German financial giant Allianz sees modest growth despite a drop in profits
Allianz reports modest growth in revenues and beat expectations with earnings, despite a drop in profits. The property and casualty insurance division struggled due to a surge in claims from natural catastrophes. Allianz experienced steady inflows an...
Troy D. Hanson
November 10, 2023
Revenues rise as insurance claims surge impacts profits
German financial powerhouse, Allianz, reported a 4.5% increase in revenues and a 14.6% decline in third-quarter profits. The company's insurance business was negatively impacted by a significant rise in claims from natural catastrophes.
Boost in sales driven by property and casualty insurance
Allianz saw its third-quarter sales rise to €36.5 billion, thanks to higher prices in its property and casualty insurance division and an uptick in single premiums in its life insurance business.
Property and casualty insurance division struggles with claims
Unfortunately, Allianz's earnings were dragged down by a 25% drop in profits from its property and casualty insurance division, primarily due to a surge in claims resulting from floods and storms that occurred across Europe this summer.
Allianz surpasses expectations
Despite the challenges faced in the third quarter, Allianz managed to beat expectations by posting earnings worth €3.46 billion, compared to the forecasted €3.21 billion. This positive outcome contributed to a 2% increase in the company's shares on Friday. In fact, Allianz's shares had already risen by 13% over the past year.
A long-standing presence in insurance and asset management
Founded in 1890 as an insurance company, Allianz expanded its operations over the years. In 1998, it established its asset management business, Allianz Global Investors, and in 2000, it acquired PIMCO.
Steady inflows for Allianz
During the third quarter, Allianz experienced inflows worth €10.5 billion, demonstrating the continued confidence investors have in the company's offerings.
Allianz Reports Inflows for Third Consecutive Quarter
Allianz, the German firm and one of the largest asset managers globally, has reported inflows for the third quarter in a row. These inflows, primarily driven by its fixed-income business, contribute to Allianz's assets under management, which now total €2.16 trillion.
This recent success follows a challenging year in 2022, where Allianz experienced significant outflows amounting to €81.4 billion. These outflows were a result of clients withdrawing their investments due to falling bond prices leading to a worldwide sell-off.
Although Allianz's asset management arm saw its revenues decrease by 2.7% to €2 billion, earnings increased by 0.1% to €788 million. This growth can be attributed to higher fees and improved margins, which offset the decline in sales.
Bank of America analysts, led by Andrew Sinclair, praised Allianz's performance despite the challenges faced in Q3. Sinclair states, "Allianz remains in excellent shape, and we believe that steady results and improving flows at PIMCO through 2024 can support a re-rating of the shares."
Despite this success, Allianz has chosen not to initiate another share buyback program at this time. Instead, they will continue with the €1.5 billion buyback program announced in May.