UPDATE: Allianz Net Profit Falls 46%; Confirms Operating Profit Goal
August 06 2010 - 2:29AM
Dow Jones News
Allianz SE (ALV.XE), Europe's largest insurer by gross premiums
and market capitalization, Friday reported a 46% slump in net
profit for the second quarter on lower income from own investments
and higher costs related to earthquakes and other natural
disasters.
It also said it is on track for an operating profit of about
EUR7.2 billion for 2010, give or take EUR500 million.
It reported improvements in property/casualty insurance and
asset management.
"Based on this very good result, we are confident that we can
achieve our outlook for operating profit for the entire year of
around EUR7.2 billion, with a fluctuation range of plus or minus
EUR500 million," Chief Executive Officer Michael Diekmann said.
Second-quarter net profit attributable to shareholders was
EUR1.02 billion, down from EUR1.87 billion in the same period a
year ago. The figure was below a forecast EUR1.15 billion in a Dow
Jones Newswires poll of 15 analysts.
Operating profit, which many investors consider to better
reflect a company's true performance from normal operations, rose
23% to EUR2.19 billion from EUR1.79 billion, substantially
outpacing the forecast EUR1.84 billion.
Analysts in general expected lower realized gains on stock
investments than in previous quarters, visible in a weaker
contribution from items known as non-operating items.
Indeed, non-operating items swung to a loss of EUR597 million
from a profit of EUR548 million in the year-earlier quarter. These
items include realized gains or losses and impairments on
investments, interest expense from external debt, fully
consolidated private equity investments, restructuring charges,
acquisition-related expenses, and reclassification of tax benefits,
among others.
Allianz said it paid EUR255 million for claims caused by natural
disasters in the quarter, such as a tornado in Saxony, flooding in
Central and Eastern Europe and a hailstorm and flash floods in
France.
The higher disaster claims weighed somewhat on the combined
ratio in property/casualty insurance. However, Allianz said it was
able to release reserves made for potential claims that were no
longer needed, which improved the combined ratio. Improvements in
credit insurance and industrial insurance business also contributed
to lower the ratio.
The combined ratio was 96.3%, a beat of the forecast 97.4% and
below the year-ago figure of 98.9%. It was also better than the
100.4% in the first quarter and better than many peers.
The combined ratio is a widely watched measure of an insurer's
profitability in its core underwriting business, when stripping off
the investment result. The ratio compares how many cents an insurer
has to pay per euro premiums earned for claims and other costs; a
figure below 100% means the insurer made a profit in its
underwriting business, a figure above 100% means it made a
loss.
Total revenue rose 15% to EUR25.4 billion from EUR22.2 billion,
above the forecast EUR22.17 billion.
In pre-market trade, Allianz shares were down EUR0.16, or 0.2%,
in a EUR90.13-90.31 range.
-By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com