Filed Under:Claims, Catastrophe & Restoration

Allianz’s profit misses estimates on natural catastrophes

Oliver Baete, CEO of the German insurer Allianz SE, poses for photographer prior to the annual balance conference in Munich, Germany, Friday, Feb. 19, 2016. (AP Photo/Matthias Schrader)
Oliver Baete, CEO of the German insurer Allianz SE, poses for photographer prior to the annual balance conference in Munich, Germany, Friday, Feb. 19, 2016. (AP Photo/Matthias Schrader)

(Bloomberg) -- Allianz SE missed analyst estimates for fourth-quarter profit because of claims from natural catastrophes.

Net income at Europe’s biggest insurer increased to 1.42 billion euros ($1.6 billion) in the quarter from 1.22 billion euros a year earlier, the Munich-based company said in a statement Friday. That compares with the 1.56 billion-euro average of six estimates compiled by Bloomberg. The insurer’s shares fell 1.44% to 133.75 euros at 12:07 p.m. in Frankfurt.

“Allianz steadily delivers strong results in increasingly challenging operating conditions,” Chief Executive Officer Oliver Baete, 50, said in the statement. “Our business is healthy and well-diversified. This makes us confident that we will continue to deliver strong earnings.”

Insurers in Europe are grappling with stricter regulatory capital requirements, low interest rates that hurt their investment income and subdued prices in some of their markets. Still, Allianz is seeking to achieve annual earnings per share growth of 5% on average from 2016 to 2018. It is also targeting a return on equity of 13%, adjusted to exclude unrealized capital gains on bonds and other items, by 2018.

Allianz plans to increase its dividend by 6.6% to 7.30 euros a share for 2015. That’s less than the Bloomberg Dividend Forecast of 7.40 euros.

Some analysts had expected Allianz to announce a share buyback on top of the dividend to help it reach its return on equity and earnings per share targets. The company hasn’t discussed either of those strategies, Chief Financial Officer Dieter Wemmer said in an interview with Bloomberg TV. 

“We want to deliver 15% EPS growth over three years,” he said. “There might be opportunities in the market, there might be excess capital to be given back to shareholders.”

The insurer’s asset management unit, which comprises Pacific Investment Management Co. and Allianz Global Investors, has seen upheaval after the departure of Bill Gross from Pimco in September 2014. Group third-party net outflows fell to 8 billion euros in the fourth quarter, compared with outflows of 141 billion euros a year earlier. Outflows at Pimco dropped by almost half last year while the Global Investors unit saw record inflows.

Allianz’s full-year operating profit rose 3.2% to 10.7 billion euros. That compares to a target of 10 billion euros to 10.8 billion euros. For 2016, the company aims for 10 billion euros to 11 billion euros. Fourth-quarter operating profit was impacted by claims from European storms and floods, the company said Friday.

“Claims have had a stronger impact on the combined ratio in the fourth quarter,’’ said Roland Pfaender, an analyst at Oddo Seydler Bank AG in Frankfurt, who has a buy rating on the stock. “The operating profit outlook is disappointing as it has been increased only little and the range has been been widened as a tribute to volatile markets.’’

Related: Allianz cuts U.S. risk in $1.1 billion transfer deal with Enstar

The property and casualty insurance unit’s spending on claims and other costs as a percentage of premiums, known as the combined ratio, improved to 96.2% from 96.5%, missing the average analyst estimate of 94.4%. A ratio below 100 percent means an insurer is making a profit from underwriting.

Allianz paid 738 million euros for natural catastrophe losses last year, compared to a year-earlier bill of 400 million euros. The net loss related to European storms and floods in December was 163 million euros, of which the U.K. accounted for 102 million euros.

The stock has fallen 19.5% in Frankfurt this year, valuing the company at about 60 billion euros. The Bloomberg Europe 500 Insurance Index declined 16% over the same time.

--With assistance from Mariajose Vera and Manus Cranny.

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