Allianz Group operating profit, revenues up in 2014 over 2013

Allianz Group saw operating profit increase to 10.40 billion euros in 2014, up 3.3% from 10.07 billion euros in 2013, with the Property and Casualty insurance segment delivering more than half of the Group total, notes a statement issued Thursday by the company.

Broken down by line, of the 10.40 billion euros last year, Property-Casualty accounted for 5.382 billion euros in 2014 (up 2.2% from 5.267 billion euros in 2013); Life/Health accounted for 3.327 billion euros (up from 2.709 billion euros); Asset Management accounted for 2.603 billion euros (down from 3.161 billion euros); Corporate and Other accounted for -828 million euros (down from -1.004 billion euros); and Consolidation accounted for -91 million euros (up from -68 million euros).

With regard to net income/loss, results for the Group were 6.603 billion euros, up 4.1% from 6.343 billion euros in 2013. By line, P&C’s income decreased 9.7% to 3.448 billion euros; Life/Health’s income increased 19.5% to 2.320 billion euros; Asset Management’s income decreased 15.8% to 1.621 billion euros; Corporate and Other’s loss was 657 million euros; and Consolidation’s loss was 129 million euros.

The Group operating profit “is in the upper end of the target range as forecast in November 2014. The projected range for the 2014 operating profit was 10.0 billion euros, plus/minus 500 million euros,” notes a statement from Allianz Group, which provides insurance, asset management and assistance services.

“We expect the economic environment to remain challenging in 2015. Our current operating profit outlook for 2015 is 10.4 billion euros, plus/minus 400 million euros,” says Michael Diekmann, chief executive officer of Allianz SE. “As always, our outlook is subject to the caveat that natural catastrophes remain within the normal boundaries and that we are spared any extreme turbulence on the capital markets,” Diekmann notes in prepared remarks.

In the P&C business for 2015, Allianz expects to achieve an operating profit of between 5.2 billion euros and 5.8 billion euros; 3.0 billion euros to 3.6 billion euros in Life/Health; and 2.2 billion euros to 2.8 billion euros in Asset Management, he says.

For 2014, the 2.2% increase in operating profit for Allianz’s P&C insurance segment was driven mainly by a better underwriting result, while the investment result remained stable and the combined ratio remained unchanged at 94.3%.

“Operating profit and the combined ratio both benefitted in 2014 from a benign natural catastrophe environment, but were impacted by certain effects, including reserve strengthening in Brazil, at Fireman’s Fund and in Russia. In the United States, Allianz will realign the set-up of Fireman’s Fund by consolidating the corporate insurance activities and divesting the retail insurance line. Retail insurance business in Russia and Ukraine was readjusted in reaction to difficult economic conditions in those markets,” the company statement notes.

“We are consolidating the corporate business of Fireman’s Fund with our industrial insurer, AGCS,” Diekmann notes in prepared comments. “The consolidation of the corporate business will give us the necessary critical size that we were unable to attain in the retail customer segment. The buyer we have found for the retail business, the U.S. insurance company ACE, will also be keeping the vast majority of the current workforce in that area.”

Overall for the P&C segment, Allianz reports that gross written premiums increased 3.7% to 48.32 billion euros in 2014 compared with 46.58 billion euros in 2013.

Strong demand for new products continued in 2014 – including two modular household cover products: one in Germany and the other in Italy – Allianz acquired part of the insurance business of the Italian insurance company, UnipolSai, and it took over the general insurance business of the Australian Territory Insurance Office. This all served to expand the P&C business in key markets, the statement notes.

“Strong volume-driven internal growth in the Property and Casualty segment is supported by the continued high demand for our new modular products in the core markets,” says Dieter Wemmer, chief financial officer of Allianz SE. “Our acquisitions, as well as the readjustments in the United States, Russia and Brazil, are important portfolio measures to continue the positive development of our property and casualty business.”

The company reports that 2014 proved the first year in which Allianz revenues surpassed the 120 billion-euro mark. Based on preliminary figures, Group total revenues rose 10.4% to 122.25 billion euros compared with 110.77 billion euros in 2013.

“Allianz achieved very good results in revenues, operating profit and net income,” Diekmann says. “Geopolitical tensions, continued market volatility and a further decline in interest rates in 2014 led to lower global economic growth than expected,” he explains, but adds that “despite these challenges, Allianz achieved very good results in revenues, operating profit and net income.”

Among the results from other Group segments are as follows:

* Life and Health insurance saw both statutory premiums (up 18.6% to 67.33 billion euros in 2014) and operating profit (up 22.8% to 3.33 billion euros in 2014) grow at double-digit rates. Operating profit was at the upper end of the forecast range following a better investment result.

* Asset Management generated lower operating profit (down 17.6% to 2.60 billion euros in 2014), while revenues declined by 10.8% to 6.39 billion euros last year (this includes the allocation of certain entities from Asset Management to Life/Health and Banking).

The company reports that changes have also been made to the Allianz SE dividend policy. Starting with fiscal year 2014, 50% of net income attributable to shareholders will be paid out compared with 40% previously. “The revised dividend policy reflects our successful efforts to prepare Allianz for the future,” Diekmann says.

“All in all, 2015 is likely to paint a similar to last year’s: economic opportunities and challenging financial markets sit alongside a plethora of political risks, not least also within Europe itself,” he notes in prepared remarks.