ALLIANZ SE, 1H2018: strong results for 2Q 2018; full-year outlook confirmed

ALLIANZ Group's operating profit decreased y-o-y by 1.8% in 1H2018. Yet, overall, the operating profit for 1H is slightly above the mid-point of the group's target range. Lower income taxes compensated for the lower operating profit and non-operating result: net income attributable to shareholders was therefore stable at EUR 3.8 billion.

"We remain on track to meet our 2018 operating profit target. I am thankful for everyone on the ALLIANZ team for making this happen across countries and companies. This makes me confident that we will achieve our three-year Renewal Agenda targets," said Oliver Baete, Chief Executive Officer of ALLIANZ SE. The main driver of the decreasing operating result was the Group's Life/Health business segment due to a normalization of the investment margin and due to unfavorable foreign exchange. Operating profit in the Asset Management business grew thanks to higher AuM-driven revenues, while the Property-Casualty operating profit increased slightly compared to prior year results.

Basic Earnings per Share (EPS) increased by 5% to EUR 8.86 in 1HHH2018. Annualized Return on Equity (RoE) increased to 13.8% (full year 2017: 11.8%). ALLIANZ maintained its strong capitalization, with the Solvency II capitalization ratio of 230% at the end of the quarter compared to 225% recorded at the end of the first quarter of 2018.

On 2 July 2018, ALLIANZ Group announced a new share buy-back program, with a volume of up to EUR 1.0 billion. The program shall be finalized by 30 September 2018 and all repurchased shares will be cancelled.

Property-Casualty insurance: Strong internal growth and good operating performance

  • Gross premiums written amounted to EUR 12.1 (11.7) billion in the second quarter of 2018. Adjusted for foreign exchange and consolidation effects, internal growth totaled 7.3%, with price and volume effects contributing 2.2% and 5.1% respectively. AGCS, ALLIANZ Partners, and Germany were the main growth drivers.
  • The combined ratio rose to 94.1% in the second quarter of 2018 reflecting a higher claims ratio from higher large losses and higher weather-related events, partly offset by an improved expense ratio.
  • Operating profit was stable at EUR 1,455 (1,446) million.
"The good results in property and casualty show the underlying strength of our business. We have made progress with our productivity initiative as shown by the expense ratio. We remain on track to meet our target of 94% in the combined ratio," said Giulio Terzariol, Chief Financial Officer of ALLIANZ SE.

In 1H2018, GWP increased slightly to EUR 30.0 (29.4) billion. Adjusted for foreign exchange and consolidation effects, internal growth amounted to 5.9%, mostly driven by positive developments at AGCS, in Germany, and at ALLIANZ Partners. Operating profit improved slightly by 0.9% to EUR 2,729 million compared to the same period of the prior year due to a higher underwriting result. The combined ratio for the first half-year improved by 0.2 percentage points to 94.4%.

Life and Health insurance: New business further improved

  • PVNBP, the present value of new business premiums, increased to EUR 14.0 (13.6) billion in the second quarter of 2018, mainly due to higher sales of capital-efficient products in the German life insurance business.
  • The new business margin (NBM) strengthened slightly to 3.5% due to a favorable business mix and a slightly higher interest rate level. The value of new business (VNB) increased to EUR 491 (469) million in the quarter driven by the continued shift to capital-efficient products.
  • Operating profit decreased by 4.6% to EUR 1,075 (1,128) million due to a lower investment margin in Spain and in our German life business. Negative foreign currency translation effects mainly from the United States due to the weakening US Dollar also contributed to the decrease.
"The positive results of our ongoing product mix shifting to capital-efficient products demonstrate our ability to adapt to a highly challenging interest rate environment. Our new business margin of 3.5% is well ahead of target and the value of new business increased to 491 million euro in the quarter, showing a good quarterly growth of five%," said Giulio TERZARIOL.

In 1H2018 PVNBP increased to EUR 29.0 (28.4) billion largely because of the higher sales of our capital-efficient products in the German life business and of our unit-linked insurance products without guarantees in Taiwan. Operating profit dropped to EUR 2,144 (2,282) million as a result of less favorable market conditions and unfavorable foreign currency translation effects in the United States.

The NBM increased to 3.4% bringing the VNB to EUR 980 (922) million.

Asset Management: Continued growth in revenues and operating profit - Total assets under management at highest level ever

  • Third-party assets under management (AuM) grew by EUR 35 billion (2.5%) to EUR 1,464 billion compared to the end of the first quarter of 2018. This increase was driven by favorable foreign currency translation effects. Third-party net outflows amounted to 9.2 billion. Total AuM reached a record EUR 1,993 billion.
  • The cost-income ratio (CIR) improved by 0.9 percentage points to 61.6% in the second quarter of 2018, as the increase in revenues outpaced an increase in expenses.
  • Operating profit increased by 11.6% to EUR 652 (584) million in the second quarter of 2018. This was driven by an increase in operating revenues, supported by both higher average AuM and an improved margin. Adjusted for foreign currency translation effects, operating profit was 18.8% higher.
"The combination of higher assets under management, higher margins and a lower cost-income ratio lead to a double-digit profit growth. While we had net outflows for the quarter, we recorded inflows for the months of June and July. We are very pleased with the performance of our Asset Management business," said Giulio TERZARIOL.

In 1H2018, operating revenues grew by 4.6% to EUR 3.3 billion euros, mainly due to increased average third-party AuM at PIMCO and an increase in third-party AuM-driven margins at both PIMCO and ALLIANZGI. As operating expenses only went up 2.7%, the CIR decreased by 1.2 percentage points to 61.7%. Operating profit rose 7.9% to EUR 1,247 (1,156) million. Furthermore, favorable foreign currency effects and third-party inflows, outweighed negative market effects resulting in third-party AuM of 1,464 billion - an increase of EUR 17 billion compared to year-end 2017.

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