Allianz Expands Buyback After Profit Beats Market Expectations — Update

By Elena Vardon

Allianz reported better-than-expected profit for the second quarter as it coped well with higher claims from natural disasters and increased the size of its share buyback program for the year.

Europe's largest insurer on Thursday reported a net profit of 2.51 billion euros ($2.74 billion) for the three months ended June 30, compared with EUR2.34 billion for the same period last year, beating an estimate of EUR2.32 billion taken from a company-compiled consensus. Total business volume, or revenue, rose 7.6% to EUR42.6 billion, the German group said.

Its operating profit increased 3.8% on year to EUR3.93 billion, beating the consensus of EUR3.70 billion. Property and casualty--its largest segment--saw an increase in weather-related losses from the floods in southern Germany and smaller and mid-sized events and also took a large hit from the New Caledonia riots. This led it to report a lower operating profit than the previous year, though it exceeded analyst estimates, which had penciled in a larger decline. Allianz reported a property and casualty combined ratio of 93.5%, ahead of views. A ratio below 100% indicates an underwriting profit.

Operating profit for its life and health unit also posted stronger-than-expected growth, while its asset management result came in slightly short of expectations.

Allianz reiterated its guidance for the year, confirming that it expects operating profit of EUR14.8 billion, plus or minus EUR1 billion. While there isn't any formal change to the outlook, the result implies that operating profit could come in at the top end of the range, Keefe, Bruyette & Woods analyst William Hawkins said in a note to clients.

"We look with confidence to the second half of 2024," Chief Financial Officer Claire-Marie Coste-Lepoutre said.

The Munich-based group said that the third-party assets under management at its asset-management business--which houses bond fund giant Pimco and Allianz Global Investors--stood at EUR1.803 at the end of the period, the highest level since the first quarter of 2022. The EUR19 billion increase compared with three months prior was driven by EUR14.1 billion in net inflows during the second quarter as well as favorable foreign currency effects, it said.

Its solvency II ratio--a measure of capital strength--came in at 206%, an improvement on the previous quarter and consensus' 203% ratio.

"We think these results should highlight the underlying quality of the business - and where diversification has helped the overall group result," Deutsche Bank analysts said in a note to clients.

Allianz decided to expand its share buyback program for 2024 to EUR1.5 billion, it said late Wednesday. In addition to the EUR1 billion program completed in July, the group will launch another up to EUR500 million buyback in mid-August to be completed by the end of December.

"Given that the group is set to launch a new strategic plan at the end of 2024, we're pleasantly surprised that management has not chosen to wait until then [to expand the buyback program]," Jefferies analysts said. Allianz will host an investor day in December.

Shares had risen 1.9% to around EUR254 by 0845 GMT, while the DAX blue-chip index traded in the red.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

August 08, 2024 05:36 ET (09:36 GMT)

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