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Last updated: May 15, 2012 7:25 pm
A euro exit would be disastrous for Greece, Allianz warned as it reported improved first-quarter earnings while cautioning investors to expect further market turmoil.
Europe’s largest insurer by market capitalisation said it expected the eurozone debt crisis to become less acute but Oliver Bäte, chief financial officer, said: “We expect further shocks before the situation finally calms down ... we remain very cautious.”
Responding to market nervousness over Greece, Mr Bäte said a eurozone exit for Athens would cause contagion and should “be avoided at all costs”. Allianz was also concerned about the “critical” situation in Spain, Mr Bäte said.
Allianz, which is one of the biggest investors in financial markets, with more than €1.6tn of assets under management, said yields on German government bonds were likely to creep up as the “haven” effect that is driving German bond prices faded this year.
”We still expect the debt crisis to abate slowly in the course of this year as EU summit decisions are implemented, structural reforms in over-indebted countries make progress, public finances continue to consolidate and ECB measures prove effective in preventing a credit crunch,” the insurer said.
Allianz booked a loss of €77m on its stake of about 7 per cent in Spain’s Banco Popular. Mr Bäte said the insurer’s joint ventures with the bank remained “very solid”.
The German group’s first-quarter net income rose 58 per cent from €915m in 2011 to €1.4bn, buoyed by a “benign” period for natural catastrophes compared with the turbulent first three months of 2011. Revenues were stable at €30.1bn for the quarter.
Allianz’s operating profits for the quarter were 40 per cent higher at €2.3bn, with Mr Bäte hailing a “very good start” in comparison with 2011, which he said had been “tough for the entire insurance industry”.
But Allianz did not raise its forecast for operating profits for the year of between €7.7bn and €8.7bn. The insurer said: “Given the lower losses from natural catastrophes and higher investment result, it would be inappropriate to simply annualise the current quarter’s operating profit and net income to arrive at an expected result for the full year.”
Operating profits from general insurance were up 79 per cent while operating profits from life and health insurance rose more than 17 per cent, driven by better investment results, despite customer reluctance to buy investment products.
Allianz recorded a net income of €84m from valuation gains on an investment in The Hartford, a US insurer. A further €100m or so should come in the second quarter from the Hartford transaction, Allianz said.
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