Management Summary: Strong top and bottom lines, operating result eases largely due to currency shifts
Allianz Group had a good start into 2018, posting a 6.8 percent rise in net income attributable to shareholders. Internal revenue growth, which adjusts for currency and consolidation effects, was 4.9 percent with positive contributions from all business segments. Total revenues increased 0.7 percent to 36.5 (first quarter of 2017: 36.2) billion euros. Operating profit decreased 6.0 percent or 176 million euros to 2.8 (2.9) billion euros. The main drivers for the decrease were 142 million euros currency translations and 148 million euros benefit in the prior year related to our corporate pension administration. Operating performance for the quarter is precisely at 25 percent of the Group’s full-year operating profit target, signaling that results are well on track.
Net income attributable to shareholders rose to 1.9 (1.8) billion euros, a 6.8 percent increase versus the first quarter of 2017, driven by a higher non-operating investment result, a decrease in restructuring charges and a lower effective tax rate.
Basic Earnings per Share (EPS) rose to 4.46 (4.00) euros. Annualized Return on Equity (RoE) was 13.8 percent (full year 2017: 11.8 percent). The Solvency II capitalization ratio remained a strong 225 percent at the end of the quarter compared to 229 percent recorded at the end of 2017.
On April 27, 2018, Allianz Group successfully completed the acquisition of Euler Hermes minorities and delisted Euler Hermes’ shares from Euronext Paris. This operation marked an important step in Allianz Group’s strategy to deploy capital in strategic businesses that deliver solid operating performance, and to strengthen positions in core markets and in Property and Casualty insurance in particular.
Separately, the Group completed its second share buy-back program, which was launched in early 2018, with a volume of 2.0 billion euros and 10.4 million shares in early May.
“Allianz enjoyed a good start into 2018. We had increases in both the top and the bottom lines, even if market volatility was visible at an operating level in the first quarter. This good performance puts Allianz on track to meet its 2018 yearly targets,” said Oliver Bäte, Chief Executive Officer of Allianz SE.
Property and Casualty insurance: Robust improvements in underlying business
Gross premiums written increased by 1.1 percent to 17.9 (17.7) billion euros in the first quarter of 2018. Adjusted for foreign exchange and consolidation effects, internal growth totaled 4.9 percent, with price and volume effects contributing 1.2 percent and 3.7 percent, respectively. Internal growth came across many countries and lines of business, including AGCS, Germany and Allianz Partners.
Operating profit increased 1.2 percent to 1.3 billion euros compared to the first quarter of 2017, as a higher underwriting result was mostly offset by lower investment income. Claims from natural catastrophes rose, primarily due to European storm Friederike, which caused some 220 million euros in claims. The Group’s underwriting result improved nonetheless due to a general improvement in the underlying loss ratio, lower claims from large losses, plus better run-off- and expense ratios.
The combined ratio improved by 0.8 percentage points to 94.8 percent.
“Premium income rose and the combined ratio improved in the quarter, underscoring the health of our Property and Casualty business. Our underwriting result strengthened due to disciplined efforts to improve technical excellence and productivity. We remain on track to meet our target of 94 percent in the combined ratio,” said Giulio Terzariol, Chief Financial Officer of Allianz SE.
Life and Health insurance: U.S. dollar weakness dents strong underlying result
PVNBP, the present value of new business premiums, rose 1.7 percent in the quarter to 15.0 (14.7) billion euros, mainly due to rising sales of capital-efficient Life products in Germany and of unit-linked products in Taiwan.
Operating profit decreased 7.4 percent to 1.1 (1.2) billion euros reflecting volatile market conditions and foreign currency translation effects in the United States. This was partly offset by higher investment margins in Germany and Spain and increased income from unit-linked business in Italy and Taiwan.
The new business margin (NBM) strengthened to 3.3 (3.1) percent, driven by favorable markets and management decisions to adapt the product mix to the low interest rate environment. This helped lift the value of new business (VNB) by 7.9 percent to 489 million euros in the quarter.
“The Allianz Group continued to improve its Life business in the quarter and the segment delivered a strong set of results. The value of new business rose 8 percent. Operating profit was also strong at 1.1 billion euros in the quarter, and we remain successfully on track with our efforts to steer new business toward preferred products,“ said Giulio Terzariol.
Asset Management: Third-party net inflows of 20.9 billion euros
The Asset Management business segment saw strong third-party net inflows of 20.9 billion euros stemming largely from PIMCO’s 19.2 billion euro contribution. Overall third-party assets under management (AuM) eased 1.3 percent to 1,429 billion euros compared to December 31, 2017, mainly due to negative foreign currency translation effects.
Operating profit increased by 4.1 percent to 595 (572) million euros, due to higher AuM-driven revenues. Adjusted for foreign exchange effects, operating profit increased a remarkable 16.3 percent.
The cost-income ratio (CIR) improved by 1.4 percentage points to 61.9 percent.
“Customers continued to favor Allianz, placing some 21 billion euros of new net third-party investments with PIMCO and Allianz Global Investors in the quarter,” said Giulio Terzariol. “This comes on top of the 150 billion euros in net inflows seen in 2017. It is a sign of customer confidence and reflects on the strength of the franchise.”
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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