Clients add RM83.4b in 1Q, reversing outflows at the end of last year

By BLOOMBERG

MUNICH • Allianz SE’s giant investment business saw managed assets grow to a record as clients added €18 billion (RM83.41 billion) in the first quarter (1Q), reversing outflows at the end of last year.

The new money lifted the amount the company oversees for outside clients to €1.55 trillion, Munich-based Allianz said yesterday.

The insurer owns US bond giant Pacific Investment Management Co LLC (Pimco) and Allianz Global Investors (AGI) in Germany, making it one of the biggest investment companies globally.

Including money overseen for Allianz’s insurance business, the firms now manage a combined €2.1 trillion, also a record.

CEO Oliver Baete, 54, has been seeking to revive growth at Europe’s largest insurer by exploring deals — including in asset management — and pushing into growth markets in Asia, where it trailed many of its European rivals.

But large acquisitions have proven elusive, leaving Baete to pursue smaller transactions and returning excess cash to shareholders, including €1.5 billion that he’s earmarked for a new share buyback programme this year.

“We are going to look at incremental deals,” CFO Giulio Terzariol said in an interview on Bloomberg Television. “We can do bolt-on acquisitions in Europe and we can also go to other regions where we want to expand our footprint.”

Shares of Allianz rose 0.7% at 9:02am in Frankfurt trading yesterday, bringing gains this year to 13%.

Both operating profit and net income exceeded analysts’ estimates for the quarter, and Allianz confirmed a full-year target of €11.5 billion in operating profit.

Zurich Insurance Group AG said last week it’s on track to meet or exceed its targets this year as pricing trends improve and will continue to review deals following the acquisition of Australia & New Zealand Banking Group’s life insurance division.

Zurich was one of the potential acquisition targets Allianz evaluated, Bloomberg reported last year, with other companies also being examined.

Other highlights from Allianz’s 1Q earnings include net income rising 1.6% to €2 billion; analysts had estimated €1.87 billion.

It reported an operating profit of €3 billion, up 7%, while non-life operating profit was €1.46 billion, up 14%.

In addition, Allianz posted €1.1 billion in life and health operating profit, an increase of 2.5%.

However, its asset management operating profit was €573 million, down 3.7%.

The jump in managed assets was driven by market swings and €21 billion in inflows at Pimco, which continued to attract new money this quarter, Terzariol said.

Pimco’s purchase of Gurtin Municipal Bond Management, a manager of US$12 billion (RM50.04 billion) in muni bonds for high-net-worth clients, also added new money.

AGI suffered €3 billion of outflows. The firm, which has been seeking to attract new money by touting the benefits of active asset management, saw just 56% of third-party assets outperform benchmarks before fees over the past three years.

At Pimco, that figure stood at 95%. Allianz didn’t give a number for performance net of fees.

Allianz had been looking at the feasibility of combining its asset management business with that of DWS Group, the asset manager owned by Deutsche Bank AG, people familiar with the matter said earlier this year.

Deutsche Bank also held talks with other firms about the business, though discussions for now appear to have stalled.

Despite record assets, operating profit at the fund management business fell because of higher investment in the unit.

Allianz’s property and casualty division posted the strongest performance.

Allianz said lower claims from natural catastrophes and higher premiums led to a 14% increase in the non-life division’s operating profit from a year earlier.

Allianz estimated it will pay out about €100 million of claims tied to mine disruptions at Vale SA and the crash of a Boeing Co 737 Max plane and the subsequent grounding of the aircraft.

Terzariol said about half of that amount was related to the plane crash.

The German insurer is one of the companies that insured Boeing’s airline manufacturer liability policy.

Settling claims from the two airplane crashes could cost US$1 billion, according to a Bloomberg Intelligence estimate based on prior cases, but legal experts agree the payouts could be even higher.

Boeing’s insurers expect to pay an additional sum for the worldwide grounding of the 737 Max planes. — Bloomberg