Germany’s Allianz AG continued to post significant profit increases. In its recently released 9-month report the German giant noted that net income for the period more than doubled to $1.8 billion euros ($2.33 billion), compared to 732 million ($946.5 million) for the first nine months of 2003. In addition the company’s combined ratio dropped to 93.2 percent.
“All segments have contributed to this result,” said the report. “It is based on strong growth in the life and health insurance business and in asset management, selective growth in property and casualty insurance, and further stabilization of operating revenues at Dresdner Bank. Higher investment income, especially in the life and health insurance business, also contributed to the result.
“At the same time, costs were reduced. This is evident in an improved combined ratio, a further decline in loan-loss provisions and a decrease in administrative expenses,” the bulletin continued. “We’re undoubtedly on target for 2004,” commented Helmut Perlet, Member of the Board of Management at Allianz AG. “We’re continuing to focus on profitability and the increase in our competitiveness. The effects are already clear.”
Allianz said: “Profit before taxes, goodwill amortization and minorities increased more than threefold during the first nine months of 2004: 4.9 billion euros [$6.33 billion] compared with 1.6 billion euros [$2.06 billion] in the previous year. The marked increase in the pre-tax result consequently triggered a tax charge amounting to 1.2 billion euros [$1.55 billion], which increased by 1.9 billion euros [$2.45 billion] compared with the equivalent year-earlier period. Minority interests also increased to 897 (585) million euros [$1.16 billion ($756 million)].” In spite of these factors Allianz still recorded greatly increased net income.
“Our success in 2004 to date demonstrates that the consistent implementation of our 3+One Program has paid off,” commented Perlet. “The positive development in our operating business should also lead to a sustained improvement for the year as a whole, compared with 2003.”
The bulletin noted that premium income from P/C operations “increased by
1.3 percent to 34.6 billion euros ($44.73 billion), compared with the first nine months of 2003. Internal growth amounted to 2.7 percent after adjustment for the effects of consolidation and exchange rates.
“The claims ratio fell to 68.2 percent, compared with 71.7 percent during the equivalent year-earlier period. This improvement was achieved despite expenditure resulting from the hurricanes that struck the southeastern USA during the third quarter. Hurricanes Charley, Ivan, Frances and Jeanne resulted in claims at a level of approximately 16-24 billion euros [$20.7-$31 billion] across the industry.” [Ed. Note: the ISO has estimated total insured losses at around $22.3 billion]. However, only 216 million euros [$280 million] of this amount were attributable to Allianz. This is below our market share in the affected region and bears witness to the effectiveness of our risk management systems.”
The company also noted a decrease in administrative expense, which led to an additional improvement in the combined ratio by 3.7 percentage points to 93.2 percent at the nine-month stage. Apart from these factors, the higher level of investment income also contributed to an improvement in net income for the period to 2.2 billion euros ($2.84 billion), compared to 1.5 billion euros ($1.94 billion) in the comparable period of 2003.
Allianz appears to have turned the corner on its troubled banking business, as its Dresdner Bank subsidiary and related banking operations contributed 573 million euros ($740 million) to operating profits during the first nine months of the year, following a loss of 69 million euros ($89 million) during the corresponding period in 2003. Dresdner contributed 542 million euros ($700 million), compared to a loss of 163 million euros ($210 million). It also contributed 360 million euros ($465 million) to Allianz net income. “This year, Dresdner Bank has succeeded in raising its profitability on a sustainable basis. Even in a difficult market environment the quality of the business has improved, showing continuity of performance,” according to Perlet.
Allianz said it is “expecting insurance business for the full year 2004 to exceed the goal of 4 percent for internal growth in total premium income. The combined ratio for the Property and Casualty insurance business looks set to be held at the level already reached, assuming that there are no significant charges from natural catastrophes and major claims during the fourth quarter.
“Strong growth and ongoing cost discipline mean that net income for the Life and Health insurance business should be significantly improved over the previous year. A balanced year-end result after restructuring expenses is anticipated for Dresdner Bank.
“On the basis of current exchange rates and stock-market prices, Asset Management should increase third-party assets under management by approximately 10 percent in a year-on-year comparison and operating profit should continue to improve. During the fourth quarter of 2004, realized gains and losses are expected to show a balanced result. A significant and sustained setback in equity markets would impact negatively on our earnings through higher write-downs.”
The complete quarterly report is available on the company’s Web site at: www.allianzgroup.com.
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