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Allianz in Central and Eastern Europe

Allianz in Central and Eastern Europe follows a good start in 2012 with a solid first half performance

Allianz SE | Munich | Aug 13, 2012

  • Revenues stable at 2.1 billion euros
  • Life and Health insurance delivers double-digit growth rate
  • Integration of Allianz Property and Casualty companies in Russia successfully completed. New company re-branded as Allianz Russia

Allianz in Central and Eastern Europe (CEE) produced solid underlying results for the first six months of 2012 in challenging economic circumstances. Following a good start in the first quarter of 2012, Allianz companies in the region continued to perform well in the second quarter. Total revenues in the first six months amounted to 2,053 million euros compared to 2,0471 million euros in the same period the year before, despite unfavorable foreign currency effects.

Operating profit for the first half of 2012 declined 6.3 percent to 133 million euros from 1421  million euros in the prior year period. A main driver of negative development was the Hungarian crisis tax for 2012 which already had to be fully booked in the first half of the year and affected both Property and Casualty insurance and the Life and Health insurance. Adverse claims experience in Property and Casualty insurance business in Slovakia also affected operating profit. These impacts were partially offset by positive developments elsewhere in the region, notably in Property and Casualty business in Poland where claims costs improved significantly.

At 99 million euros, net income in the first two quarters of 2012 was 28 percent lower than the 1381 million euros earned in the same period in 2011. Significant non-recurring items in both periods make up the majority of the large year-on-year deviation in net income. Whilst the first half of 2012 contains restructuring charges and write-downs of intangible assets in Russia of around 12 million euros, the first half of 2011 benefited from a 20 million euros deferred tax credit arising out of the loss on disposal of the Bank in Poland.

Manuel Bauer
Manuel Bauer: "Considering the difficult market condition in Central and Eastern Europe we are on track. We have found the right balance in our portfolio to weather ongoing challenging conditions."

Property and Casualty Insurance

Allianz operations in most of the CEE region saw lower revenue levels due to a contracting market amid worsening economic conditions, as well as strong price competition. A notable exception was Allianz in Croatia, which managed to grow despite a declining market.

Property and Casualty gross premiums written declined by 8 percent to 1,272 million euros in the first six months of 2012 compared to 1,383 million euros over the same period in 2011.  Unfavorable foreign exchange effects amounted to 38 million euros. 

Operating profit for the first six months of 2012 declined by 6.2 percent to 76 million euros from 81 million euros last year. The combined ratio rose by 1.5 percentage points to 98.1 percent from 96.6 percent. Both measures were adversely impacted by the Hungarian crisis tax booking, which burdened the operating profit of the first 6 months of 2012 with 13 million euros and the combined ratio with 1.3 percentage points. Excluding this effect, which will unwind over the second half of 2012, first half 2012 operating profit was 10 percent higher than in 2011.

Allianz operations in Poland, Russia and Ukraine showed improved operating profit but these were outweighed by several major impacts from other markets in the first half of the year. Allianz in Hungary suffered from the already mentioned crisis tax, while other entities in CEE recorded significantly higher weather related claims, most notably in Bulgaria.

In Russia the integration of CJSC Allianz Russia, OJSC IC Progress Garant and OJSC IC ROSNO was successfully completed at the beginning of the second quarter. In the process, the newly created company was re-branded to Allianz Russia. With this step, Allianz in Russia is well positioned to participate in the fast-growing Russian market.

“The introduction of new taxes as well as a higher level of natural catastrophes have impacted our profitability. The economic situation is very difficult but we are expecting it to improve next year. Nonetheless throughout the economic cycle our fundamentals remain robust with a consistent focus on maintaining our margins”, commented Bruce Bowers, regional CEO of Allianz inCentral and Eastern Europe. “With the new setup in Russia we will continue to strengthen our position among the top players in this key market,” he added.

Life and Health insurance

In the first half of 2012, Life and Health insurance statutory premiums rose to 730 million euros versus 609 million euros in the respective period in 2011. Almost all Allianz operations in CEE contributed to this overall increase of 20 percent, with Allianz in Russia, Poland, the Czech Republic and Croatia delivering strong double-digit growth rates.

Operating profit in the first half of 2012 declined slightly to 38 million euros from 39 million euros over the same period in 2011. This development was mainly due to the crisis tax booking in Hungary.

Bruce Bowers: “Our Life and Health segment is continuously growing in premiums. This trend will continue due to the changing demography in the region. Although the business in Hungary is affected by domestic conditions, other entities in CEE were able not only to offset this effect but also to increase premiums with double-digit growth rates."

Pension Fund and Asset Management

Assets under Management reached 8.0 billion euros at the end of June 2012 compared to7.1 billion euros at the end of 2011. This growth was supported by increasing net inflows primarily driven by strong new business acquired in Czech Republic during the first quarter of 2012. Operating revenues remained stable at 34 million euros compared to the same period of the previous year.

Operating Profit decreased by 3 million euros to 16 million euros2. Regulations in Croatia changed, with the maximum management fees for obligatory funds being cut from 0.65% to 0.45%. This effect together with higher acquisition costs paid in the Czech Republic and re-nationalization of assets by the Hungarian state contributed to the decrease in Operating Profit. On the other hand performance fees in Slovakia benefited from a positive market development.

“Considering the difficult market condition in Central and Eastern Europe we are on track. We have found the right balance in our portfolio to weather ongoing challenging conditions. Internally our efforts to improve our efficiencyand get our costs down are bearing fruits”, commented Manuel Bauer, Member of the Board of Management of Allianz SE responsible for growth markets.

 

1 Excluding the results of discontinued operations in Kazakhstan (Property and Casualty), Slovakia (Asset Management) and  Poland (Banking).

2 Excluding the results of discontinued operations in Slovakia (Asset Management). 2011 results include 5 months of management fee income on 1.4 billion euros of Assets under Management re-nationalized by the Hungarian state in May 2011.

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Allianz in Central and Eastern Europe delivers strong results for 2011