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Allianz Group achieved strong results in the first quarter of 2016 in a continued challenging environment. Net income attributable to shareholders rose by 20.5 percent to 2.2 billion euros, driven in part by non-operating realized gains. In the Property and Casualty insurance segment, operating profit showed a substantial improvement compared to the previous year, largely due to lower claims stemming from natural catastrophes. The Life and Health insurance segment recorded a decline of total revenues as a result of changes to the product strategy. In Asset Management, third-party net outflows continued to decrease compared to the prior year.
“The first quarter represented a great start to the year. We are well on our way towards achieving our operating profit target in the range of 10.5 billion euros, plus or minus 500 million euros for the entire year,” said Dieter Wemmer, CFO of Allianz SE.
Revenues down 6.4% in 1Q
Total revenues in the first quarter fell by 6.4percent to 35.4 (37.8) billion euros, primarily reflecting the targeted shift toward capital-efficient products as well as lower premiums from the unit-linked business in Italy and Taiwan in the Life and Health segment.
Operating profit €2.8bn in 1Q
Operating profit decreased by 3.5 percent to 2.8 billion euros. In the Life and Health segment, operating profit has been on track despite partial loss recognition of 82 million euros in Korea and a lower contribution from Germany after an exceptional first quarter in 2015. In Asset Management, lower average third-party assets under management were the main driver for a drop in operating profit. These effects were partly compensated by an increase in operating profit in the Property and Casualty segment.
Annualized return on equity 15.7% in 1Q
The non-operating result improved by 339 million euros to 278 million euros as a result of higher realizations, mainly on equity investments, as well as a positive contribution from hedging-related activities. Net income attributable to shareholders amounted to 2.2 billion euros, an increase of 20.5 percent. Basic Earnings per Share (EPS) rose 20.3 percent to 4.82 euros. Annualized Return on Equity (RoE) was at 15.7 percent (full year 2015: 12.5 percent). Annualized figures are not a forecast for full year numbers.
Solvency II ratio 186 % at 31.3.2016
Solvency II capitalization eased to 186 percent at the end of the first quarter compared to 200 percent at the end of 2015 due to capital market developments, partly offset by risk management actions. The decrease was also due in part to a changed regulatory tax treatment of the German life sector that took effect on January 1, 2016.
“The Property and Casualty insurance business continued on last year’s successful path with very good results. The segment contributed more than half of the Allianz Group’s total operating profit this quarter,” said Dieter Wemmer. “The business also benefitted from fewer natural catastrophes in the quarter.”
Gross premiums written down 0.5% in 1Q
In the Property and Casualty segment, gross premiums written reached 17.2 (17.3) billion euros in the first quarter of 2016, a slight decrease of 0.5 percent year-on-year due to negative foreign exchange effects. Adjusted for foreign exchange and consolidation effects, internal growth was good at 2.7 percent, primarily driven by Allianz Global Corporate & Specialty (AGCS), Turkey and Germany. Price and volume effects contributed 1.0 percent and 1.7 percent respectively.
Combined ratio 93.3% in 1Q
Operating profit grew 12.0 percent to 1.4 billion euros compared to the prior-year quarter. The decrease in investment income was more than compensated for by much lower claims from natural catastrophes as well as lower restructuring expenses. The combined ratio improved by 1.3 percentage points to 93.3 (94.6) percent compared to the year-earlier period.
“The first quarter of 2016 is the third consecutive period with healthy and stable new business margins. The launching of new capital-efficient products became visible in the second half of 2015 and continued throughout the first quarter of 2016,” said Dieter Wemmer. “Repricing activities on traditional products and the introduction of new capital-efficient products helped to improve new business profitability across Europe and the United States.”
Statutory premiums down 11.4% in 1Q
Statutory premiums decreased by 11.4 percent to 16.7 (18.8) billion euros due to reduced sales of traditional products, primarily in Germany, and to lower unit-linked single premiums in Italy and Taiwan. Adjusted for foreign exchange and consolidation effects, statutory premiums fell by 11.1 percent.
Operating profit €0.9bn in 1Q
Operating profit declined by 16.0 percent to 0.9 billion euros in the first three months of 2016. This was predominantly caused by a lower investment margin in the German life business after a very high first quarter last year, lower unit-linked performance fees in Italy, and by partial loss recognition in Korea.
VNB €367mn and NBM 2.5% in 1Q
The value of new business (VNB) rose to 367 million euros in the first quarter, an increase of 36.7 percent compared to the first quarter of 2015. As a result of changes in product strategy, premiums shifted to capital-efficient products. The new business margin went up by 1.0 percentage point to 2.5 percent compared to one year ago, enhanced by a more favorable business mix with higher shares of capital-efficient products and a lower share of guaranteed savings and annuities.
“Net outflows of third-party assets under management at PIMCO slowed but continued to weigh on assets under management, as did currency shifts,” said Dieter Wemmer. “Although we anticipate a challenging environment for the asset management industry, we continue to expect positive net flows at PIMCO in the second half of the year, alongside steady net inflows at Allianz Global Investors.”
Operating profit €463mn in 1Q
In Asset Management, operating profit in the first quarter declined by 16.5 percent to 463 (555) million euros. Following the decline in average third-party assets under management and a slight decrease in margin on those assets, operating revenues sank 11.8 percent to 1.4 (1.6) billion euros. This development was partly offset by lower operating expenses.
CIR at 66.6% in 1Q
The cost-income ratio (CIR) increased to 66.6 percent from 64.7 percent in the year-earlier quarter, related primarily to the decrease in revenues at PIMCO.
3P net outflows at €9bn in 1Q
Compared to December 31, 2015, third-party assets under management decreased by 34 billion euros to 1,242 billion euros, mainly driven by negative foreign currency translation effects. Third-party net outflows in the first quarter of 2016 receded to 9 billion euros, compared to 62 billion euros in the first quarter of 2015. Net outflows were driven by third-party net outflows at PIMCO, while Allianz Global Investors again recorded third-party net inflows, which it has done now for more than three years running.
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