By Ulrike Dauer
MUNICH--Fending off shareholder criticism, Allianz SE Chief
Executive Michael Diekmann Wednesday expressed strong support for
Pacific Investment Management Co., the insurer's asset-manager, and
Bill Gross, its founder.
"There is no reason to rake us over the coals," Mr. Diekmann
told the annual shareholders' meeting, praising Pimco's record of
substantially outperforming its peers in most of the past 26 years.
The company's flagship fund, which has nearly $2 trillion of assets
under management, is struggling with investor defections and a weak
investment performance.
"Allianz will do anything sensible to strengthen Pimco further,"
Mr. Diekmann said, adding that clients have given the company "very
positive feedback" on Pimco's new management structure. Mr.
Diekmann asked shareholders to give the company until the next
annual shareholders' meeting before passing judgment.
"If we, as Pimco owner but also as Pimco customer, aren't
pleased, shareholders can rake us over the coals," he said.
Still, shareholders grilled Allianz management about Pimco's
performance and a recent management shake-up that involved the
departure of CEO Mohamed El-Erian and the appointment of six deputy
chief investment officers. Mr. El-Erian, who served as co-chief
investment officer with Mr. Gross, left amid tension over the
management style of Mr. Gross, who remains at the helm.
"Mr. Diekmann, what do you want to do to get Pimco out of the
negative media headlines," asked Ingo Speich, fund manager at Union
Investment, one of the top investors in Allianz, Europe's biggest
insurer by market value. He asked whether the parent wants to get
more strongly involved in Pimco, which is based more than 9,000
kilometers away in Newport Beach, Calif.
"We will see whether the new management structure with six
deputy investment officers under Bill Gross will be sustained and
generate better investment returns," Mr. Speich said.
He added that Allianz's share price, which he said has
underperformed both the Stoxx 600 insurance index and the German
DAX by 5% since the beginning of 2014, reflects "a substantial
Pimco discount."
Investors pulled a net $5.5 billion from Pimco's funds in April,
including $3.1 billion from Mr. Gross's $230 billion Total Return
fund, according to research firm Morningstar Inc. U.S. bond mutual
funds and exchange-traded funds attracted a net $11.2 billion in
new cash in April.
Pimco has always operated autonomously, with few questions from
investors about its parent company's involvement. As a result,
Allianz executives aren't holding Pimco to any timetable dictating
when it has to turn around outflows and performance, according to
investors and people familiar with the situation. But because of
its management shake-up and mutual-fund outflows, the role of
Allianz has taken center stage.
"We didn't need a male cat fight," said Daniela Bergdolt,
referring to the conflict between Mr. Gross and Mr. El-Erian. Ms.
Bergdolt represents DSW Deutsche Schutzvereinigung für
Wertpapierbesitz, one of Germany's two biggest retail shareholder
groups.
Eric Jacobson, a senior fund analyst at Morningstar, said before
the meeting that Allianz has no choice but to defend Mr. Gross
because so much of Pimco's value is tied up in him. "Doing anything
at this point is probably a riskier proposition for Allianz than
standing on the sidelines," Mr. Jacobson said.
A Pimco spokesman declined to comment.
Shareholders separately urged the company to provide clarity
over possible contract extensions, as contracts for six out of 11
management board members expire at the end of the year, including
that of CEO Diekmann. Mr. Speich, Ms. Bergdolt and other
shareholders expressed their wish for Mr. Diekmann to consider an
extension of his contract by one or two years.
Also Wednesday, Allianz reported that its profit fell 4% in the
first quarter, but that it was on track to hit its target for its
full-year operating profit.
Quarterly operating profit at the company's insurance
operations--property/casualty and life/health insurance--was higher
than called for by the company's guidance on its full-year
operating results, while performance in asset management was in
line with that target, Mr. Diekmann said.
Net profit fell to about EUR1.64 billion ($2.28 billion) from
EUR1.71 billion in the same period a year ago, beating an average
forecast of EUR1.61 billion.
Operating profit, the main item for which the group provides
guidance, fell 2.9% to EUR2.72 billion for the quarter from about
EUR2.80 billion, also better than the average analyst forecast of
EUR2.60 billion. Allianz expects operating profit of between EUR9.5
billion and EUR10.5 billion for the full year.
Like other European insurers, Allianz benefited from a mild
winter on the Continent that resulted in low claims for natural
disasters. The low total helped support profits in the
property/casualty business.
Allianz said market-value increases kept third-party assets
under management in its asset-management business stable.
Total revenue rose 6.3% to EUR34 billion, the highest quarterly
result so far in the company's history, Allianz said. A year ago,
that figure was EUR32 billion.
Allianz usually releases a small set of first-quarter figures
before the annual shareholders' meeting. The full earnings release
is due May 14.
Kirsten Grind contributed to this article.
Write to Ulrike Dauer at ulrike.dauer@wsj.com
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