RETURNING consumer demand for life insurance and other investment products helped Allianz, Europe’s largest insurer, increase sales and operating profits in spite of the shadow cast during the first half of the year by the euro zone sovereign debt crisis.
The German group said consumers were “showing an increased appetite for investment products in general” but said financial service providers faced an uncertain environment.
“Our base scenario is that in the coming years the necessary consolidation efforts of the highly indebted countries – not only those within the euro area, but also outside – will weigh on the economic prospects and as a consequence growth will be more moderate than in the years before the crisis,” Allianz told shareholders.
Allianz’s 23 per cent increase in operating profits to €2.2 billion in the second quarter of the year exceeded expectations and Michael Diekmann, chief executive, said the company remained on track to meet its operating income target of between €6.7 billion and €7.7 billion this year.
Revenues grew by 14.5 per cent to €25.4 billion in the quarter, helped by stronger life insurance sales and a 43 per cent jump in the asset management business.
However, sales in the largest property and casualty insurance business were flat. Quarterly operating profits in property and casualty insurance rose 28 per cent to €1.1 billion on improved underwriting and investments. However, life and health fell 28 per cent to €713 million.
Allianz’s asset management segment more than doubled its quarterly operating profit to €516 million.
Net income in the quarter fell from €1.9 billion to €1.1 billion. In 2009 Allianz earned €666 million from selling shares in the Industrial and Commercial Bank of China, compared with €115 million in the second quarter of this year.
Non-operating income was also affected by a €264 million fall in the value of warrants held in The Hartford, the US insurer in which Allianz invested in 2008.
Allianz said its sovereign bond exposure in Portugal, Ireland, Greece and Spain – countries at the centre of concerns about euro zone sovereign debt – was €9.4 billion at the end of June, with unrealised losses of €900 million. Allianz’s total investments in sovereign and other debt are almost €400 billion.
Allianz is one of the insurers expected to make a bid for Quinn Insurance, which is under the control of administrators after it was earlier this year found to have broken solvency rules imposed by the State’s financial regulator.
– (Copyright The Financial Times Limited 2010)
