Allianz reports 2.5 billion euros operating profit in 3Q 2017; on track for full-year target
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Total 3Q 2017 revenues rise 2.1 percent to 28.3 billion euros / 3Q 2017 operating profit down 17.3 percent to 2.5 billion euros / 3Q 2017 net income attributable to shareholders down 17.3 percent to 1.6 billion euros / 9-month 2017 operating profit up 3.5 percent to 8.3 billion euros / 9-month 2017 net income attributable to shareholders up 4.9 percent to 5.4 billion euros / Solvency II capitalization ratio strengthens to 227 percent at end of 3Q from 219 percent at end of 2Q 2017 / Operating profit for 2017 expected in upper half of the target range of 10.8 billion euros, plus or minus 500 million euros
Munich, Nov 09, 2017
Management Summary: Allianz resilient as natural catastrophe claims rise
Allianz Group reported good results for the third quarter of 2017 after a series of hurricanes, storms and other natural catastrophes drove claims higher. Total revenues rose 2.1 percent compared to the third quarter of 2016 to 28.3 (third quarter of 2016: 27.7) billion euros, mostly due to another strong performance in the Life and Health business segment. Operating profit declined to 2.5 (3.0) billion euros, largely due to 529 million euros losses from natural catastrophes. Operating profit also eased in the business segments Life and Health and Asset Management but remained at an overall high level. Net income attributable to shareholders decreased 17.3 percent to 1.6 (1.9) billion euros, affected by high claims from natural catastrophes and partly offset by lower tax expenses. Excluding the impact of natural catastrophes, the Group reported a strong performance similar to the preceding two quarters of the year.
Basic Earnings per Share (EPS) amounted to 3.53 (4.17) euros. Annualized Return on Equity (RoE) was 12.4 percent (full year 2016: 12.3 percent). The Solvency II capitalization ratio strengthened to 227 percent at the end of the quarter, compared to 219 percent at the end of the second quarter of 2017.
The first nine months of 2017 developed positively with all business segments, contributing to a 2.2 percent increase in total revenues. Operating profit increased by 3.5 percent to 8.3 billion euros, driven by the Life and Health and Asset Management segments. The Property and Casualty business saw a decline in operating profit due to claims from natural catastrophes during the third quarter. Net income attributable to shareholders in the nine-month period grew by 4.9 percent to 5.4 billion euros.
“Third quarter results were robust, given the massive natural catastrophe events that impacted our Property and Casualty segment. It was also very good to see how our experts were able to actively support our customers in these difficult circumstances,” said Oliver Bäte, Chief Executive Officer of Allianz SE. “The group absorbed claims stemming from hurricanes, storms and earthquakes in the quarter and still increased operating earnings in the nine-month period. Our capitalization also strengthened further, as the rising solvency ratio shows. For the year as a whole, Allianz expects to deliver strong financial results with operating profit in the upper half of the target range of 10.8 billion euros, plus or minus 500 million euros.”
Property and Casualty insurance: Allianz helping customers to recover from storms
Gross premiums written amounted to 11.5 billion euros in the third quarter of 2017. Adjusted for foreign exchange and consolidation effects, internal growth totaled 2.2 percent, with price and volume effects contributing 0.9 percent and 1.3 percent respectively. Allianz Partners, AGCS, Latin America and UK were the main growth drivers.
Operating profit decreased 28.0 percent to 1.0 billion euros in the third quarter compared to the same quarter in the previous year. The underwriting result was pressured by higher claims from natural catastrophes and higher large and weather-related losses.
The combined ratio rose 3.4 percentage points to 96.9 percent in the third quarter compared to the year-earlier period, due to natural catastrophes.
“The Property and Casualty segment held up very well after a series of hurricanes, storms and other events. Natural catastrophes caused 529 million euros in losses. This relatively low amount is testimony to the Group’s underwriting skills and risk discipline. Setting aside claims from catastrophes, the segment is on track to meet its 2018 target of a combined ratio of 94 percent,” said Dieter Wemmer, Chief Financial Officer of Allianz SE.
In the first nine months of 2017, gross premiums written increased slightly to 40.9 (40.4) billion euros. Adjusted for foreign exchange and consolidation effects, internal growth amounted to 1.5 percent, with price and volume effects contributing 1.0 percent and 0.5 percent respectively. Operating profit declined by 6.8 percent to 3.7 billion euros compared to the same period of the prior year due to a lower underwriting result. The combined ratio for the first nine months of 2017 rose 1.0 percentage point to 95.4 percent.
Life and Health insurance: Value of new business up 29 percent
Statutory premiums in the third quarter of 2017 rose 3.9 percent to 15.1 (14.5) billion euros due to stronger sales of capital-efficient products in Germany and higher unit-linked premiums in Italy, Taiwan, Belgium and Luxembourg. This more than compensated for softer sales of fixed-income annuities in the United States. Adjusted for foreign exchange and consolidation effects, statutory premiums increased by 8.2 percent.
Operating profit decreased 10.3 percent to 1.1 (1.2) billion euros in the third quarter of 2017 mainly due to a lower investment margin. This resulted predominantly from a normalized level of realizations in the German life business and last year’s one-off gain from the sale of real estate in France, as well as from unfavorable foreign currency translation effects in the United States.
The value of new business (VNB) increased 28.8 percent to 410 million euros in the third quarter of 2017 as customers continue to shift to capital-efficient products.
The new business margin (NBM) strengthened to 3.4 (2.8) percent in the third quarter of 2017, driven by favorable markets and management decisions to adapt the product mix to the low interest rates.
“The new business margin stayed at the high level of 3.4 percent for the second consecutive quarter, well above the 2.8 percent margin one year ago, partly due to a better business mix. Customers and shareholders are both benefiting from the new products we have generated in response to this very low interest rate environment,” said Dieter Wemmer.
In the first nine months of 2017, operating profit increased nearly 10 percent to 3.4 (3.1) billion euros. Statutory premiums rose 2.6 percent to 48.7 billion euros. The new business margin rose to 3.3 (2.6) percent reflecting the targeted shift toward capital-efficient products. As a result, the value of new business (VNB) increased by 29.6 percent to 1.3 billion euros compared to the first nine months of 2016.
Asset Management: Growth continues - five straight quarters of third-party net inflows
Compared to the end of the second quarter of 2017, third-party assets under management (AuM) grew by 7 billion euros to 1,413 billion euros. High third-party net inflows of 32 billion euros, marking the fifth consecutive quarter with third-party net inflows, and positive market effects, offset negative foreign currency and deconsolidation impacts.
In the third quarter of 2017, operating profit decreased by 2.7 percent to 588 (604) million euros, mainly driven by lower performance fees and negative foreign currency effects. Adjusted for currencies, operating profit slightly increased.
The cost-income ratio (CIR) rose 1.2 percentage points to 61.9 percent in the third quarter of 2017, mainly due to lower performance fees.
“The Asset Management segment broke the 100-billion-euro mark for third-party net inflows already in the first nine months, a remarkable achievement. The outstanding investment performance of our actively managed funds is the main reason for these strong inflows,” said Dieter Wemmer.
In the first nine months of 2017, operating profit grew by 11.5 percent to 1,743 million euros, mainly due to higher AuM driven fees. Strong third-party net inflows of 106 billion euros and positive market effects outweighed negative foreign currency effects, resulting in 1,922 billion euros of total assets under management – an increase of 51 billion euros compared to year-end 2016. The cost-income ratio improved by 1.6 percentage points to 62.6 percent.
Technical Notes: Prior-year figures have been adjusted due to an updated operating profit definition and an accounting policy change, as already described in the first quarter of 2017. Annualized figures are not a forecast for full year numbers.
The quarterly figures regarding the net assets, financial position and results of operations have been prepared in conformity with International Financial Reporting Standards. This Quarterly Earnings Release is not an Interim Financial Report within the meaning of International Accounting Standard (IAS) 34.
This is a translation of the German Quarterly Earnings Release of the Allianz Group. In case of any divergences, the German original is binding.
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