Allianz profit plummets 29%; CEO stresses 'resilience' amidst COVID-19 turmoil

German insurance giant Allianz said first quarter 2020 results were "resilient" despite facing COVID-19 induced turmoil and financial market headwinds that aggravated business conditions and slashed its profits by almost 29 percent.

The insurer's 2020 outlook €12 billion operating profit, plus or minus €500 million, has been withdrawn given the current market condition and COVID-19 uncertainties.

However, chief executive Oliver Bäte noted that the group's well-diversified business portfolio and a robust balance sheet is well prepared to manage the Corona crisis.

The insurer made a net profit of €1.4 billion, down 28.9 percent from €2.0 billion in Q1 2019. The decline was mainly driven by COVID-19-related market downturn, which impacted the investment margin and deferred acquisition costs. The operating profit was hit by COVID-19-related losses.

The company's total revenue increased 5.7 percent to reach €42.6 billion, compared with €40.3 billion in the prior year quarter. Internal revenue grew 3.7 percent, driven in particular by its life/health business.

"The first quarter of 2020 showed the resilience of Allianz in these unprecedented circumstances," said Bäte. "I am very proud of the operational preparedness of Allianz, the dedication of our employees and our IT that ensures the highest service levels for our customers even in this challenging situation. These are very testing times for us all, but I believe that together we will rise to this challenge."

In its property/casualty unit, revenues rose by 4.2 percent to €20.3 billion in the first quarter of 2020. AGCS, Allianz Asia Pacific, and Allianz Turkey were the main growth drivers. However, the combined ratio, which rose 4.1 percentage points to 97.8 percent, was burdened by COVID-19 and natural catastrophes claims.

"COVID-19 has aggravated operating conditions in our Property-Casualty business segment," said Giulio Terzariol, chief financial officer of Allianz SE.

Terzariol added: "New business margin in our Life/Health business segment held up very well during the first quarter of 2020 and sales were concentrated on our preferred lines. On the other hand, our operating result reflects the turbulences in financial markets. We continue to manage actively our product range and asset base to ensure the resilience and value proposition of our Life/Health business segment."

Gross premium written in its Allianz Global Corporate & Specialty (AGCS) unit increased by €143 million to €3.011 billion, compared with €2.869 billion in Q1 2019, driven by growth in all lines of business and regions. However, the combined ratio for the quarter stood at 117.5 percent (Q1 2019: 99.7 percent), largely attributed to losses resulting from the COVID-19 pandemic.

The overall impact from COVID-19 on AGCS’ underwriting result was €233 million. The unit saw an operating loss of €141 million in Q1 2020, compared with a profit of €106 million in Q1 2019, suffering mainly from negative foreign exchange effects largely attributed to the Covid-19 outbreak.

In the enlarged Allianz Holdings Group, which includes Allianz Insurance, LV= General Insurance and the general insurance business acquired from Legal & General, the overall gross written premium was£1.026 billion in the first quarter of 2020, with L&G General Insurance contributing £512 million to the GWP.

Jon Dye, CEO of Allianz Holdings, said: “We opened a new chapter for our business and it would be no exaggeration to say that this coincided with the start of an unprecedented period for the market and the country, as we live through the largest insured event in history."

Dye added: “The company has doubled in size to become the second largest general insurer in the UK and achieved substantial underlying growth in both Commercial and Personal lines. However, the quarter also saw significant claims for storms and floods amounting to £68m, and the slowdown in new business due to COVID-19 was already being felt at the end of Q1.”