months, plans to stick to a dividend payout
ratio of 40% of net profit, Baete said.
Third-quarter net profit rose to EUR1.32 billion from EUR545
million in the year-earlier quarter, roughly in line with the
EUR1.33 billion average forecast in a Dow Jones Newswires poll of
15 analysts.
The year-earlier figure was restated to reflect continuing
operations only, after Allianz sold Dresdner Bank to Commerzbank AG
(CBK.XE) for around EUR5.1 billion in the first quarter. A year
ago, Allianz made a EUR2.02 billion loss when it still owned
Dresdner Bank.
Operating profit rose 23% to EUR1.93 billion from EUR1.56
billion, beating a forecast of EUR1.84 billion. Life/health
insurance and financial services benefited from improvements in
capital markets, the gradual economic recovery and the narrowing of
credit spreads - which supported good-margin revenue growth from
investment products with underlying guarantees.
Meanwhile, property/casualty contributed 18% less to operating
profit than in the year-ago quarter, which the company attributed
to negative effects from the recession on business in Germany,
France, Italy and credit insurance, and to an unusually high number
of weather-related claims in those countries.
Higher claims costs pushed the combined ratio up to 96.9% from
96.5% a year ago, meaning Allianz spent 96.9 cents on claims and
other costs for each euro of premium income. For the full year,
Allianz targets a combined ratio of between 97% and 98%. JPMorgan's
Huttner said a combined ratio better than 97.5% could be difficult
to reach in 2009, as it would require a fourth quarter figure of
some 95%.
Allianz said property/casualty business is working on improving
productivity, that first signs of improvement will be seen in 2010,
but the full impact will only be noticeable over the next three
years.
The investment result, and notably lower net write-downs on
investments, made a substantially better contribution to earnings
than a year ago. In the quarter, net write-downs on investments
were EUR46 million compared with EUR921 million in the third
quarter of 2008. Net realized disposal gains were EUR322 million
compared with EUR517 million a year ago.
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com
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