Group does not trust the stock market: Allianz is aiming for records again

Friday 19th February 2021

Group does not trust the stock market
Allianz is aiming for records again

Allianz cannot ignore the corona crisis, but it masters it with ease. The company plans to achieve record results again in 2021. Meanwhile, the insurance company is looking at the rally on the stock market with increasing skepticism – and is taking precautions.

Allianz got away with the corona pandemic with a black eye and sees good chances of a record profit again this year. The Munich insurance giant exceeded expectations with a final spurt in 2020: The operating result fell by nine percent to 10.8 billion euros for the year – the first decline in nine years. The experts had expected the alliance on average to be 400 million less.

On a comparable basis, sales shrank by almost two percent to 140.5 billion euros. "Without Covid we would have achieved our goals well," said CEO Oliver Bäte. But he remains cautious: "We are not out of the subject at all yet. It remains difficult." A third corona wave, a recession or a crash on the stock market could thwart plans.

Therefore, Bäte is aiming for an operating result of around twelve billion euros for 2021 – that would be slightly more than in the record year 2019. However, with a fluctuation range of one billion up and down, it leaves twice as much leeway as is usual at Allianz.

Last year Corona devoured 1.3 billion euros, the lion's share of it in property insurance. The failure of major events, hotel and restaurant closings, fewer trips (Allianz Partners) and the failure of supplier credits (Euler Hermes) hit the office there.

In Germany, the state had assumed most of the risks in trade credit insurance in order not to tear the supply chains. But bankruptcies were largely absent. "The credit umbrella cost us 100 million euros," said Bäte. Nevertheless, he does not regret the step: "We would have acted as a fire accelerator because we would have had to cut the (hedging) limits."

Stable dividend – skepticism when looking at the stock market

The insurance group was hit hardest by the crisis in property and casualty insurance, the operating result of which fell by 13 percent and fell short of its target by 1.2 billion euros. The company took the opportunity to clean up the long loss-making key account division AGCS and to give up particularly loss-making businesses, said Bäte.

In life and health insurance, new business suffered, the value of which fell by EUR 500 million to EUR 1.7 billion. Life insurance is difficult to sell on video, and Allianz agents did not even get in to sell company pensions because of restrictions.

The asset management division with the fund companies Pimco and Allianz Global Investors increased profits and managed more money than ever with 2.4 trillion euros, although the weak dollar decimated the growth by 100 billion.

As announced, shareholders are to receive a stable dividend of EUR 9.60 for 2020, although net profit shrank by 14 percent to EUR 6.8 billion. In view of the pandemic, the EU insurance regulator EIOPA continues to warn against generous distributions. But the German financial regulator BaFin has already given the alliance the green light in view of its thick capital cushion, as Bäte said. "But we would not have managed to get through an increase, and also no share buyback."

The unbroken upward trend in the markets is causing Bäte to frown. The high spirits remind him of the time before the crashes in 2000 and 2008. "That's pretty crazy," he said. Allianz has therefore throttled its share quota. 58 billion of the more than 700 billion euros in capital investments are accounted for by shares. "A crash on the stock markets would be easy for us to cope with," believes CFO Giulio Terzariol.