(Updates with supervisory board chairman comment in fifth, investor comment in sixth and 11th paragraph.)
May 7 (Bloomberg) -- Allianz SE, Europe’s biggest insurer, reported first-quarter operating profit that fell 2.9 percent, less than analysts estimated, and said it was maintaining its earnings target for the year.
Operating profit was 2.72 billion euros ($3.8 billion) after 2.8 billion euros reported a year earlier, beating the 2.6 billion-euro estimate of six analysts surveyed by Bloomberg. Net income fell 4 percent to 1.64 billion euros, the Munich-based insurer said in a statement today. It kept its target for operating profit of 9.5 billion euros to 10.5 billion euros compared with 10.1 billion euros in 2013.
“The first quarter came in strong like last year,” Chief Executive Officer Michael Diekmann said in a speech at the company’s annual shareholder meeting in Munich. “Both property and casualty insurance and life and health insurance exceeded their quarterly share of our full-year outlook, and asset management was in line with target.”
Diekmann, 59, and five other executives on Allianz’s 11- member management board have their contracts ending this year. The insurer said in February that it expects the supervisory board to make a decision on the leadership in October. Some shareholders warn that the long period of uncertainty about the future management is a risk for the company.
Allianz will stick to the plan and won’t comment on the topic further today, Allianz supervisory board Chairman Helmut Perlet, who served as the insurer’s chief financial officer until 2009, said in opening remarks today. Management board member Oliver Baete, 49, and Markus Riess, 48, who heads the insurer’s German business, are seen as potential candidates to succeed Diekmann as CEO.
Union Investment, a Frankfurt-based fund that’s Allianz’s eighth-biggest shareholder according to data compiled by Bloomberg, voiced its concern at today’s AGM.
“We ask for a clear communication on the future composition of the management board and do not want to wait until the supervisory board meeting in October,” Union fund manager Ingo Speich said in a speech. “The continuing uncertainty regarding a prolongation of the contracts of Mr. Diekmann and his colleagues is a governance risk, which paralyzes the organization and weighs on the share price.”
Shares rose 0.4 percent to 124.45 euros at 1:09 p.m. in Frankfurt today, curbing losses this year to 4.5 percent and valuing Allianz at 56.8 billion euros. The Bloomberg Europe 500 Insurance Index rose 0.2 percent since Dec. 31.
Allianz’s spending on claims and other costs as a percentage of premiums, also known as the combined ratio, at the property and casualty insurance unit, typically the most important division in terms of earnings, improved to 92.6 percent in the quarter from 94.3 percent. A ratio below 100 percent means an insurer is making a profit from underwriting.
Allianz’s asset management unit, which includes Newport Beach, California-based Pacific Investment Management Co., increased third-party assets under management to 1.34 trillion euros from 1.33 trillion euros at the beginning of the year. The rise was helped by “market value increases,” it said.
As lower interest rates continue to weigh on insurers’ investment returns, shareholders are focusing on the performance of asset management after the surprise resignation of Pimco Chief Executive Officer Mohamed El-Erian in January. El-Erian, who had shared the role of co-chief investment officer with Bill Gross, has continued to work for Allianz as chief economic adviser.
The Pimco Total Return Fund, the world’s largest bond fund, managed by Gross, suffered its 12th straight month of withdrawals in April as it trailed peers. Investors pulled a record $41.1 billion from Pimco Total Return in 2013, according to Morningstar. They’ve removed $11.3 billion from the fund this year, the data show.
Allianz acquired a stake of about 70 percent in Pimco in 1999 for $3.3 billion. It gave the fund manager, co-founded by Bill Gross in 1971, greater independence in 2011 by separating it from the insurer’s other asset managers, which are combined in the Allianz Global Investors unit. Both are part of the Allianz Asset Management holding, led by management board member Jay Ralph.
“Whether Pimco’s new management structure is working and leads to better investment results remains to be seen,” Union Investment’s Speich said. “Maximum autonomy has been the recipe for success of Pimco so far. Do you now want to get involved more in Newport Beach?”
Allianz is due to report first-quarter earnings May 14.