Investment Impairments Hit Allianz 3Q Profit

Investment impairments and exposure to Greek sovereign debt drove Allianz SE’s third-quarter profit down, as the group’s life and health segment felt the economic effects particularly hard.

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Net profit for the quarter fell to 258 million euros (US$351.6 million) from 1.3 billion euros a year earlier. Allianz reported 931 million euros in nonoperating impairments, mainly for investments and exposure to Greek sovereign debt.

Allianz said impairments in equity investments rose by 695 million euros from a year earlier, totaling 715 million euros. Impairments to investments in Greek sovereign bonds totaled 145 million euros.

Impaired investments were mainly excluded from tax considerations, driving the group’s tax rate in Germany to 60% from last year’s 34.4%.

“All market participants have to face the uncertainty and high volatility of the capital markets,” said Chief Financial Officer Oliver Bate in a statement. “We remain committed to achieving our operating profit target for 2011 of 8 billion euros, plus or minus 0.5 billion euros.”

Allianz added in the “Outlook” section of its third-quarter financial report that “although not part of our outlook, we recognize that our net income during the third quarter was heavily impacted by the effects of losses from investments in financial sector assets. As such, and although dependent on a number of factors, including market developments in the fourth quarter, we would expect the full year 2011 net income to be well below that of 2010.”

Operating profit for the life and health segment fell 20.6% to 520 million euros, and statutory premiums fell 6% to 11.8 billion euros on a decline in investment-oriented products.

“Premium volume grew in most major European markets or maintained at least last year’s level,” said Allianz. “In Asia and the U.S. the volume declined primarily due to one-off effects.”

On property and casualty side, operating profit fell 1% to 1.11 billion euros. Gross premiums written rose 2.2% to 10.8 billion euros.

“Higher premiums in the U.S., U.K., Australia and in the Asia-Pacific region offset declines in other markets, specifically in Germany and reinsurance,” Allianz said. “Most of this growth stemmed from crop insurance in the U.S., where higher commodity prices drove up revenues.”

The group’s asset management segment boosted its operating profit 3.1% to 537 million euros on a higher level of assets under management.

Allianz SE

(By David Pilla, international editor, BestWeek: David.Pilla@ambest.com)