US Justice Department to investigate Europe's largest re/insurer; financial hit expected

The US Department of Justice (DoJ) is investigating one of Europe's largest re/insurers after receiving several lawsuits over its so-called Structured Alpha Funds. The carrier has confirmed the probe and warned of a potential material risk to its financial earnings and capitalisation as a result of the litigation.

Subsequent to the litigation pending in US courts in relation to the Structured Alpha Funds against Allianz Global Investors US and other Allianz Group companies, the US Securities and Exchange Commission launched a probe into its asset management activity in 2020.

Global multiline insurance group Allianz has warned that the legal battle could materially hurt its earnings.

The German insurer said that its Allianz Global Investors US unit has received a voluntary request for documents and information from the DOJ and that Allianz is fully cooperating with the US Securities and Exchange Commission (SEC) and the DOJ in the investigations and has immediately started its own review of the matter.

The management of Allianz has reassessed the matter and has come to the conclusion that there is a "relevant risk that the matters relating to the Structured Alpha Funds could materially impact future financial results of Allianz Group."

It noted that it was not feasible to reliably estimate the amount of any possible resolution including potential fines and therefore, no provision has been recognised at the current stage.

According to the analysts, the possible resolution to the pending litigation may result in a hefty fine that would "eat into the group's future earnings and possibly capitalisation".

"We believe that the potential costs or provisions associated with the investigation could be substantial and might lead us to reconsider our view of the group's earnings or capitalisation," said S&P Global, adding that it recognises the company's "generally very strong capitalisation and earnings capacity across its diverse operations."

"We understand that the financial consequences and timing of the investigation are highly unpredictable at this stage.

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