Allianz 2Q Net Profit Seen -39% On Lower Cap Gains, Higher Claims
August 04 2010 - 1:12PM
Dow Jones News
Allianz SE (ALV.XE), Europe's largest insurer by gross premiums
and market capitalization, is expected to report a 39% decline in
net profit for the second quarter, on lower income from own
investments and higher costs triggered by earthquakes and other
natural disasters.
Second-quarter net profit attributable to shareholders is
forecast to drop to EUR1.15 billion from EUR1.87 billion in the
same quarter a year ago, according to a Dow Jones Newswires poll of
15 analysts. Analysts in general expect lower realized gains on
stock investments than in previous quarters, which will be visible
in a weaker contribution from so-called non-operating items.
Allianz already said it realized a EUR130 million capital gain
on reducing its stake in Industrial and Commercial Bank of China
Ltd. (1398.HK) in April.
The analyst survey forecast operating profit to have risen 2.9%
to EUR1.84 billion from EUR1.79 billion, and total revenue is also
forecast to have gained 4.8% to EUR23.24 billion from EUR22.17
billion.
Most analysts linked the quarterly earnings forecasts to the
previous quarter, rather than the same period a year ago, for
better monitoring of the earnings trend.
The higher claims from natural disasters could have weighed on
the quarterly combined ratio in the property/casualty insurance
business. Still, most analysts expect an improvement in the
combined ratio over the first quarter, which J.P. Morgan Cazenove
analyst Michael Huttner attributes mainly due to lower motor claims
in Germany and lower large industrial claims compared with the
previous quarter. He sees the combined ratio at 97.2%, down from
100.4% in the first quarter and also lower than 98.9% in the
second-quarter of 2009.
The combined ratio is a widely watched measure of an insurer's
profitability in its core underwriting business, when stripping out
the investment result. The ratio compares how many cents an insurer
has to pay per euro premiums earned for claims and other costs; a
figure below 100% means the insurer made a profit in its
underwriting business, a figure above 100% means it made a
loss.
Over the past years, European insurers in general have been
hampered by rising insurance claims and enhanced price competition
in key areas such as motor insurance business, where players are
underscoring each other. In addition, life insurers have been
challenged by the low interest-rate environment, which makes it
more difficult to meet pledges to policyholders. Likewise, market
conditions in the industrial business will remain challenging this
year and next, while the mid-term outlook is positive, Allianz said
at a recent investors day.
On Wednesday, AXA SA (CS.FR), Europe's second-largest insurer by
market value, reported a 29% decline in first-half net profit to
EUR944 million, hit by a EUR1.55 billion charge arising from
selling part of its U.K. life operations in June.
Excluding the hit from the U.K. disposal, underlying profit
declined 3% to EUR2.08 billion, as improving life insurance margins
helped soften the blow of higher claims linked to natural disasters
on its non-life operations.
Overall, Allianz is still benefitting from investor relief after
the successful sale of Dresdner Bank to Commerzbank, completed in
January 2009. The bank, which Allianz bought in 2001, had burdened
the insurer's earnings for more than half a decade.
Investors will watch for a company full-year outlook and beyond.
Allianz has previously said it expects an operating profit of
around EUR7.2 billion for 2010, give or take EUR500 million.
Allianz shares closed up EUR0.27, or 0.3%, at EUR91.20
Wednesday. The shares have gained 25% over the past year,
underperforming the Stoxx 600 insurance index, but putting the
company's market capitalization at EUR41 billion.
By Ulrike Dauer, Dow Jones Newswires; +49 69 29725 500;
ulrike.dauer@dowjones.com
(Elena Berton contributed to this article.)