By Ulrike Dauer
FRANKFURT-- Allianz SE posted a 4% decline in net profit in the
first quarter after its asset management business--notably U.S.
fund manager Pimco--dented both profits and revenues, partly owing
to one-time factors.
Pimco had taken center stage at last week's annual meeting when
shareholders expressed their concern about continuing net asset
outflows and underperformance compared with peers, in the wake of
Pimco's top management reshuffle and the departure of co-Chief
Investment Officer Mohamed El-Erian. Investors will scrutinize
Pimco's performance in the coming months for signs of either
improvement or further restructuring needs.
Overall operating profit was down 2.6% at EUR2.72 billion ($3.74
billion) from EUR2.80 billion, with the bulk of the decline due to
the asset management business, where operating profit dropped 28%
to EUR646 million from EUR900 million.
The decline was a result of lower revenue, foreign exchange
losses due to the strength of the euro and the absence of one-off
performance fees that boosted profits a year ago following a
closure of a closed-ended fund.
In the first quarter of 2013, Allianz had booked EUR276 million
in performance fees in asset management. The figure was only EUR19
million in the first quarter of this year. A reclassification of
group assets that resulted in an asset transfer out of asset
management into the life/health insurance segment contributed to
the decline.
The weak part was EUR21.7 billion in net outflows at Pimco
between December and March, which wasn't offset by EUR1.9 billion
in net inflows at Allianz Global Investors, the smaller player in
the group's asset management business.
Pimco's net outflows were still on a high level, but eased from
the two previous quarters, analysts noted.
"Pimco's net asset outflows roughly halved compared with the
fourth quarter, we are on track toward a stabilization," said Chief
Financial Officer Dieter Wemmer.
Pimco collected $5.5 billion in commitments for a new distressed
debt fund in the first quarter, Mr Wemmer said. "This strong
interest proves investor trust that Pimco, with its new products,
will be able to build on the high performance of past years," he
said.
Pimco's first-quarter outflows were most pronounced in the
Americas and Asia, both from retail and institutional clients, and
affecting both traditional and non-traditional products, Allianz
said. In the first quarter, 88% of Pimco assets outperformed their
respective benchmarks, down from 90% in 2013.
Market value increases kept third-party assets under management
in the asset management business stable.
Allianz group net profit fell to EUR1.64 billion from EUR1.71
billion a year earlier, as lower claims costs and revenue gains
weren't enough to offset the weaker contribution from asset
management. Revenue was up 6% at EUR34 billion from EUR32 billion
in the first quarter of 2013.
Allianz Chief Executive Michael Diekmann last week guided for
lower quarterly operating profit.
Allianz also said first-quarter results put it on track for its
full-year operating profit target. For 2014, Allianz has set a
target range of between EUR9.5 billion and EUR10.5 billion for
operating profit. In 2013, operating profit was EUR10.07
billion.
The target is lower due to several factors identified by the
company, including lower performance fees in asset management and
lower average assets under management. Investment returns are also
forecast to decliner amid continuing low interest rates and
negative forex translation effects as the euro is expected to
remain strong against major currencies.
Write to Ulrike Dauer at ulrike.dauer@wsj.com
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