insurances
Allianz remorseful after lawsuits worth billions
Storms, floods, rock-bottom interest rates – the usual dangers and annoyances for insurance companies have not affected Allianz 2021. The US judiciary is currently the most expensive risk for the largest German insurer.
The Allianz board of directors is repentant after several major US customers have lost billions. CEO Oliver Bäte expressed his regret to the angry investors on Friday in Munich and assured: “Management will bear a fair share of the burden.”
Since the payment of Allianz board members – as is usual in DAX companies – is linked to performance, Bäte and his colleagues will have to accept a drop in salary: “That will have a significant impact on our remuneration,” said the manager. How high the salary cuts for the board of directors will be will be published on March 4th in the annual report.
The Munich Dax group has set aside 3.7 billion euros because of the legal disputes with major customers, the net burden in the annual balance sheet is therefore 2.8 billion euros. US investors blame asset management Allianz Global Investors (AGI) for billions in losses in spring 2020. The group not only sells insurance, but with its two subsidiaries AGI and Pimco is also one of the largest asset managers in the world.
The allegations in the USA boil down to the fact that AGI managers did not comply with their own guidelines and did not react appropriately to the price slumps in the first phase of the corona pandemic. According to US media reports, the plaintiffs included the New York Metro, the teachers’ pension fund in the state of Arkansas and the Teamsters union.
According to Bäte, the alliance has now reached an agreement with the majority of US investors. However, the investigations by the US Department of Justice and the US Securities and Exchange Commission (SEC) have not been completed. The US judiciary is known – and feared – for high penalties that companies have to shell out for mistakes. According to Bätes and his CFO Giulio Terzariol, the 3.7 billion are not intended solely for payments to investors.
CFO Giulio Terzariol was confident about the current year. The Executive Board is aiming for an operating profit of between 12.4 billion and 14.4 billion euros for 2022. By 2024 it should be 14.5 billion or more.
The Allianz board of directors also hopes for rising interest rates. Bäte sharply criticized the European Central Bank in connection with the high inflation: “In Germany we have interest rates of minus five to six percent, which is basically theft of private individuals’ money.” The predictions of the ECB were “all wrong”, the hoped-for goal of higher investments in Europe with low interest rates and “quantitative easing” – ultra-loose monetary policy.
Like the insurance industry as a whole, Allianz has suffered from the low interest rates in recent years, particularly in the life insurance business. “Interest rates must rise, now,” demanded Bäte – and at the same time emphasized that great caution should be exercised.
The bottom line is that the Allianz Group still earned around 6.6 billion euros with insurance and asset management in 2021, three percent less than in the previous year – an effect of the anger in the USA. But apart from the expensive legal disputes, Allianz’s business went very well last year, especially in asset management. Investors invested more than 110 billion euros net in new investments in AGI and Pimco, so that the assets managed for clients increased by around 15 percent to almost 1.97 trillion euros.
Compared to the previous year, sales rose by almost six percent to 148.5 billion euros. Operating profit increased by almost a quarter and reached a record value of 13.4 billion euros. The Allianz shareholders should not go hungry either, the dividend will be increased from 9.60 to 10.80 euros.