Allianz promises withdrawal from Russia
May 12, 2022, 4:30 pm
Insurance giant Allianz sees no business consequences in the war in Ukraine. However, the company is cutting its links with Russia, which will have a one-off impact on the balance sheet. Overall, however, things are going according to plan for the group.
Under the impact of the war in Ukraine, the alliance is likely to withdraw completely from Russia. “There is a very high probability that we will leave Russia entirely,” said Giulio Terzariol, Chief Financial Officer. In this case, the insurance group risks having a negative equity effect of 400 to 500 million euros, which will affect the income statement. Allianz had already stopped new operations in Russia in February. Terzariol said Allianz had received only a few reports of damage in connection with the war in Ukraine. “I don’t see anything bigger than that.”
In most insurances, war damages are excluded from the contracts. In credit insurance, where things are different, Allianz has allocated around 100 million euros as a precaution. In addition, there are unquantified write-downs on investments in Russia and Ukraine, which have lost value due to the war and sanctions.
In spite of everything, Allianz is sticking to the profit forecast for the current year. The operating result will be between 12.4 billion and 14.4 billion euros, in the mid-range it would be at the level of the previous year. Allianz has already achieved almost a quarter of this result in the first quarter: however, the operating result was three percent lower than the previous year’s figure of 3.2 billion euros due to significantly higher claims from natural disasters. It spent nearly € 700 million on storms in Germany or floods in Australia, four times more than in the first quarter of 2021 and more than a decade.
The life insurance industry has stalled
The € 1.6 billion after-tax that Allianz set aside for deals with US investors in the hedge fund loss dispute decimated net profit after third parties by more than three quarters to € 561 million in the first. quarter. The insurer hopes to financially put an end to the story of billionaire losses of US pension funds and institutional investors with hedge funds. “We take responsibility for this as a member of the board,” Terzariol said when asked about the consequences for the staff. “But personal responsibility is something else”.
Operational activity usually goes smoothly. Sales, or the sum of insurance premiums and asset management fees, increased from January to March by 6 percent to 44 billion euros. Growth was driven by property insurance, where premiums rose 9%. Only the European branch of the shrinking direct insurance Allianz Direct gives Terzariol a headache. In the Netherlands things are going well, in Italy the competition suffers, but in Germany we need to act. “We urgently need to do something. We have lost focus on customers, for example.”
Life insurance is in place when it comes to the outcome. However, Terzariol referred to the return on new investment from clients’ funds, which had risen to 2.3%. “That doesn’t bother me much anymore.” In the asset management division, US asset manager Pimco, specializing in fixed income investments, had to accept net outflows for the first time in a long time. At the end of March, the division was managing € 1.88 trillion for external clients.