Allianz posts higher Q1 operating profit despite rise in large losses, Ogden

German insurer Allianz has reported an increase in operating profit for the first quarter of 2017 despite a rise in large losses and a “higher than expected” charge from the UK’s  Ogden personal injury discount rate change.

Operating profit grew by 9.4 percent year on year to €2.9 billion in the first quarter of 2017, driven by a strong performance of the life and health, and asset management business segments, the company said in a statement.

In the property/casualty (P&C) line, operating profit declined by 12.7 percent year on year to €1.3 billion in the first quarter. This decrease was due to a lower underwriting result driven by higher large losses amounting to €141 million and an increase in claims stemming from natural catastrophes at around €108 million. In addition, the segment was hit by a “higher than expected” Ogden personal injury discount rate change impact of around €112 million.

As a result, the combined ratio in P&C deteriorated to 95.6 percent in the first quarter from 93.3 percent a year earlier.

Gross premiums written in P&C grew to €17.7 billion in the first quarter of 2017 compared to €17.2 billion in the same period a year ago.

“The property and casualty business segment is on track to meet its full-year target despite higher quarterly charges compared to prior year for large losses, storms in Europe and Australia, and the Ogden discount rate change,” said Dieter Wemmer, chief financial officer of Allianz SE.

In life and health operating profit increased by 35.5 percent to €1.2 billion in the first quarter, reflecting a higher investment margin in the US due to more positive market effects, the company said.

Statutory premiums in the segment grew by 1.3 percent to €16.9 billion due to single premium growth from the sale of capital-efficient products in Germany and higher unit-linked premiums in Taiwan, which compensated for the decline in premiums in the US, the company noted.

“The life and health business segment enjoyed an outstanding start to the year with operating profit rising by more than a third, mainly driven by a strong investment margin in the United States. Even with low interest rates, our new products create value for both our customers and shareholders,” Wemmer said.

In the asset management business segment, operating profit increased by 24.4 percent to €572 million in the first quarter, primarily driven by an increase in operating revenues as a result of higher average third-party assets under management, according to the insurer.

Nevertheless, the group’s net income attributable to shareholders fell by 15.3 percent to €1.8 billion euros, as the prior year quarter benefitted from one-off gains from the sale of financial stakes, as well as significantly lower restructuring expenses and a lower effective tax rate, the company said. Total revenues grew to €36.2 billion compared to €35.4 billion over the period.

“Allianz saw a good start into 2017 with results putting the group on track to meet its operating profit target for the full year of 10.8 billion euros, plus or minus 500 million euros, barring unforeseen events, crises or natural catastrophes,” Wemmer noted.

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