Legal dispute with US hedge funds: Allianz boss: "It was a terrible week"

Allianz boss Oliver Bäte announces the consequences of the dispute over hedge funds in the USA. More than a year ago, the decision was made to "fundamentally reorganize" the Allianz Global Investors business model, said Bäte on Friday in Munich. The product range will be streamlined, around 40 percent of the investment strategies should be abandoned. The hedge funds, with which US pension funds had suffered massive losses at the beginning of the corona pandemic, were "not at all representative of our success," emphasized Bäte, who surprisingly took part in the conference call.

The Munich insurance giant admitted a few days ago that, after the SEC, the US Department of Justice has now also intervened in the matter.

Her lawsuits against Allianz now add up to around six billion dollars, according to her.

According to US media reports, the plaintiffs include the New York Metro, the teacher pension fund in the state of Arkansas and the Teamsters union.

The allegations amount to the fact that the fund managers did not adhere to their own guidelines and did not react appropriately to market developments in the early phase of the corona pandemic.

This in turn is said to have caused the high losses for investors.

“It's been a really terrible week for us,” said Bäte.

Allianz has not yet made provisions for impending losses because it does not consider them to be foreseeable.

In due course, provisions will be made when you can see more clearly, said Bäte.

“This event will leave its mark, but it will not dissuade Allianz from its path.” The manager did not say how much money Allianz is planning for it, but the company expects “potentially negative effects” on net income, as CFO Giulio Terzariol said.

Natural disasters cost 600 million euros

Europe's largest insurance group, on the other hand, is apparently taking the consequences of the catastrophic storms in Europe with ease and is aiming for a record profit in the current year: The operating result will probably be between 12 and 13 billion euros and thus in the upper half of the previous target range, the company said. The previous record of 11.9 billion euros comes from 2019; in the Corona year 2020, operating profit fell to 10.8 billion. "I am pleased that all of our business areas are delivering very good results and that we are growing profitably," said CFO Giulio Terzariol.

Natural disasters cost Allianz a good 600 million euros in the second quarter alone.

The flood disaster caused by the low “Bernd” in July is burdening the current third quarter with around 400 million euros.

In doing so, Allianz can apparently pass a part on to the reinsurers: The subsidiary in Germany had put the damage at more than half a billion.

Far exceeded expectations

Nevertheless, Allianz posted a profit jump in the second quarter, also because the burdens of the corona pandemic disappeared.

From April to June, the insurer generated an operating result of 3.3 billion euros, which was not only 29 percent higher than in the previous year, but also far exceeded analysts' expectations.

You had given the alliance an average of 3.06 billion euros.

The net profit even rose by 46 percent to 2.2 billion euros.

The growing confidence had become apparent: Allianz is starting to buy back shares again after the forced break.

By the end of the year she wants to buy up her own shares for 750 million euros.

The financial supervisory authority BaFin, which had urged the insurers to keep their money together in the crisis, now has nothing against it.

The announcement made the Allianz share rise strongly in late trading on Thursday.

Allianz had canceled its 1.5 billion euro share buyback program halfway in the first Corona wave, now it is practically catching up with the second part.

On Friday the share price rose at times by 2 percent.

"The minimum is always the last dividend"

Sales, i.e. the sum of insurance premiums and fund fees, rose in the second quarter by 11 percent to 34.3 billion euros.

The main sales driver was the life and health segment, which sold more unit-linked life insurance.

In property insurance, Terzariol particularly praised the “focus on drawing discipline and productivity”.

The combined ratio improved to 93.3 (2020: 95.5) percent.

The industrial division AGCS raised prices and returned to profitability.

The asset management division with asset managers Pimco and Allianz Global Investors raised 26 billion euros net.

As a result and as a result of price increases, the assets managed for third parties grew by 56 billion to 1.83 trillion euros.

Allianz boss Bäte promised the shareholders that at least the dividend should not be cut: "The minimum is always the last dividend."