By Ulrike Dauer
FRANKFURT--Germany's Allianz SE (ALV.XE) and France's Axa SA
(CS.FR), two of Europe's largest insurers, posted overall solid
results Friday, helped by lower sovereign debt hits, but costs for
disaster-related claims ate into some of the profit.
Allianz, Europe's largest insurer by market value and premium
income, was one of the star performers of the sector, posting a 39%
increase in first-half net profit to EUR2.61 billion, which beat
the analysts consensus forecast of EUR2.58 billion. Axa, Europe's
No. 2 insurer by market value, posted a net profit of EUR2.59
billion for the first six months, which was down from a year
earlier but still above analyst expectations. Axa's year-ago figure
was boosted by asset sale gains.
This comes a day after Italian peer Assicurazioni Generali SpA
(G.MI) reported a 44% rise in second-quarter net profit, as the
absence of impairments for Greek government debt felt a year
earlier helps the recent period's performance.
Insurers got through the crisis in better overall shape than the
banking sector, and the ageing population and rising demand for
retirement products is usually playing in their favor. However,
narrow margins in the life insurance segment have been exacerbated
by protracted low interest rates during the crisis, which causes
them to seek alternative sources of investment returns to ensure
policyholder pledges and planned tougher capital requirements are
met.
A better diversification of the business, such as into asset
management, enables them to compensate for volatile property &
casualty insurance results, which are vulnerable to major
disasters. Last year around this time, high costs for earthquakes
and the tsunami in Japan, earthquakes in New Zealand and flooding
in Australia combined with heavy losses due on Greek sovereign debt
holdings. This year so far has been dominated by moderate disaster
claims, for which, however, primary insurers, rather than
reinsurers, bore the brunt.
Silvia Quandt analyst Christian Muschick called Allianz's
performance "much better" compared than its two competitors. While
all three released good results in life insurance, Allianz's claims
costs were in line with expectations, while Axa's substantially
higher claims costs disappointed, the analyst said.
The major claims in the period came from earthquakes in Italy,
tornadoes in the U.S. and thunderstorms in Germany, which cost
Allianz EUR174 million in the second quarter, unchanged from the
year-earlier quarter. A EUR120 million upward revision of claims
estimates for last year's flood in Thailand added to this.
Allianz's weaker operating profit in the P&C business,
though still the main contributor, was offset by substantial
improvements in the life/health and asset management segments in
the second quarter.
Axa reported improvements in the life and non-life business in
the first six months over the year-earlier period, while the
international and asset management segments were weaker. Last
year's international business benefited from gains related to the
sale of some of Axa's Asia Pacific operations. Asset management
operations was lower this year due to "lower management fees
reflecting a shift in product mix as well as lower average assets
under management at the AllianceBernstein unit," Axa said.
While all insurers are seeking alternative investments such as
real estate, infrastructure and corporate bonds to achieve the
investment returns needed to keep pledges to policyholders, the
pressure of low interest rates hasn't yet fed into their results,
Credit Suisse analysts cautioned.
Silvia Quandt's Muschick said insurers with international
operations are much less vulnerable to low-interest rate pressure
than insurers with operations in a single country, something that
shold benefit big players like Allianz, Axa and Generali.
All three insurers' shares were up sharply in late trading in a
higher overall day for global financial shares. The Stoxx 600
insurance index was up 4.2% at 1450 GMT.
-Write to Ulrike Dauer at ulrike.dauer@dowjones.com
(Noemie Bisserbe, Alexandra Edinger and Giovanni Legorano
contributed to this article.)
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