Allianz reports strong profitability in 2Q 2019, operating profit outlook for full-year confirmed

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Management summary: Strong total revenues and profitability

After a successful start into 2019, Allianz Group continued with a very strong operating performance in the second quarter of the year. At the heart of this result is Allianz’ focused strategy, strong execution, and its diversified business portfolio. Internal revenue growth, which adjusts for currency and consolidation effects, was 4.1 percent in the second quarter of 2019. Total revenues increased 6.1 percent to 33.2 (second quarter of 2018: 31.3) billion euros. Operating profit grew 5.4 percent to 3.2 (3.0) billion euros in the second quarter of 2019, largely driven by our Life/Health business segment with a good underlying performance and a one-off profit in the United States. Our Asset Management business segment’s operating profit increased mainly as a result of higher assets under management driven revenues. A lower investment result led to a decrease in our Property-Casualty business segment’s operating profit.

Net income attributable to shareholders increased 13.1 percent to 2.1 (1.9) billion euros in the second quarter of 2019 due to operating profit growth and an improved non-operating result. The latter improved as the second quarter of 2018 was burdened by a negative impact from the sale of our traditional life insurance portfolio in Taiwan.

Basic Earnings per Share (EPS) increased 10.2 percent to 9.76 (8.86) euros in the first half-year of 2019. Annualized Return on Equity (RoE) amounted to 14.7 percent (full year 2018: 13.2 percent). The Solvency II capitalization ratio decreased from 218 percent at the end of the first quarter 2019 to 213 percent at the end of the second quarter 2019. The decrease was predominantly driven by market movements and capital management actions, which were partially offset by positive operating Solvency II earnings.

In the first half-year of 2019, operating profit grew by 6.4 percent to 6.1 (5.8) billion euros, which is above the mid-point of our full-year target range. Our Life/Health business segment’s operating profit increased, supported by a one-off profit in the United States. Property-Casualty business segment recorded an improved underwriting result while our Asset Management business segment operating profit was stable. Our operating profit growth was the main driver for the 7.3 percent increase of net income attributable to shareholders to 4.1 billion euros.

On February 14, 2019, Allianz announced a new share buy-back program of up to 1.5 billion euros.

6.2 million shares have been acquired by June 30, 2019, representing 1.5 percent of outstanding capital.

“I am proud that the Allianz team has once again delivered a healthy performance,” said Oliver Bäte, Chief Executive Officer of Allianz SE. “Sustainable performance is the result of our rigorous strategy execution that provides desired solutions for our customers. Our half-year results testify that Allianz is on track to achieve its full-year targets.”

Second-quarter 2019 results analyst conference call

Property-Casualty insurance: Strong revenue growth and solid underwriting result

  • Total revenues grew by 7.3 percent to 13.4 billion euros in the second quarter of 2019. Adjusted for foreign currency translation and consolidation effects, internal growth totaled 4.3 percent. AGCS, Euler Hermes, and Germany were the main growth drivers.
  • Operating profit declined by 5.0 percent to 1.4 billion euros compared to the second quarter of 2018. This was driven by a lower investment result while the underwriting result remained stable.
  • The combined ratio was broadly flat at 94.3 percent in the second quarter of 2019, as a lower run-off result was partially offset by a strong improvement in our expense ratio.

“We are seeing a solid performance in our Property-Casualty segment despite a lower investment result,” said Giulio Terzariol, Chief Financial Officer of Allianz SE. “Internal growth, supported by healthy rate changes, shows the strength of our business. Our underwriting remains disciplined while we keep on making progress with our productivity as shown by the improved expense ratio.”

In the first half-year of 2019, total revenues increased to 32.9 (30.9) billion euros. Adjusted for foreign exchange and consolidation effects, internal growth amounted to 4.5 percent, mostly driven by AGCS, Germany, and Euler Hermes. Operating profit improved by 4.0 percent to 2.8 billion euros compared to the same period of the prior year due to a higher underwriting result as we recorded lower claims from natural catastrophes, as well as an improved expense ratio. The combined ratio for the first half-year improved by 0.4 percentage points to 94.0 percent.

allianz CFO Giulio Terzariol
Allianz CFO Giulio Terzariol
allianz second quarter 2019 revenue profit

Life/Health insurance: Double digit profit growth 

  • PVNBP[1], the present value of new business premiums, went up to 15.2 (14.0) billion euros in the second quarter of 2019, mainly as a result of increased sales in the German and U.S. life insurance business. This was partly offset by weakened sales of unit-linked products in Italy and Taiwan.
  • New business margin (NBM) increased to 3.6 (3.5) percent in the second quarter of 2019 due to a favorable business mix, driving the value of new business (VNB) up by 10.7 percent to 544 (491) million euros.
  • Operating profit grew to 1.2 (1.1) billion euros in the second quarter of 2019, mainly driven by the change in the DAC amortization period for the fixed index annuities in the United States, and by volume growth. This development was partly offset by a lower investment margin.

“Our Life/Health segment continued holding up very well in the low-interest rate environment, as shown by our dynamic sales,” said Giulio Terzariol. “We kept on growing across geographies and in our preferred lines of business. Healthy new business margins will support our future operating profitability.”

In the first half-year of 2019, the present value of new business premiums increased to 32.9 (29.0) billion euros largely because of the higher sales in the German and U.S. life insurance business. Operating profit went up to 2.3 (2.1) billion euros driven mainly by the favorable effect from the change in DAC amortization period in the United States. The new business margin increased to 3.5 (3.4) percent bringing the value of new business to 1,153 (980) million euros.

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

Asset Management: Strong net inflows also in the second quarter – assets under management at all time high

  • Third-party assets under management (AuM) grew by 44 billion euros to 1,591 billion euros in the second quarter of 2019 and again reached an all-time high. The increase was driven by positive market effects of 37.8 billion euros and net inflows of 20.3 billion euros. Unfavorable foreign currency translation effects of 14.4 billion euros had an offsetting impact.
  • Total assets under management increased to 2,163 billion euros, also reaching again an all-time high.
  • The cost-income ratio (CIR) improved by 0.5 percentage points to 61.1 percent compared to the second quarter of 2018. Operating profit increased to 678 (652) million euros in the second quarter of 2019 due to an increase in operating revenues, supported by higher average AuM. Adjusted for foreign currency translation effects, operating profit was stable.

“This quarter, Asset Management again delivered strong results,” said Giulio Terzariol. “With third-party assets under management at a new record level of 1,591 billion euros, we are on track to reach our operating profit full-year target.”

In the first half-year of 2019, operating revenues grew by 1.9 percent to 3.3 billion euros, supported by higher AuM-driven revenues. As performance fees decreased and investments in business growth were made, the cost-income ratio went up by 0.6 percentage points to 62.3 percent. Operating profit rose by 0.4 percent to 1,251 (1,247) million euros. On an internal basis, operating profit decreased by 4.9 percent. Furthermore, favorable market effects, third-party net inflows, as well as the acquisition of Gurtin Municipal Bond Management resulted in third-party assets under management of 1,591 billion euros – an increase of 155 billion euros or 10.8 percent, compared to year-end 2018.

allianz second quarter 2019 highlights
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The Allianz Group is one of the world's leading insurers and asset managers with more than 92 million retail and corporate customers. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 673 billion euros on behalf of its insurance customers. Furthermore our asset managers PIMCO and Allianz Global Investors manage more than 1.4 trillion euros of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we hold the leading position for insurers in the Dow Jones Sustainability Index. In 2018, over 142,000 employees in more than 70 countries achieved total revenues of 131 billion euros and an operating profit of 11.5 billion euros for the group.

These assessments are, as always, subject to the disclaimer provided below.

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Holger Klotz
Allianz SE
Daniela Markovic
Allianz SE
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