August 6, 2010

Allianz SE Loses Profits as PIMCO Helps Unit Double Earnings

European insurer's North American life insurance unit says premiums "ahead of expectations"

Allianz SE (AZSEY), Europe's largest insurer, said its second-quarter profits fell nearly 50%, largely due to the sale of shares in Industrial & Commercial Bank of China and a write-down in its investment in Hartford Financial Services Group Inc.

Net income in the second quarter dropped to 1.02 billion euros ($1.34 billion) from 1.87 billion euros a year earlier, missing analysts' estimates of 1.18 billion euros. Still, Allianz's second-quarter report saw a 23% gain in operating profits, 2.19 billion euros, which surpassed projections.

"While in the second quarter soft market conditions persisted in many insurance markets, positive price effects were observed in several of our core markets," CFO Oliver Baete said in the statement.

Allianz posted a 167 million-euro write-down on its investment in Hartford in the quarter, compared with a positive effect of 97 million euros in the previous three months. Two years ago, it invested $2.5 billion in Hartford, which now represents nearly 20% of the U.S. insurer.

Earlier this week, Hartford said it expects 2010 core earnings per share to be between $2.10 and $2.30. The previous guidance was between $2.70 and $3.00. This includes the impact of a pre-tax underwriting loss of $206 million from other operations in property and casualty.

The asset-management unit of Allianz, which includes Newport Beach, Calif.-based Pacific Investment Management Co.,(or PIMCO), more than doubled its operating profit to 516 million euros. The division had net inflows of 23 billion euros in the quarter, bringing third-party assets under management to 1.14 trillion euros, Allianz said.

In the first half of 2010, inflows have totaled about 60 billion euros.

Minneapolis-based Allianz Life Insurance Company of North America (Allianz) said it posted an operating profit of $67 million in the second quarter, and that premiums were "ahead of expectations, as anticipated, operating profit results were down slightly from the first quarter based on the challenging market environment," it explained in a statement.

Total assets of the U.S. insurer grew to more than $93 billion, with reported premiums of $2.6 billion. Fixed index annuity premiums were $1.6 billion, up 9% over the second quarter of last year. And sales of variable annuities were 44% above last year's same-quarter results.

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