Allianz reports 11.9 billion euros operating profit in 2019 – the fifth consecutive increase

Allianz Group achieved outstanding results in revenues, operating profit and net income in 2019 despite a further decline in interest rates. Internal revenue growth, which adjusts for currency and consolidation effects, amounted to 5.9 percent, driven by all business segments. Total revenues increased by 7.6 percent to 142.4 (2018: 132.3) billion euros. Operating profit grew 3.0 percent to 11.9 (11.5) billion euros and is in the upper half of the Group’s announced target range of 11.0 to 12.0 billion euros. Operating profit growth was mostly driven by our Life/Health business segment due to a higher investment margin, a positive one-off profit in the United States, and volume growth. Our Asset Management business segment also reported a strong increase in operating profit due to higher average third-party assets under management (AuM) and positive foreign currency translation effects. Our Property-Casualty business segment was negatively impacted by lower run-off, due to a strengthening of reserves at AGCS, and lower operating investment income. This was partly compensated by the improved expense ratio. Net income attributable to shareholders grew 6.1 percent to 7.9 (7.5) billion euros mostly due to the increased operating profit and improved non-operating result, as well as a lower tax rate. 

Basic Earnings per Share (EPS) increased 8.4 percent in 2019 to a record 18.90 (17.43) euros. Return on Equity (RoE) grew to 13.6 percent (13.2 percent), the highest level of the last ten years. The Solvency II capitalization ratio amounted to 212 percent at end-2019, compared to 229 percent at end-2018. The Board of Management will propose a dividend of 9.60 euros per share for 2019. This is 6.7 percent higher than last year’s dividend of 9 euros and the seventh increase in a row.

Allianz completed its fourth share buy-back program on July 30, 2019, with a total volume of 1.5 billion euros and 7.3 million shares. All repurchased shares have been cancelled. On February 20, 2020, Allianz has announced a new share buy-back program of up to 1.5 billion euros that is to be completed by the end of the year.

70 percent of businesses worldwide achieved a Net Promoter Score (NPS) above market average compared to 74 percent in the previous year. The Inclusive Meritocracy Index (IMIX), which measures leadership and performance culture, was at an all-time high of 73 percent in 2019.

”2019 was another successful year with record results for the Allianz Group. This reflects the trust of customers and shareholders and the engagement of our excellent people. Allianz continued to make important strategic strides in 2019 like our acquisitions in the UK and Brazil and being awarded the first fully foreign-owned insurance holding in China. We also contribute to society: As one of the initiators of the newly launched UN-convened Asset Owner Alliance we committed to transition our own investment portfolios to net-zero by 2050,” said Oliver Bäte, Chief Executive Officer of Allianz SE. 

In the fourth quarter of 2019, operating profit amounted to 2.8 (2.8) billion euros. Reserve strengthening at AGCS led to a lower operating profit from our Property-Casualty business segment, which was mostly offset by an increase in our Life/Health and Asset Management business segments. Our Life/Health business segment operating profit increased mostly as a result of an improved investment margin. The strong increase in operating profit from our Asset Management business segment was mainly attributable to a rise in assets under management (AuM) driven revenues and performance fees. Net income attributable to shareholders grew 9.5 percent to 1.9 (1.7) billion euros in the fourth quarter of 2019 due to an improved non-operating result.

“Allianz had a successful financial year 2019, with operating profit of 11.9 billion euros in the upper half of the Group’s announced operating profit target range,” said Giulio Terzariol, Chief Financial Officer of Allianz SE. “Active risk management led to a strong Solvency II capitalization ratio of 212 percent, showing the Group’s resilience in today’s negative interest rate environment and providing a safe haven to our customers and shareholders. We look to generate 12 billion euros in operating profit in 2020, plus or minus 500 million euros – barring unforeseen events, crises or natural catastrophes.”

Total revenues rose to 59.2 (55.4) billion euros in 2019. Adjusted for foreign currency translation and consolidation effects, internal growth totaled 4.7 percent, driven by a positive price effect of 2.6 percent and a positive volume effect of 2.0 percent. 

Operating profit decreased by 11.9 percent to 5.0 billion euros in 2019 compared to the previous year. This development was foremost driven by our underwriting result, due to a strengthening of reserves at AGCS, partly offset by an improved expense ratio. Operating investment income also declined.

As a consequence, the combined ratio deteriorated by 1.5 percentage points to 95.5 percent.

“Our Property-Casualty business segment performed below expectations in 2019, following a disappointing reserve strengthening at AGCS that overcompensated for a solid accident year, underwriting and productivity gains,” said Giulio Terzariol. ”Most of our operations have been performing very well. We remain committed to our goal of improving the combined ratio to 93 percent by the end of 2021.”

In the fourth quarter of 2019, total revenues increased to 13.1 (12.1) billion euros. Adjusted for foreign currency translation and consolidation effects, internal growth amounted to 5.6 percent, with price and volume effects contributing 2.9 percent and 2.8 percent respectively. Operating profit decreased by 42.3 percent to 861 million euros compared to 2018 due to a lower underwriting result, mainly driven by the aforementioned reserve strengthening at AGCS. The combined ratio for the fourth quarter of 2019 worsened by 5.5 percentage points to 99.6 percent.

PVNBP 1, the present value of new business premiums, increased to 67.0 (58.5) billion euros in 2019. This mainly resulted from the higher sales of our capital-efficient products in the German life business, and in our business with non-traditional variable annuities in the United States. 

The new-business margin (NBM) decreased in 2019 to 3.2 (3.6) percent due to the impact of lower interest rates, which was partly offset by management actions and a more favorable business mix. The value of new business (VNB) grew to 2.2 (2.1) billion euros in 2019, driven by the increase in sales and the continued shift to preferred lines of business outweighing the negative effects from the worsening of the interest rate environment.

Operating profit rose to 4.7 (4.2) billion euros, mainly due to an improved investment margin, driven by lower impairments and higher realizations predominantly in France and Germany. Other contributing effects included a change in the deferred acquisition cost amortization period for fixed index annuities in the United States, as well as higher volume growth in the German and U.S. life business, and in the Asia-Pacific region.

“While the interest rate environment remained challenging, we managed to increase our value of new business by 3.8 percent in 2019. I am optimistic about our business prospects. We continue to take management actions and adapt our product offering for the benefit of our stakeholders as shown by the strong operating profit,” said Giulio Terzariol.

In the fourth quarter of 2019, PVNBP grew to 18.1 (16.1) billion euros due to the sales growth in our capital-efficient products in the German life business. Operating profit increased to 1.3 (1.0) billion euros predominantly due to an improved investment margin in France and in the United States. NBM dropped to 2.9 (3.9) percent, causing the VNB to decrease to 519 (631) million euros.

1 PVNBP is shown after non-controlling interests, unless otherwise stated. 

Third-party assets under management (AuM) increased by 250 billion euros to 1,686 billion euros compared to the end of 2018, marking an all-time high. All influencing effects were positive: we recorded positive market effects of 138.6 billion euros and net inflows of 75.8 billion euros; positive foreign currency translation amounted to 24.6 billion euros and consolidation effects added another 11.0 billion euros to the increase. Total assets under management increased to 2,268 billion euros. 

The cost-income ratio (CIR) decreased slightly by 0.2 percentage points to 62.3 percent in 2019 due to higher operating revenue growth compared to a lower increase in operating expenses. 

Operating profit increased by 6.9 percent to 2.7 (2.5) billion euros. This development was mostly driven by higher average third-party AuM, mainly at PIMCO, due to strong market effects and net inflows, supported by positive foreign currency translation effects.

“Our Asset Management business segment finished a very good year with outstanding growth in third-party assets under management,” said Giulio Terzariol. “Strong net inflows are a testimony for the attractive value proposition to our customers and make our Asset Management business segment a strong pillar to achieve our performance targets.”

In the fourth quarter of 2019, operating profit increased by 18.5 percent to 750 million euros, mostly due to higher AuM-driven revenues and performance fees. The cost-income ratio went down by 1.0 percentage points to 62.7 percent. Third-party AuM increased by 5 billion euros: third-party net inflows of 19.7 billion euros and positive market effects of 17.2 billion euros were burdened by negative effects from foreign currency translation of 32.1 billion euros.

As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer.

Other

The figures regarding the net assets, financial position and results of operations have been prepared in conformity with Inter-national Financial Reporting Standards.

Final results for fiscal year 2019 were released on March 6, 2020 (publication of the Annual Report). There have been no changes compared to the preliminary figures published on February 21, 2020.

This is a translation of the German Quarterly and Full-Year Earnings Release of the Allianz Group. In case of any divergences, the German original is binding.

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