Market Rally Suits Allianz – US-FOREX.US
For the first time in many years, the life and health insurance business of Germany’s Allianz proved to be its star performer in the second quarter, as the recent rally in the markets sent its investment income soaring while leaving the property and casualty division in the shadows. The big question for the insurer is: with revenues from premiums under pressure, is this a sustainable trend?Probably not, says Konrad Becker, an analyst at Merck Finck in Munich. The spectacular rally in the markets, which increased its investment income-a big contributor to the life insurance division-is unlikely to continue at the same rate this year. That means there won’t be the same “write-up” of 639 million euros on assets that had previously been marked down.
“I had expected a slight improvement but not an increase of this scale – in this respect, it’s a positive surprise,” said Becker. However, he added that this gain fell into the firm’s non-operating income, while the more closely watched operating income had disappointed. That’s one reason why Allianz
shares fell 3.3%, in Frankfurt on Friday.Gross premium revenues fell to 9.5 billion euros during the quarter, from 9.8 billion euros the year before at Allianz’s property and casualty insurance division. The firm has traditionally gained around a third of its premium income in this division from providing car insurance, but with demand for new insurance policies falling, and competition forcing the firm to cut premiums for existing policies, its hardly a surprise that revenues fell. However, on a more positive note, the firm’s closely watched combined ratio-which measures expenses and claims against the premium earned-remained stable at 98.9%, from 98.7% a year ago. A figure below 100% indicates the business is profitable.Allianz is the latest insurer, alongside Aviva, Axa and Munich Re to see investment income topping up under-pressure premium income. One of the few bucking that trend was Switzerland’s Munich Re, which reported a surprise quarterly because of impairment costs.
Allianz Chief Executive Michael Diekmann remained downbeat about the year ahead, warning that the firm was preparing itself for “the
new normal” – an “ongoing challenging market environment with structurally lower returns.”