May 14, 2014 8:24 am

Pimco troubles hit Allianz’s net profit

Investors pulling their money out of Pimco funds took their toll on Allianz's earnings, as the German insurer announced a drop in net income for the first quarter.

Allianz said operating profit in its asset management arm fell 28 per cent to €646m in the first three months of the year, driven largely by net outflows of €22bn from troubled fixed income house Pimco.

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That weighed on the insurer’s bottom line, with net income falling 3.9 per cent to €1.6bn, in line with preliminary figures from Allianz released last week.

Allianz came under pressure from shareholders at its annual general meeting last week over how it was dealing with Pimco after the high-profile departure of the California-based fund manager's chief executive officer, Mohamed El-Erian, in January. 

Shareholders said Allianz could have done more to ensure calm at its subsidiary, while some questioned the wisdom of continuing to own the fixed-income specialist. 

Allianz executives have said their hands-off approach with Pimco still makes sense, and described the subsidiary's performance in the first quarter as “solid”. Net outflows at the fixed-income specialist were lower than in the fourth quarter, when investors pulled €36bn out of the funds.

The losses at the asset management arm were offset by the Munich-based insurer’s other two business arms, which had a better quarter than the same period last year. Allianz said it remained on track to meet its goal of operating profit of €10bn this year, which would be flat compared with 2013’s result.

Operating profit in the property and casualty arm rose nearly 13 per cent to €1.49bn. That made up more than half Allianz’s total operating profit for the quarter as the underwriting business benefited from fewer natural catastrophes, with problems mainly limited to floods in the UK and winter storms in the US. However, Dieter Wemmer, Allianz’s chief financial officer, warned that not every quarter would have such a low impact from natural catastrophes.

Mr Wemmer said that customers were also responding well to new products in the life insurance arm, where the US business showed particularly strong premium growth of 64 per cent. Operating profit for the life insurance division rose nearly 3 per cent to €880m, though the rise was largely due to restructuring after a small portion of the asset management business was transferred across.

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